Thread by @ramanmann1974

Thread
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How, over the past 40 years, U.S food supply chain has become concentrated in hands of a few large multinationals, which serve as middlemen in everything from seed genetics to hog processing to supermarkets. Do we want such a business model in India; think hard, do we ?

~From 1975 to 2015, Market share of 4 largest beef packing firms increased from 25% to 85%.

~From 1988 to 2016, Market share of 4 largest soybean seed firms increased from 42% to 76%.

~From 1976 to 2015, Market share of 4 largest hog processing firms increased from 33% to 66% !

~From 1997 to 2018, Market share of 4 "top grocers" increased from 25% to 44%.

~~From 1988 to 2016, Market share of 4 largest corn seed firms increased from 59% to 85%.

~6 brands acct for half the global chocolate market, an asymmetrical market that favors only buyers & traders

~In 1990, US ranchers received 59 cents of each dollar spent on beef, while retailers received 33 cents; today, 38 cents & 51 cents
~Since 2014, price farmers receive for milk has fallen by 40%, 55% below avg farm’s break-even point. 4600 dairy farms closed each year for 2 years

Now, Big 6 (Monsanto, DuPont, Syngenta, Dow, Bayer, BASF) have consolidated into a Big 4 dominated by Bayer & Corteva (new firm created after the Dow–DuPont merger), & rounded out with ChemChina & BASF. These 4 firms control more than 60% of global #seed sales !

By 1998 the large agribusiness companies had consolidated by buying up smaller firms to accumulate more IP rights. By 2008, Monsanto’s patented genetics alone were planted on 80% of US corn acres,86% of cotton acres & 92% of soybean acres. Today, these percentages are even higher

A sector with a 4-firm concentration ratio (CR4) of
more than 40% is uncompetitive, an oligopoly; a CR4 of over 70% is a monopoly. Above this threshold, concentration can entrench dominant market positions for the largest Companies; exert price pressure on suppliers or buyers !

Economists say-an industry loses its competitive character when concentration ratio of the top 4 firms is <40%. The seed industry continues to exceed this benchmark. For eg-even before the Big 4 merged, 3 firms Monsanto,Syngenta & Vilmorin controlled 60% of global veg seed market

Industries with a “concentration ratio”, defined as the market share of the 4 largest Companies—of 40% or more as anticompetitive !
Such is the U.S model #consolidation
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Poultry=35%
Beef=85%
Corn #seed=85%
Soybean seed=76%
Agrochemicals at 84%
Retail food=40%
Farm equipment=40%

4 companies, 2 of which are foreign-owned, now slaughter 52% of all meat consumed in the US, more than twice the market share that the 4 largest companies held in 2002. Consolidation results in entire control being transferred to the corporations, where farmers r totally helpless

The US crop subsidy program, for example, will continue to give 80% of all farm subsidies to the top 20% of American farmers. It is little wonder that monopolies & corporate farms have grown more powerful at the expense of workers/family farmers & our babus want to ape US model🙄

The prices that the U.S #dairy monopolists pay #farmers for their milk is based not on supply & demand, but on a convoluted formula for "the price of block cheddar traded on the Chicago Mercantile Exchange"; & our Netas + Babus want to ape this #agri model. We need to be original

In the 1980s, 37 cents out of every dollar went back to the US #farmer. Today, the share has dropped to 15 cents on every dollar. This new economic reality forces farmers to survive on volumes, creating a system where only d largest farms can make a living. Get big or Get Out !🤨

Oligopolies create barriers to entry for new firms & establish mutually beneficial pricing arrangements with each other. This behavior in markets controlled by just a few firms is more common than outright
monopolies, but is harder to identify as the companies are in competition.

Highly concentrated buyer power, such as in meatpacking, is called monopsony. Seller concentration (monopoly), is prevalent in seeds, #agri chemicals & equipment. Both forms of market power allow company a great deal of control over practices of those who sell to or buy from them

Large firms do not just dictate terms to Co's in their supply chain, they buy up those Co's, in a process called vertical integration. Eg-Tyson Foods purchased chicken breeders, feed mills, slaughter facilities & transportation Xo's & incorporated them under the Tyson umbrella.

Horizontal integration happens when competing firms merge, which can look like the German seed & chemical giant Bayer purchasing the American seed & chemical giant Monsanto, or like Coca-Cola buying small smoothie company called Odwalla in order to diversify its beverage profile.

Concentration is self-reinforcing; consolidation in one part of the industry triggers similar activity across the industry. Large retailers prefer “one-stop” sourcing from large wholesalers and processers, while the processing industry relies on just a few buyers for most sales.

As firms grow, they prefer to source from fewer entities in their supply chain, as it simplifies ordering, consistency, transport etc. A company that has recently expanded through a merger or acquisition may exert pressure on its suppliers to likewise expand or make other changes

The number of U.S #farms has fallen, & their size has increased. Farm numbers peaked at 6.8 million in 1935,29 then fell sharply until leveling off at about 2.3 million in 1974.30 Since then, decline has continued, but at a slower pace. There were just 2.02 million farms in 2020.

Mid-size US #farms have been hardest hit, while the numbers of very small & very large farms have increased. In the 2017 survey farms with 50~1,000 acres declined 5-15%. Only very small farms (fewer than 10 acres) & very large farms(more than 2,000 acres) increased in that period

Mid size US #farms are too large to sell direct to consumers (eg-farmers markets) and too small to sell to the largescale distributors that supply large stores. They have been especially hard hit by consolidation, as there are ever-fewer mid-size businesses to buy from & sell to

Result=Majority of US food comes from biggest operations. In 1991, farms with $1 million or more in GCFI accounted for 1/3 of all farm production; by 2015, they accounted for more than half; while small farms with less than $350,000 in GCFI dropped from 46% of production to 25% !

Consolidation at farm level occurred alongside greater farm specialization. Farms reorganized to focus on either livestock or crops, or on a greater specialization, which reflects the shift from raising farm animals on diversified farms to large-scale animal feeding operations !

From 1996~2015, % of corn grown on US farms that also raised livestock fell from 46% to 33%. Few farms grow only 1 crop, but farms increasingly grow just 2 or 3, down from 4 to 6. Livestock production shifted towards farms that rely on purchased feed rather than growing own feed

This trend is reflected not just in production, but in control of the land as well. Essentially, a small number of very large farms control most of the farmland. The average farm had 155 acres in 1935, which had grown to 444 acres in 2021 !

Domination of select few in the the #seed market is alarming, the Big 3, along with France-based Limagrain, now control 66% of seed sales globally. For specific crops, the % are even higher: even before these mergers, 3 firms controlled 60% of the global vegetable seed market !

For the most widely-planted row crops, genetically modified varieties, the vast majority of which contain genetics patented #GM by Monsanto, accounted for 92 percent of corn, 94 percent of soybeans, and 98 percent of cotton planted in the U.S. in 2019

Slaughter capacity in U.S, is extremely concentrated: 7% of beef plants process 95% of all U.S beef; while 5% of pork plants, with just 33 facilities process 92% of pork. In 1977, 38% of hogs were slaughtered in plants processing more than 1million hogs/year; in 2019, it was 92%

There are similar trends in dairy marketing and processing. The four largest dairy cooperatives marketed 41 percent of all U.S. milk in 2017, though that percentage is much higher at the local level, where there is sometimes only one processor

U.S #Dairy processing plants shrank by half from 2017 to 1970, while number of dairy Coops' –farmer run organizations formed to give farmers a better shot against big corporations, but which now too often look like corporations themselves declined from 1244 in 1964 to 118 in 2017

Dairy sales shifted from open cash market to contract arrangements between processor & grower. While contracts can guarantee a secure future price for a farmer, the reality is that buyer generally sets the terms, which can be extremely restrictive for & unfavorable to the farmer.

In 2017, more than one-third of all commodities were produced under contract, with large variations by sector. More than 95 percent of broiler chicken, for example, was raised under contract.

Finally, adding a new twist to the shape of vertical integration, largest food retailers r now getting into livestock/dairy markets themselves. Their reason, ironically, is that consolidation has raised the prices they pay their suppliers

Their solution is further consolidation.

This is the U.S #food model, which many in want India to ape! Consolidation in the farm and food sector means that more of the market is controlled by fewer businesses, giving those businesses more power and leaving less control for everyone else. Do we want such a model, decide.