, DC ? Sen. Chuck Grassley of Iowa this morning questioned economists, government officials, agricultural leaders, and industry representatives about how family farmers are impacted by the mega-merger trend in agri-business today and what the effect might be down the road if "merger mania" goes unchecked.
"I've been asking tough questions about increased consolidation within the agricultural seed, grain, biotechnology, transportation, meatpacking, and banking industries," Grassley said. "We need to take into account the long-term implications of this mega-merger trend for the family farmer, who has unique status in our national and international economy. It is very important that we see increased scrutiny by Congress and our federal and state regulators in this area so that marketplace conditions are kept healthy and promote competition."
As part of a sustained effort to give special attention in Washington to the impact that mergers have on all of rural America, Grassley requested the hearing convened early this morning by the Senate Agriculture Committee.
Grassley said that growing interest in consolidation in the agriculture industry was heightened late last year when Minneapolis-based Cargill, Inc. announced a $300 million deal to buy the grain operations of New York-based Continental Grain Company. Grassley is pro-actively monitoring the Justice Department anti-trust review of this mega-merger, which would affect the control of export sales, grain storage, and barge and rail service for corn and soybean farmers, and could result in control of nearly one-third of all U.S. grain exports.
"As companies work to keep a competitive edge in the global marketplace, more horizontal buy-outs and vertical mergers will take place. Agriculture benefits from the resulting efficiencies, stronger international market power and the expanded research, especially in biotechnology. But how big is too big? I'm concerned that ownership within the hands of too few within the food and feed chain could harm small and mid-sized producers," Grassley said.
In particular, Grassley today focused on:
- the impact on farmers' income of vertical integration in agricultural production. Grassley said the issue is, does the fact that a smaller number of companies control more aspects of ag production really increase efficiency or simply reduce farmers' profits? Grassley pointed to USDA figures that indicate since 1980, a farmer's share of every food dollar spent
- decreased from 37 cents to 23 cents in 1998. "Is it a coincidence that as vertical integration increases the farmers' profitability decreases?" Grassley asked. "Farmers can't afford to see their incomes threatened any further. So we need to take a good look at the reduction in competition in seed technology, storage, transportation, trading, exporting, and retail merchandising."
- the impact of mega-mergers on trade opportunities. The recently announced purchase of Continental Grain by Cargill could mean that one company controls up to 42 percent of all corn inspected for export, according to the U.S. Secretary of Agriculture. "If one company controls a large portion of the country's grain exports, there's potential for producers to be cut-off from international trade opportunities. We need to make sure that our export competitiveness is not diminished," Grassley said. In addition to his seat on the Senate Agriculture Committee, Grassley is chairman of the International Trade Subcommittee.
- the extent to which consolidation in agri-business may have contributed to record-low porkprices. "Along with the obvious need to respond to the pork price crisis immediately, Congress and the administration also need to consider what can be done to prevent the situation we have today from repeating itself," Grassley said. "That's why I'm committed to seeking mandatory price reporting, in addition to new markets, tax reform and expanded use of federal dollars dedicated to food aid." Grassley said that "anti-competitive pricing practices on live hogs or pork will not be tolerated." In December, he wrote a letter to the nation's 31 meat packing facilities and called upon them to take three basic steps to address the current glut in the market: to expand their slaughter capacity, provide more and better information about pricing and participate in programs that promote pork.
- the impact on consumers. Grassley said that efforts to reduce overhead and streamline business operations may lower prices for consumers and result in a more comfortable profit margin for businesses and shareholders. "Conversely, they may bring fewer consumer choices," he said.
In 1998, Grassley won a commitment from the Justice Department that all mergers reviewed by the anti-trust department would be considered for their particular impacts on rural America. "A free market economy depends upon competition to give consumers, workers, shareholders, and business owners a fair shot at the American dream. Yet, consumer prices could climb and choices could be limited if corporate mergers and acquisitions step on the toes of fairness in the marketplace. This is especially true for rural areas of the country," Grassley said.
Iowa's senior senator has put the spotlight on this concern from his senior position on the Senate Judiciary Committee. The panel is responsible for congressional oversight of the Justice Department.
