THE NEW ROAD: Can it be built with today’s agriculture?

The New Road 3/13/03 Dennis Keeney 1

THE NEW ROAD:Can it be built with today’s

agriculture?Dennis Keeney

Institute for Agriculture and Trade Policy

Minneapolis


Institute for Agriculture and

Trade PolicyIATP is a non-profit organization

based in Minneapolis. It was

founded in 1986 as an independent

research organization to address

natural resource conservation and

agriculture policies. IATP's mission

is to foster economically, socially

and environmentally sustainable

communities.


Iowa has been hit with a series of commodity potholes

A commodity is: standardized, produced at lowest cost and in open world-wide competition, lowest cost producer gets the sale

Corn, soybeans, cotton, rice, pork, chicken, shrimp, bananas, coffee, wheat, you name it, most of the world’s food and fiber are based on commodities, they are a key part of the world’s food systems


But commodity potholes lead to:

Overuse of natural resourcesSoil, water and air pollutionDecline in farmer income and rural

communitiesCompetition among farmers leading to farm

consolidationsTechnology treadmillsExodus of farmers


IOWA ESTIMATED CROP PRODUCTION COSTS, 2003 (Duffy 2003)

Corn After SB SB after Corn

Machinery $79.55 $43.88

Seed, Chemicals 125.10 84.47

Labor 23.40 22.05

Land 135.00 135.00

TOTAL 363.04 284.90

$/bushel $2.42 $6.33

CBOT, 3/1/03 $2.31 $5.77


The commodity system led to the 1980’s farm crisis

The Russian wheat deal of 1972 started globalization, industrialization, soaring food demand from infusion of petrodollars and rapidly increasing commodity and land prices– Which led to decline in demand, overproduction, over

capitalization, and a collapse in the economic systems supporting agriculture

– And to a complete change in the way we do business:

the restructuring of agriculture


Restructuring of Food Systems

Vertical IntegrationHorizontal IntegrationGlobalizationRetailingFood Clusters


Vertical Integration

Started with centralized animal production, growing on contract, starting with broilers and now in hogs turkeys, beef.

Changes the “farmer” to the “grower”

Grower provides buildings, land, equipment and labor

Integrator supplies animals, feed, management, marketing


Horizontal Integration

Concentration within industries, limiting market access and controlling international markets

AnimalsBeef packers: 81% by Tyson, ConAgra, Cargill and

FarmlandPork Packers: 59% by Smithfield, Tyson, ConAgra

and CargillPork Production: 46% by Smithfield, Premium

Standard, Seaboard and Triumph Pork Group


Horizontal Integration in Plant Products

• Terminal Grain Handling: 60% by Cargill, Cenex, ADM and General Mills

• Corn Exports: 80% by Cargill, ADM, Zen Noh

• Soybean Exports: 65% by Cargill, ADM and Zen Noh

• Soybean Crushing: 80% by ADM, Cargill, Bunge and AGP


Top Food and Beverage Companies, 1999

Nestle SA Phillip Morris Companies Inc Conagra, Inc Pepsico, INX Unilever Coca-Cola Cargill Diaglo Mars, Inc ADM


Top Grocery Retailers

• Wal-Mart USA 10 countries $193 billion• Carrefour, France 22 countries $60 billion• Ahold, Netherlands 24 countries $49 billion• Kroger, USA• Metro, Germany 21countries• Target, USA• Albertson’s, USA• Rewe, Germany• Edeka, Germany


Changing agriculture structure has changed definition of a farm, a farmer

USDA: 300,000-500,000 farms, omits very small farms. Management, rather than labor, has become the key definition of a farmer.

Large farms are becoming integrated into food system clusters.

Farmers (operators) no longer autonomous because they do not make the management decisions and profits accrue to integrators and food clusters rather than the local community


Does the US really need farmers?

About half of the world makes less than $2/day and many are farmers. Land costs also very low in other countries and therefore US agriculture is not competitive on the global scale and must be subsidized

The triumph of global capitalism is that more than half of the worlds 100 largest economies are centrally planned for the primary benefit of the wealthiest 1% of the world’s people


Building the New Road

Social forces are building here and worldwide for changing the global economic system leading to new opportunities

Connecting food systems to consumersRecognizing environmental benefits of agricultureRenewable energyMarketing the landscape


Connecting to Consumers Organics (becoming a commodity?) Community supported agriculture Specialty crops (3rd crop) Local foods (restaurants, institutions, grocery) GMO-free crops (European) Healthy meats (low fat, grass fed, special breeds) Certification of green cropping systems (bio-plastics,

energy) Country of Origin Labeling (Opposed by Ag, USDA)


Environmental Benefits Government Programs

New Farm Bill has many conservation entitlements, but full funding not likely

Nutrient TradingSelling BMP’s to point source industries

Carbon CreditsTying carbon up in organic matter long term cutting

down on atmospheric carbon dioxide buyers are smokestack industries

Watershed ProtectionMunicipalities paying for establishment of BMP’s


Renewable Energy

Wind industry, in infancy but showing much promise

Biomass, many opportunities, but more technology needed. Largely for local electric and heat generation

Liquid fuels, primarily corn based ethanolSome advantages to farmer owned cooperativesBecoming a commodity, control by ADM, Cargill


Marketing Your Landscape

Agro-TourismFarm Visits

Bed and breakfasts, farm stays

Pick your ownHayrides, etc

Hunting, fishing, hikingRegional Themes

Silos to Smokestacks


THE NEW ROADCurrent Attitude

“In the long term we are all dead”

New Vision“Work outside the commodity systems to establish

new contracts with society”Many processors and marketers have been left out of the current agriculture structure, these offer opportunities for partnerships, contracts and new joint ventures


Commodities are on the global superhighwayAg cannot export its way to prosperity There are ways to get off the highway, but the

new road has lots of difficulties and turnsNeed new partners, innovative thinking,

regional, actionsDo it ourselves, do not count on the

governmentConnect with consumers

Documents

THE NEW ROAD: Can it be built with today’s agriculture?