Corporate farming

Corporate farming is a term that describes the business of agriculture, specifically, what is seen by some as the practices of would-be megacorporations involved in food production on a very large scale. It is a modern food industry issue, and encompasses not only the farm itself, but also the entire chain of agriculture-related business, including seed supply, agrichemicals, food processing, machinery, storage, transport, distribution, marketing, advertising, and retail sales. The term also includes the influence of these companies on education, research and public policy, through their educational funding and government lobbying efforts. "Corporate farming" is often used synonymously with "agribusiness" (although "agribusiness" quite often is not used in the corporate farming sense), and it is seen as the destroyer of the family farm.

Critics argue that the ultimate goal of corporate farming is to vertically integrate the entire process of food production, up to the point of the distribution and sale of food to consumers. Some corporations are considered to be well on the way to achieving this objective, and have become very large in the process, such as Archer Daniels Midland, Monsanto Company, and the privately held Cargill, with 2004 revenues of $62.9 billion.

"Corporate farming" is a fairly broad term that deals with the general practices and effects of a small number of large, global corporations that dominate the food industry. It does not refer simply to any incorporated agribusiness enterprise, although most agricultural businesses today are in some way economically connected to the dominant food industry players. As such, it may be thought of as a movement, which is at times also referred to as "anti-corporate farming".

Contract farming

Contract farming is a form of vertical integration where the farmer is contractually bound to supply a given quantity and quality of product to a processing or marketing enterprise. The buyer agrees in advance to pay a certain price to the farmer and often provides technical advice and inputs (the cost of the inputs being deducted from the farmer's revenue once the product has been sold to the buyer). Contract farming has not so far resulted in a significant improvement in the livelihoods of small farmers in developing countries because buyers generally prefer to deal with large-scale producers who are better placed to meet the stringent quality and timeliness requirements.

Corporate farm vs family farm

beef processing plant]] Farms are expensive to operate; input costs include farm machinery, crop insurance, fertilizers, irrigation, pesticides, fuel, and seeds. Some people question whether small family farms are still economically sustainable in the United States. However, there is a growing resurgence of interest in organic, free range, and locally grown family farm products.

One major difference between independent farming and corporate farming is that a corporate farmer is usually a contracted employee, rather than the owner of the farm. However, ownership itself does not mean independence. An owner-operated farm today faces many constraints that are completely out of the owner's control. Most of these can be seen in light of increasing concentration of ownership, not only of farms, but of the equipment and inputs necessary to farm, and the available sales channels.

Production contracts are a primary means of control and vertical integration of family farms. These are of two general types. Production management contracts specify the methods farmers must use. Resource-providing contracts require the contractor to also provide materials (e.g) and equipment. Under the latter, increasingly prevalent arrangement, the family farm owns its land and "sells" its output, but retains no real decision making control over the essential farming activities, like crop selection, equipment purchase, production methods, sales channels, and buyers.

A prime example is the drive to constantly improve production efficiency, as measured by farm output. By using successive waves of new technology (in agrichemicals, mechanization, crop varieties, drugs, etc.), output has steadily risen over the past decades. This in turn has contributed to steadily driving down the price farmers can get for their output. As the cost of remaining in production rises, and income falls, only the larger business entities, with the ability to profit from outside of the immediate farming activities (such as through financial services, agrichemical production, food distribution, and so forth) can afford to remain in the game.

In terms of income disparity, large family farms, rather than factory farms, have the greatest impact. Although 14% of total food production comes from the two percent of all farms in the United States that are owned by corporations or other non-family entities, 50% of food production comes from the biggest two percent of all farms. In 1900, it came from 17% of all farms.

Effects ascribed to corporate farming

Agriculture is an industry which provides significant economies of scale to large producers. As is the trend in such industries, agricultural production in most free-market economies has been increasingly concentrated in the hands of a small number of large companies. As this trend continues, so too does the risk that markets for food will display monopolistic or oligarchical characteristics. At the same time, competition law and policy seeks to redress such market anomalies.

Concentration of production

Corporate farming is criticized for its tendency to concentrate food production, through the adoption of methods which are designed to maximize crop yield. At the same time, through a process of vertical integration, corporate farming results in the concentration of not only ownership of the means of production, but also the distribution and sale of food which is produced. Over time this has resulted in the steady decrease of the number of farms and the percentage of independent farmers. Those farmers who cannot compete or whose businesses are purchased are no longer able to make independent production decisions, and are forced to sign production contracts with corporations.

The trend towards concentration began in the chicken and vegetable industries and has since expanded to hog and grain production. In 1997, some 60% of hogs sold within the U.S. were sold under some form of contract, whereas in 1980 only 5% of hogs were sold in this manner.

As production continues to concentrate and is coupled with increasing reliance on technology, farmers complain about their increasing remoteness from centers of population or production. For example, farm machinery repair services, which were once as close as two miles away, are increasingly as far as 40 miles away.

Food quality and cheap food

A critical consideration is whether the quality of the food which reaches the consumer is as good as it would be under alternative structures of ownership and production. To the extent that corporate farming primarily seeks to maximise yield and profit, this is seen as adversely impacting upon nutritional value, freshness and flavour, as well as upon the range of products available for consumers. Corporate farming practices may also more readily involve the use of genetically modified crops, hormones, preservatives, color additives and insecticides, again with a view to maximising yield and profit.

Genetic engineering

The debate about large corporations in agriculture is heightened at the intersection with the already controversial issue of genetically modified food. Critics of both are concerned that these large businesses will leverage their economic and political power to defeat attempts to regulate or restrain the spread of genetic engineering in agriculture, or leverage intellectual property rights in GMOs to unfair advantage over their competitors, against the interests of users and consumers of their products, and to the detriment of the environment.

A reason given in support of patents is that they provide an economic incentive for the creation of new and useful inventions by temporarily rewarding the inventor with monopoly profits. The patent holder has certain exclusive rights to the exploitation of her invention, which may result in significant economic rewards. However, consumers may choose to buy rival products (which could be protected by other patents), and the lifetime of the patent is limited.

Simple possession of a naturally occurring seed (free from patent restrictions) gives one the ability and the legal right to grow crops from the seed, to modify the breed, and to sell, exchange, or share the seed as one sees fit. With patent rights, however, the inventor (often a large corporation) may choose to restrict how farmers may use a given organism, in order extract the economic value of each type of use, and to extract economic value from each user.

Critics of GMOs and corporations say that these rights give already powerful corporations an even greater advantage, and in a way which disrupts millennia-old agricultural practices. Supporters of genetic engineering emphasize the potential benefits in nutrition, reduced environmental impact, and increased productivity that may be possible with the technology. They say that the additional economic rewards are necessary to encourage the large capital investments needed to make useful advancements in the field.

Sources

Further reading

Corporate Agribusiness Research Project

Voices of the Family Farm

Project to Eliminate Factory Farming

Anti-Corporate Farming Laws in the Heartland law, history, and facts on anti-corporate farming laws in nine US states

Big Sugar and the Political Economy of US Agricultural Policy

External links

Contract Farming Resource Center

Encyclopedia of Oklahoma History and Culture - Corporate Farms

Category:Agriculture Category:Industrial agriculture Category:Agricultural economics Category:Business