Wednesday, February 10, 2010
Posted by Mike Sykuta (Agricultural and Applied Economics, University of Missouri-Columbia)
Learn from history, don’t repeat it.
Antitrust laws originated in Midwest state like Missouri in the late 1880s when small farmers banded together in the face of falling agricultural commodity prices to stand against the competitive pressures of larger, more efficient farming operations. Over a century later, it is, as Yogi Berra said, “déjà vu all over again.”
Of the almost 2.2 million farms in the USDA’s 2008 Agricultural Resource Management Survey, the 1.8 million smallest farms lost money on their farming operations (on average) even after accounting for government program payments. These farms represent only 10% of the value of agricultural production in the US, yet received roughly 28% of government payments.
In addition, these small-scale farmers are less likely than their larger competitors to shop beyond the nearest town for key inputs, to shop for the best price from suppliers, to negotiate price discounts, or to lock in prices for inputs. Small-scale farmers are also much less likely to market their products using contracts or to use market-based risk management tools. In short, small-scale farmers fail to (or are simply unable to) take advantage of market opportunities that larger, more efficient farms do. That large farms do engage in these activities suggest a very competitive agricultural economy.
Although antitrust has long been used as an anticompetitive club by economically inefficient competitors, such applications do more harm than good. The agriculture sector would be better served by eliminating the subsidies that sustain marginal producers than by using antitrust to penalize more efficient, better managed farming operations and other firms along the rest of the food value chain. DOJ’s antitrust inquiry will, at best, simply perpetuate the inefficient industry fringe or, more likely, inhibit the kinds of technological and market innovations that have provided US consumers and the world with a safe, reliable food supply.