the new road 3/13/03dennis keeney1 the new road: can it be built with today’s agriculture? dennis...
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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
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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.
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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
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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
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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
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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
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Restructuring of Food Systems
Vertical IntegrationHorizontal IntegrationGlobalizationRetailingFood Clusters
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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
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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
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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
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Top Food and Beverage Companies, 1999
Nestle SA Phillip Morris Companies Inc Conagra, Inc Pepsico, INX Unilever Coca-Cola Cargill Diaglo Mars, Inc ADM
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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
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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
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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
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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
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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)
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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
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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
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Marketing Your Landscape
Agro-TourismFarm Visits
Bed and breakfasts, farm stays
Pick your ownHayrides, etc
Hunting, fishing, hikingRegional Themes
Silos to Smokestacks
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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
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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