A Food System Designed For Shareholder Profit

Tom Philpott’s essay on how the pork industry serves as an economic negative to the Iowa communities in which factory farms are concentrated is quite interesting.

In short, since 1982, the number of hog farms in Iowa has declined rapidly while production has skyrocketed. This means more pigs concentrated into huge farms. Those megafarms not only force pigs to live terrible lives but are also massive environmental hazards in places people don’t want to work or live unless they lack the sense of smell. This has happened because the Big Four meatpackers have consolidated control of the hog markets and have forced small farmers out of business in the name of efficiency. One might think that the counties with megafarms would have benefited economically, but this isn’t true. Today, hog-centric counties in Iowa have slightly lower per capita income rates than non-hog counties, a quite different picture from 30 years ago. That’s partially because the corporations have pushed down real wages for meatpacking workers.

Our internalized rhetoric of market efficiency (which even most progressives subscribe to without thinking) means that we think that this consolidation (even with its unfortunate side effects) is obviously worth it because it means lower food prices. But Philpott shows that corporations have little incentive to pass on lower prices to consumers while they have tons of incentive to pass on costs when food prices go up. So essentially, consolidation in the Iowa hog industry has led to more money in the pockets of corporate shareholders at the cost of everyone else involved. Just like the rest of the American economy since the 1970s.

17 comments on this post.
  1. DrDick:

    Capitalist markets are highly efficient – at extracting rents for capitalists at the expense of everyone else. At anything else, not so much.

  2. James E. Powell:

    Almost everything is like this. And almost all of it was built, developed, or constructed since the end of WWII. Some of it more recently. Yet Americans accept it as permanent and unchangeable.

    You can try to explain it to them. But almost no one wants to hear it because the implications are that they would have to make major changes in their lives. Too much work. Too much anxiety.

  3. ploeg:

    Thing is that the small farmers will generally take the side of the corporate farms in most disputes, even to their detriment, because they don’t want government regulating their business.

    Also, the areas in which hog farming is strong and expanding are areas where you don’t have a lot else going on. The smarter, more energetic people move elsewhere to make a buck (the Ames-Des Moines corridor or the Cedar Rapids-Iowa City corridor in state, or the Twin Cities, Kansas City, or Chicago out of state). So the people left don’t feel like they have a lot of options: let the big boys in, or let the big boys go elsewhere in state or go to North Carolina and have the towns dry up completely eventually, or take the risk of trying something new (like organic) and hope that you’re smart enough to market your product successfully.

  4. Left_Wing_Fox:

    Well, trust-busting regulation seems to have been pretty effective initially; barring cherry picking of data, it appears the major acceleration happened post Reagan deregulation and the mergers and acquisition.

    The big question is what do we replace this with? Is there an effective market capitalization system which encourages market diversity rather than conglomeration?

  5. Erik Loomis:

    A state-enforced breakup of large monopolistic corporations might be a good start.

  6. Gepap:

    If all the externalities inherent in this type of farming where priced into the meat, it would not be so cheap.

  7. tt:

    But Philpott shows that corporations have little incentive to pass on lower prices to consumers while they have tons of incentive to pass on costs when food prices go up.

    Philpott doesn’t show this, he says the FWW study shows this. However, the FWW study doesn’t show it directly either, instead citing a bunch of other studies which actually show mixed results, according to the authors’ own summary. For the particular result you are referencing, the authors preface their description with “some studies have shown” and then reference only a single study.

    I tried to track down their first cited study, which the authors quote as saying that consumer prices for pork have “increased substantially.” The study is “The changing economics of US hog production”. However, this study states that prices at meatpacking plants actually track prices at the farm quite well (which have declined by ~30% from 1992-2004), and therefore doesn’t explain the divergence of retail prices. This study lists some other factors which make explain the divergence: “slower productivity
    growth in the retail sector, greater input price inflation for retailers, and
    increasing value added.”

    So, maybe consumers have benefited from consolidation? At least the picture doesn’t seem as clean as the one you’re painting, 4 degrees away from people doing the actual analysis.

  8. ploeg:

    It’s not clear that a breakup would be constituted to the benefit of farmers. Much of the problem is that there just aren’t that many packing plants anymore. So back in the day, you might have two packing plants within 50 miles of your farm, and you could call them up and see which one gave you the best price. Nowadays, maybe one of those plants is still in operation, if you’re lucky, and your alternatives could be clear across the state, and transporting your hogs to those places would take time and eat into your profits. So we have a basic infrastructure gap here, and it’s not clear to me how it is in the successor companies’ interests to fill that gap. Certainly farmers have tried to fill the gap themselves, but were swallowed up in the end.

  9. mch:

    Not to mention, flavor. Pork produced in the mass way (largely because of the hog sub-species appropriate to that method — cf. tomatoes!) may be cheap for the consumer, but it has almost no taste.

    A chicken in every pot — for Sunday dinner. Now, there’s a worthy goal. And that chicken had flavor.

    Of course, that era of once-a-week chicken also produced lots of rickets and such. Finding the golden mean betwixt production/distribution/nutrition/consumption: very hard.

  10. cpinva:

    economies of scale only work to the benefit of consumers when a monopoly isn’t involved.

    A state-enforced breakup of large monopolistic corporations might be a good start.

    this would be a direct result of the aforementioned.

    Much of the problem is that there just aren’t that many packing plants anymore.

    the monopoly has its own packing plants, there is no incentive for anyone else to open one. given an incentive (more independent pig farmers), and independent packing companies to serve them will follow.

    it’s called “econ 101″

  11. cpinva:

    which is ironic, since government already regulates their business, and has since the great depression.

    Thing is that the small farmers will generally take the side of the corporate farms in most disputes, even to their detriment, because they don’t want government regulating their business.

    what it really means is that they aren’t particularly bright.

  12. bradP:

    Our internalized rhetoric of market efficiency (which even most progressives subscribe to without thinking) means that we think that this consolidation (even with its unfortunate side effects) is obviously worth it because it means lower food prices.

    That’s not market efficiency. Market efficiency is timely and accurate prices that approach an economic equilibrium.

    There are massive government subsidies that distort the market and make it inefficient.

    And yes, megafarms have some pretty big externalities that basically precludes market efficiency at this level of corporate development.

  13. bradP:

    Thing is that the small farmers will generally take the side of the corporate farms in most disputes, even to their detriment, because they don’t want government regulating their business.

    Granted I haven’t lived in a farming community for a while now, but back when I did, there seemed to be some serious resentment towards the corporate farms and regulation.

    In many cases the resentment towards both is justified, as with the feral pig story Loomis posted a while back, commercial farms and government agencies can work together to be extremely hostile towards small farms.

  14. ploeg:

    Farmers like “regulations” that result in checks from the government. As for other regulations, there’s plenty of farming exemptions. You don’t even need to pay minimum wage if you’re in agriculture.

  15. ploeg:

    Nobody’s going to open a new packing plant with the benefit of “independent pig farmers” in mind unless it’s the pig farmers themselves, and they’ve already tried that. The current set of packing plants satisfies the demand for pork as it is currently constituted, and it’s a lot easier to crank up production at an existing plant than it is to build a new one, so it will be awhile before you see any new packers, if ever. And if you split up the existing packing companies, the successor companies will simply split up the existing plants and continue as before.

    This is a case where the bed has been shat and can’t easily be unshat.

  16. Anonymous:

    and yes, market efficiency is a chimaera that is based on the standard ridiculous assumptions present in neo-classical economics

  17. zezya:

    Twig:

    a person of your caliber

    A person of what caliber, exactly? They came here to lie because they were paid to do so. Their post does not make them seem intelligent, honest, noble, or any other quality associated with people of “high caliber.” On that note, you yourself seem to be of increasingly questionable caliber–exactly what is it you think you add to this forum?

    Twig Jun 25, 11, 10:54AM | #6
    Joined: May 10, 11
    Threads: 2
    Posts: 141
    pheelyks:

    A person of what caliber, exactly?

    Low caliber.
    pheelyks:

    On that note, you yourself seem to be of increasingly questionable caliber–exactly what is it you think you add to this forum?

    I do not think you are the right person to ask me such a query. Sh*t

    pheelyks Jun 25, 11, 11:42AM | #7

    Twig:

    I do not think you are the right person to ask me such a query. Sh*t

    Any one here has every right to question someone else’s legitimacy. Your lack of explanation is more indicative of your character and potential nefariousness than a simple acknowledgment that you’re a Kenyan writer looking for a new way to scam customers.

    Twig Edited by: Twig Jun 25, 11, 12:08PM | #8
    Joined: May 10, 11
    Threads: 2
    Posts: 141
    pheelyks:

    that you’re a Kenyan writer looking for a new way to scam customers.

    Can you prove this. You are just fond of making unsubstantiated allegations. If you are sure I am a scamming writer, go ahead and expunge my username. Fu*k. You think you are the King/Prince of this forum. Provide evidence to show that I am indeed a scamming writer. How many students have I scammed? How many Pheelyks? Provide a list of their names and the amount of money.

    pheelyks Jun 25, 11, 05:09PM | #9

    Twig:

    Can you prove this.

    No.
    Twig:

    You are just fond of making unsubstantiated allegations

    No, I’m not, but when you have no apparent reason for posting here and refuse to answer a direct question pertaining to that purpose, I will voice my suspicions aloud.
    Twig:

    If you are sure I am a scamming writer, go ahead and expunge my username.

    I am not a moderator here, nor do I have any influence over the moderators (I don’t even know who they are). I am not sure that you’re a scamming writer, but that’s certainly what it seems like. Since you won’t share what you’re actually doing here, I am forced to guess.
    Twig:

    You think you are the King/Prince of this forum

    No.
    Twig:

    Provide evidence to show that I am indeed a scamming writer

    I don’t have any, and never claimed to. Again, all I have are my suspicions.

    If you’re not a scam writer, tell us what your purpose for being here is. It certainly isn’t to add anything useful to the discussions.

    Twig Edited by: Twig Jun 25, 11, 10:25PM | #10
    Joined: May 10, 11
    Threads: 2
    Posts: 141
    pheelyks:

    I don’t have any, and never claimed to. Again, all I have are my suspicions.

    Who really cares? If you have admitted that you are not the moderator, any future question(s) from you regarding my credibility will go unanswered. Meanwhile, keep on suspecting me. I am a writer with integrity, and writes for 20 private clients.

    Twig Edited by: Twig Jun 25, 11, 10:42PM | #11
    Joined: May 10, 11
    Threads: 2
    Posts: 141
    pheelyks:

    If you’re not a scam writer, tell us what your purpose for being here is.

    And what about you? Your reasons for being here are:
    1) To criticize others
    2) To make unsubstantiated claims
    3) To trade insults
    4) To write crap
    5) To show off that you are the most talented writer in the world. Do you possess a PhD in English Language? No.
    Do they really help anyone? No.

    craftywriter Jun 25, 11, 11:10PM | #12
    Joined: Jun 25, 11
    Posts: 3 Twig, never argue with a fool (pheelyks), he will lower you to his level, and then beat you with experience.

    craftywriter Jun 25, 11, 11:34PM | #13
    Joined: Jun 25, 11
    Posts: 3

    pheelyks Jun 26, 11, 09:55AM | #14

    Twig:

    I am a writer with integrity, and writes for 20 private clients.

    Wow. 20. They must all be really pleased at the barely passing grades you are able to earn with those ESL skills.
    Twig:

Leave a comment

You must be