Rural America in a Globalizing World: Problems and Prospects for the 2010's

by Conner Bailey, Leif Jensen, Elizabeth Ransom

Overview

This fourth Rural Sociological Society decennial volume provides advanced policy scholarship on rural North America during the 2010’s, closely reflecting upon the increasingly global nature of social, cultural, and economic forces and the impact of neoliberal ideology upon policy, politics, and power in rural areas.

The chapters in this volume represent the expertise of an influential group of scholars in rural sociology and related social sciences. Its five sections address the changing structure of North American agriculture, natural resources and the environment, demographics, diversity, and quality of life in rural communities. 

 

Product Details

ISBN-13:	9781940425108
Publisher:	West Virginia University Press
Publication date:	08/01/2014
Series:	Rural Studies Series
Edition description:	1st Edition
Pages:	816
Product dimensions:	5.90(w) x 8.90(h) x 1.60(d)

About the Author

Conner Bailey is Professor of Rural Sociology at Auburn University. He is a past President of the Rural Sociological Society.  Leif Jensen is Distinguished Professor of Rural Sociology and Demography at Pennsylvania State University. Elizabeth Ransom is an Associate Professor of Sociology at the University of Richmond. 

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Rural America in a Globalizing World

Problems and Prospects for the 2010s

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By Conner Bailey, Leif Jensen, Elizabeth Ransom

West Virginia University Press

Copyright © 2014 West Virginia University Press
All rights reserved.
ISBN: 978-1-940425-12-2

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CHAPTER 1

Economic Concentration in the Agrifood System: Impacts on Rural Communities and Emerging Responses

DOUGLAS H. CONSTANCE, MARY HENDRICKSON, PHILIP H. HOWARD, AND WILLIAM D.HEFFERNAN

Introduction

In this chapter we examine how the industrialization of agriculture has proceeded over the last thirty years, a process we argue has had negative consequences for farmers and rural communities. We apply a Missouri School of Agrifood Studies framework to the topic of economic concentration in agrifood to inform discussions regarding rural quality of life (Kleiner and Green 2009). Our method is to document economic concentration, provide a framework for interpreting its consequences, and to present accessible information to help farmers, workers, policy makers, and community members make sense of their lived experiences of agribusiness consolidation. We present concentration data for the input, production, processing, and retailing sectors. Our research reveals that the processes of vertical and horizontal integration accelerated during the latter half of the twentieth century, resulting in an oligopolistic market structure whereby a few firms dominate across several commodity sectors at the national and global levels. Vertical integration rationalizes the commodity chains, often to the detriment of producers, and horizontal integration limits producers' access to competitive markets. Agrifood system restructuring means some actors have more power to affect their life chances than other actors. As a result, rural quality of life decreases.

We are interested in farmers' concerns regarding restructuring in the United States and the world. As Bonanno notes in the introduction to this section, farmers and consumers have challenged neoliberal restructuring and consolidation in the agrifood system. Farmers' movements have resisted agribusiness market power by making claims on the government. The recent US Department of Agriculture and US Department of Justice (USDA/USDOJ) antitrust hearings are the latest examples. Despite these efforts, economic concentration continues.

Economic Concentration in Agrifood Systems

We have researched the relationship between economic concentration of agrifood systems and rural quality of life for forty years, beginning with Heffernan's (1972) study of poultry production in Union Parish, Louisiana. His goal was to understand how the structure of the industry impacted community in historically poor areas. Despite major investments from poultry growers and the largest agricultural sales in the state, Union Parish remained a persistent poverty county from the 1960s to 1999 (Hendrickson et al. 2008a). How could this happen? Horizontal and vertical integration in the food system reduced returns to communities as returns to capital and management flowed to corporate headquarters, thereby reducing rural quality of life (Heffernan 1982; 1984). Farmers were caught betwixt and between powerful input suppliers and processors (Martinson and Campbell 1980).

Agrifood consolidation accelerated during the 1980s as the government embraced neoliberalism and loosened antitrust enforcement activities. This shift created a surge of mergers and acquisitions across all sectors of the economy, but particularly in agricultural production and processing (Heffernan and Constance 1994; Heffernan, Hendrickson, and Gronski 1999). This trend toward increased vertical and horizontal integration diffused globally, resulting in a global poultry agrifood complex (Constance and Heffernan 1991), a pattern repeated in the hog industry (Bonanno and Constance 2006; Constance, Kleiner, and Rikoon 2003).

The Missouri School method is to document agribusiness concentration by reporting the market shares in major agricultural commodities in CR4 tables (CR4 is the combined market share of the top four firms in each market). We gleaned the data from trade journals, company annual reports, government reports, and financial newspapers, among other sources. As global concentration became apparent, our research expanded into a global network of rural social scientists loosely linked through the Agribusiness Accountability Initiative (Gronski and Glenna 2009).

We are interested in the top four firms in a specific market for two reasons. First, institutional economists generally agree that when four firms control more than 40 percent of a market the oligopolistic/oligopsonistic structure confers market power to those firms (Breimyer 1965; Connor et al. 1984). Second, the theory of small group behavior indicates that actors in small groups inform their own actions through observation of other actors, rather than through openly discussing actions with others (Olson 1965). We recognize that CR4 is an imperfect assessment of power relationships within a particular commodity (James, Hendrickson, and Howard 2013), but the value of the method is the documentation of the dominant players in and across particular commodities that helps people understand the reach of corporate actors. Until recently our CR4 tables were the only organized source of up-to-date statistics on the oligopolistic structure of agricultural markets. Due to pressure from agricultural groups, the USDA-Grain Inspection, Packers, and Stockyards Administration (GIPSA) now provides current information on CR4 ratios. Our major contribution remains the identification of the top firms by name to document the progress of cross-commodity integration. For instance, Table 1.1 reveals that Tyson provides a full array of protein — beef, pork, and broilers — while Cargill produces and processes meats, provides feed, and trades and processes corn and soybeans. Another major contribution of the Missouri School has been the documentation of concentration trends in alternative markets such as organics (Howard 2009a).

HORIZONTAL INTEGRATION

We focused initially on major grain and livestock commodities, and then expanded to include input markets, food retailing, and organics. Over twenty years of CR4 data reveal clear trends. First, horizontal integration is a key component of agrifood system restructuring. Table 1.1 reveals that almost all commodities show increases in CR4 ratios from 1990 and 2011, which is primarily due to acquisitions and mergers among dominant players. We see the same process in grains and protein, where certain actors dominate across several commodities. For instance, in 1999 the top four beef packers were IBP (absorbed in 2001 by Tyson), ConAgra (now JBS, the world's largest meat company and top beef packer), Cargill, and Farmland National Beef Packing Company (a cooperative that has dissolved with packing operations, now just National Beef), with a CR4 of 79 percent. In beef, horizontal integration means that farmers and ranchers have fewer choices when they sell their cattle.

Farmers also have few options when they buy inputs such as fertilizers and seeds (Hubbard 2009; Moss 2011). Companies such as Yara, Potash Corp, Agrium, and Mosaic dominate the global fertilizer sector (Taylor 2010). Three cartels in potash and phosphorous account for about 70 percent of global trade (Blas 2010; Etter 2008). Significant consolidation has occurred in the seed industry after the introduction of Round-up Ready seeds in 1996 (Howard 2009b). About 70 percent of the corn seed and 60 percent of the soybean seed in the United States is controlled by two firms, DuPont/Pioneer and Monsanto (Pollack 2010). In 2006, DuPont/Pioneer, Monsanto, Syngenta, and Limagrain controlled approximately 29 percent of global seed sales (UNCTAD 2006), including a CR4 of 53 percent for the global proprietary seed market, with Monsanto at 23 percent and DuPont at 15 percent (ETC Group 2008). Monsanto entered the seed industry in the mid-1980s and has since acquired more than fifty seed firms, some at a cost of over $1 billion. The numerous cross-licensing agreements carried out by the Big 6 chemical/seed companies create barriers to entry for non-Big 6 seed companies (see Howard's visual representation of seed industry consolidation at www.msu.edu/~howardp//seedindustry.html).

VERTICAL INTEGRATION AND GLOBAL REACH

Vertical integration is also a key factor in agrifood restructuring. In 1999, the concept of the food chain cluster was developed from the integration of CR4 tables and research on firm strategies (Heffernan, Hendrickson, and Gronski 1999). Similar to Wilkinson's (2002) "netchains" concept, foodchain clusters are groups of dominant actors across input areas that have formal and informal agreements (e.g., acquisitions, joint ventures, or operating agreements) to operate from "seed to shelf." The clusters identified in 1999 (i.e., Cargill/Monsanto, ADM/Novartis, and ConAgra) appeared to operate with little competition within the vertically integrated cluster, but with quite dynamic competition between clusters.

The important point regarding clusters is that actors operate on a global scale and the global concentration ratios are difficult to document (McIntyre et al. 2009). The reorganization of space that Bonanno describes in the introduction to this section is thus aided by its increasingly opaque nature. Cargill operates significant processing enterprises around the globe with grain trading activities in all major ports. Tyson has significant broiler operations in Mexico and is expanding in China, India, and Brazil; Smithfield operates pork facilities in Brazil and Eastern Europe (Constance, Martinez, and Aboites 2010), and is being sought by a Chinese agrifood transnational corporation (TNC). Agrifood consolidation has generated a global food retail oligopoly with firms like Walmart (US), Tesco (UK), and Carrefour (France) acquiring or building supermarkets in Mexico, Brazil, China, and Southeast Asia (Burch and Lawrence 2007; Hendrickson et al. 2001; Reardon, Henson and Berdegué 2007; Wrigley and Lowe 2007). Walmart is the largest grocer in the United States and Mexico, the second largest grocer in the United Kingdom and the third largest in Brazil, while Carrefour is the largest food retailer in France, the second largest in Brazil, and the third largest in China (Bauerova, Burritt, and Oliveira 2010;Datamonitor 2009).

In the United States, consolidation rose from a CR5 of 24 percent in 1997 to a CR4 of almost 50 percent at the time of writing (Table 1.2), with Walmart at three times the sales of its nearest competitor (Clifford 2011). Walmart changed food retailing when it entered the market in the late 1980s. Pressured by Walmart, in 1998 Kroger bought Fred Meyer and Albertson's bought American Stores to compete with Walmart. In 2006, after the brutal reorganization of food retail and Walmart's ascent, number two Albertson's abandoned the grocery business.

Walmart uses its market power to lower prices paid to producers, manufacturers, and workers, rather than forcing consumers to pay higher prices (Lynn 2009). This is an example of buyer power, which is not the mirror image of seller power, the usual focus of antitrust regulators (Chen 2008; Grundlach, and Foer 2008). Seller power takes effect in very highly concentrated markets (at 60 percent market share), while buyer power can be exhibited in relatively less concentrated markets (around 20 percent) (Foer 2010). Farmers are at the mercy of buyer power of highly concentrated processing firms, while those firms' selling power is no match for Walmart's buying power. For example, Tyson claimed that a changing food retail environment forced it to make acquisitions to provide the entire protein case, which prompted its purchase of pork and beef packer IBP in 2001.

Economists view increasing CR4 ratios as the natural result of economies of scale; larger firms are more efficient. Therefore, nothing should alter this fundamental process that serves best the needs of society. This is the position of most agricultural economists, industry leaders, and policy makers. However, as in the examples of Albertson's and Tyson above, very few of the acquisitions involved small, inefficient firms. It is more likely the acquired firms were so well-managed and with such great potential that their stock was undervalued. These transactions are better understood by focusing on power rather than efficiency. There are larger and fewer agrifood firms, while rural populations have declined. Farmers who remain have few choices in buying inputs and marketing commodities. A sharp increase in the concentration of food retail means those firms now force restructuring upstream through the system to the worker and farmer levels, all the while decreasing consumers' choice of where and what to shop.

Economic Restructuring and Impacts on Rural Communities

The idea that the industrialization of agriculture has negative impacts on rural communities has a long history in the rural social sciences. The Goldschmidt Hypothesis predicts that a middle-class structure of agriculture supports a higher quality of life for producers and their communities (Goldschmidt 1947; Lobao 1990; Lyson 2004). A meta-analysis by Lobao and Stofferahn (2008) on the relationship between agricultural structure and community well-being found industrial farming had detrimental effects on communities in 82 percent of fifty-one studies. These negative effects included greater income inequality; decreased retail trade and diversity of retail firms; population declines; and negative health effects of large livestock operations. In the Jeffersonian tradition, independent family farms that provide the management, capital, and labor make the best citizens because the autonomy of decision making on the farms carries into the civic arena (Breimyer 1965). With economic concentration and globalization, an agrifood system based on multiple horizontal linkages with multiplier effects at the community level is replaced with a system of vertical linkages organized as global commodity chains that send profits out of the community. Consolidation at the production level results in fewer family farms overall, combined with more of those farms linked in asymmetrical power relationships to agrifood TNCs that extract wealth from rural communities (Heffernan 2000; James, Hendrickson, and Howard 2013).

(Continues...)

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Table of Contents

Preface
 
Rural America in a Globalizing World:  Introduction and Overview
Conner Bailey, Leif Jensen & Elizabeth Ransom
 
Part I Changing Structure of Agriculture
 
Agriculture and Food in the 2010s, Alessandro Bonanno
 
1. Economic Concentration in the Agrifood System: Impacts on Rural Communities and Emerging Responses
Douglas H. Constance, Mary Hendrickson, Philip H. Howard, William D. Heffernan
 
2. The Declining Middle of American Agriculture: A Spatial Phenomenon
Amy Guptill and Rick Welsh
 
3. Land Ownership in American Agriculture
Douglas Jackson-Smith and Peggy Petrzelka
 
4. Mexican-born Farmworkers in U.S. Agriculture
Eric B. Jensen
 
5. Agricultural Technologies and the Structure of the North American Agrifood System
Leland L. Glenna and Christopher R. Henke
 
6. Food Safety and Governance of the Agrifood System
Michelle R. Worosz and Diana Stewart
 
7. Changing Animal Agriculture and the Issue of Farm Animal Welfare
Jeff Sharp and Dani Deemer
 
8. Agrifood Movements: Diversity, Aims, and Limits
Clare Hinrichs and John Eshleman
 
Part II Natural Resources and the Environment
 
Connections: The Next Decade of Rural Sociological Research on Natural Resources and the Environment, Louise Fortmann, Merrill Baker-Médard and Alice Kelly
 
9. Impacts of Climate Change on People and Communities of Rural America
Lois Wright Morton and Tom Rudel
 
10. Contemporary Water Issues in Rural North America
Courtney G. Flint and Naomi Krogman
 
11. Resource Dependency in Rural America: Continuities and Change
Richard S. Krannich, Brian Gentry, A.E. Luloff, and Peter G. Robinson
 
12. The Gulf: America’s Third Coast
Robert Gramling and Shirley Laska
 
13. Biofuels and Rural Communities: Promises, Pitfalls and Uneven Social and Environmental Impacts
Theresa Selfa and Carmen Bain
 
14. New Natural Gas Development and Rural Communities: Key Issues and Research Priorities
Abby Kinchy, Simona Perry, Danielle Rhubart, Richard Stedman, Kathryn Brasier, and Jeffrey Jacquet
 
15. Got Coal? The High Cost of Coal on Mining-Dependent Communities in Appalachia and the West
Suzanne E. Tallichet
 
Part III Population Change in Rural North America
 
Rural Population Change in Social Context, David L. Brown
 
16. Demographic Trends in Nonmetropolitan America: 2000 to 2010
Kenneth M. Johnson
 
17. Population Shifts Across U.S. Nonmetropolitan Regions
John Cromartie and Timothy S. Parker
 
18. Rural Families and Households and the Decline of Traditional Structure
Jessica A. Carson and Marybeth J. Mattingly
 
19. Children and Youth in Rural America
Diane K. McLaughlin and Carla Shoff
 
20. Concentrations of the Elderly in Rural America: Patterns, Processes and Outcomes in a Neoliberal World
Peter B. Nelson
 
21. New Rural Immigrant Destinations: Research for the 2010s
Martha Crowley and Kim Ebert
 
Part IV Diversity in Rural America
Gender, Race, Ethnicity, Class, and Sexuality in Rural America, Carolyn Sachs
 
22. The Status of African Americans in the Rural United States
John J. Green
 
23. Hispanic Immigration, Global Competition, and the Dairy Industry in Rural Communities
J.D. Wulfhorst, Priscilla Salant, Leigh A. Bernacchi, Stephanie L. Kane, Philip Watson, and Erinn Cruz
 
24. Native Nations in a Changing Global Economy
Sarah Dewees
 
25. The Past is the Present: Gender and the Status of Rural Women
Cynthia B. Struthers
 
26. Rolling in the Hay: The Rural as Sexual Space
Julie C. Keller and Michael M. Bell
 
27. Rural Poverty: The Great Recession, Rising Unemployment, and the Underutilized Safety Net
Jennifer Sherman
 
Part V Rural Economies, Community, and Quality of Life
 
Economic Change, Structural Forces and Rural America: Shifting Fortunes across Communities, Linda Lobao
 
28. Education and Schooling in Rural America
Kai A. Schafft and Catharine Biddle
 
29. Work in Rural America in the Era of Globalization
Tim Slack
 
30. Rural Entrepreneurship
Lori A. Dickes and Kenneth L. Robinson
 
31. Community Organization and Mobilization in Rural America
Cornelia Butler Flora and Jan L. Flora
 
32. Community as Moral Proximity: Theorizing Community in a Global Economy
Todd L. Goodsell, Jeremy Flaherty, and Ralph B. Brown
 
33. Food Insecurity and Obesity in Rural America: Paradoxes of the Modern Agrifood System
Keiko Tanaka, Patrick H. Mooney and Brett Wolff
 
34. Thinking About Rural Health
E. Helen Berry
 
35. Housing in Rural America
Katherine MacTavish, Ann Ziebarth, and Lance George