Senator Jon Tester (D-MT) announced on May 24 that he was again introducing legislation to halt major ag mergers in an effort to combat corporate consolidation. Tester is co-sponsoring the bill with presidential candidate, Senator Cory Booker (D-NJ) and Representative Mark Pocan (D-WI).
The bill, titled “Food and Agribusiness Merger Moratorium and Antitrust Review Act,” would place an 18-month moratorium on any mergers or acquisitions in the agriculture or food sector. The goal is that this act would lead to congress proposing comprehensive legislation addressing corporate agriculture consolidation in the future.
“Less competition means higher prices and fewer choices for small family farmers as they struggle to make ends meet. This bill will help put family farmers back in control of their futures by improving access to a competitive marketplace,” Tester stated through a recent press release.
Agriculture’s first antitrust legislation was the Packers and Stockyard Act of 1921 (PSA). At that time, five companies controlled 50 percent of the cattle and hog market. The companies involved agreed to a consent decree. Packers were required to be more transparent with their transactions and stockyards had to become quasi-public utilities and needed to register with the government. In addition, stockyard owners were not allowed to deal with any of the cattle they handled, according to the act. Essentially, the PSA re-established conditions for competition.
Come 1980, the Regan administration made changes to the regulation of antitrust laws. At that time, more emphasis was put on the welfare of the consumer, not necessarily the seller. With that line of thinking, company mergers and consolidations could be thought of as favorable for the consumer, albeit detrimental to the seller.
With little antitrust regulations some major agriculture companies have been able to make consolidations. According to the “Food and Agribusiness Merger Moratorium and Antitrust Review Act,” four pork packing companies control 71 percent of the market and the top four beef packers control an alarming 85 percent. In other sectors of agriculture, the top four companies control 86 percent of corn processing, 90 percent of grain trade, 50 percent of the fluid milk market, 53 percent of the poultry market and 57 percent of the sheep market. The majority of these mergers and consolidations have taken place in the last 30 years.
The past two years alone have seen some major ag company mergers. In 2018, Bayer purchased Monsanto for $66 billion while Dow Chemical Company and DuPont completed a merger in 2017. There are now only three major companies controlling two thirds of the world’s commodity crop seed and 70 percent of agricultures chemicals and pesticides.
A positive side effect of these mergers is those companies are now in a better position to streamline innovations. It costs millions of dollars to develop a product and fewer and fewer companies have the means to move forward with discoveries. It is no surprise that agriculture demands cutting edge research, and some argue the consolidation of major ag companies gives them more opportunity to come up with viable product development.
However, these mergers have narrowed the market leaving producers with fewer and fewer outlets to market their product. The ultimate fear is total vertical integration across all aspects of agriculture. Tester and his cohorts are urging for congress to step in and try to slow down, or possibly even halt major ag mergers in the future.
Gills Stockton, a rancher from Grass Range, Mont., and a member of the Northern Plains Resource Council looks to the benefits this proposed moratorium could have on the cattle market in particular.
“The hope is that in the long run this moratorium will help establish competition in the cattle market again,” Stockton stated.
The Northern Plains Resource Council signed, along with 200 other food and agriculture companies, a letter in support of this 2019 moratorium legislation.
It can be a misconception that antitrust legislation is set to punish businesses for becoming successful when in truth, antitrust laws are set in place to ensure that fair competition exists in an open-market economy. This 2019 legislation proposed by Booker, Pocan and Tester will not do anything to the major companies that already exist in agriculture. This bill aims to set guidelines so eventually, any major company mergers in the future must first be reviewed by a commission.