Organization for Competitive Markets Food and Agriculture Conference

The Organization for Competitive Markets (OCM) hosted a Food and Agriculture Conference, July 19-20, 2001, in Nashville, Tenn. This conference received Farm Foundation support.

The first day of the conference focused on the new competition in agriculture. This session explored the growth trends of new firms and marketing methods which could grow to compete with the concentrated firms in food and agriculture. In the food system, the niche markets are the deepest reservoir of meaningful new or potential competition.

Mark Winne spoke of how many constituencies can seek the same goals for very different reasons. Winne, executive director of the Hartford (Connecticut) Food System, gave the example of the school lunch program created several decades ago. The U.S. military, concerned about the poor nutritional status of new recruits, and farm interests, wanting an outlet for excess food, drove the ultimate creation of this program. Pam Roy, past president of the North American Direct Marketing Association, spoke of how farmers bypass the conventional food processing, distribution and sales infrastructure through farmers markets and other methods. The level of economic activity of farmer direct marketing is far larger, especially in more urban areas, than many believe.

Neil Hamilton, agricultural law professor at Drake University, told of how state governmental programs have a large impact on the ability of farmers to market directly and capture a larger portion of the consumer dollar. State food policy councils and state specific food labels are examples of how some state departments of agriculture and departments of economic development are focusing more of their resources on small farmers. Randy Torgerson, USDA Rural Development, presented information on the cooperative form of business organization, which is receiving increased attention during this period of food industry consolidation as a way for farmers to capture more of the consumer dollar. The federal government is increasing its budget to support farmer-owned processing, distribution and sales entities.

Vanessa Langston, of the Center for Industrial Services in Nashville, spoke of how her organization can help farmer-owned businesses keep abreast of, and bid on, government food procurement contracts. Clara Klotz, an ag economist with the USDA Wholesale and Alternative Markets Program, told about how the USDA is increasingly tracking and assisting farmer direct marketing efforts.

Mike Callicrate talked about how his company, Ranch Foods Direct, is responding to consumer demand for natural beef produced by families. Callicrate’s company is finding widespread demand for high quality beef produced without hormones or subtherapeutic antibiotics and is working to return more money to farmers who produce this beef.

Barbara Meister of America Fresh in California, uses a computer system and website to provide an efficient forum for buying, selling and delivering produce in and around major urban areas. The system matches farmers’ supply with restaurants’ demand with regard to volume and timing in the San Francisco Bay area. Meister is seeking to franchise the business across the country in target areas.

Stan Rosendahl, of Family Quality Pork Processors Cooperative, is aggressively developing a pork processing and sales company owned by Nebraska pork producers. He told of the challenges and opportunities he found as the cooperative strives to build a packing plant to serve his producers and to sell pork to food service and retail outlets.

The second day of the conference focused on conventional agriculture and how we can correct the problems with strategic behavior and abuse of power in the marketplace. The first panel dealt with the issue of increasing concentration among food retailers.

Ron Bloch, a former Federal Trade Commission attorney, discussed the problems of the increasingly concentrated retail supermarket sector. He spoke of the issue of slotting fees (retailers demanding large payments from food sellers for the privilege of getting shelf space) as well as the ramifications for small communities who lose their local grocery stores.

Bert Foer, of the American Antitrust Institute presented the newly emerging phenomenon of “category captains” as a mechanism for food manufacturers to engage in improper opportunistic behavior. Large supermarkets increasingly turn over the management of a food category (such as pet food) to the dominant supplier. That supplier then gets the information on competitors to design pricing strategies and allocate shelf space. The potential for abuse of the information is great and the potential for new competitors to get shelf space diminishes.

Ron Cotteril, ag economist from the University of Connecticut, presented his recent study of the Northeast U.S. dairy sector concluding that Suiza Foods, the dominant dairy processor there, had used its power to improperly raise milk prices. Cotteril directs the Food Marketing Policy Center. His study also concluded that the Northeast Dairy Compact had little impact on consumer milk prices.

Art Jaeger, of the Consumer Federation of America (CFA), gave a consumer perspective on food issues. He said that consumers are very concerned about food safety but have not been complaining of high food prices, even though food prices have not declined when farm gate prices decline. Nonetheless, he said that he is very interested in taking action if there is proof of a link between industry concentration and higher prices, such as in the Cotteril study.

Brett Kay, of the National Consumer League (NCL), also said that food safety was a major consumer concern as well as biotechnology and other issues. He agreed with Jaeger that consumers have not been complaining about high food prices. NCL, however, is very concerned with retail and agribusiness consolidation and is interested in working with farmers to remedy the problem.

The next panel focused on the federal government’s recent activities relating to the agricultural marketplace. John VanDyke, USDA Market News Service, informed participants about how USDA is altering the much criticized 3-60 rule in the Mandatory Price Reporting system. That rule prevented the reporting of many livestock market reports because of an insufficient number of buyers. VanDyke said that USDA would implement a 3-70-20 rule to increase the number of reports.

Warren Preston, USDA Packers & Stockyards Programs, described his agency’s activities in enforcing the Packers & Stockyards Act. He discussed recent cases and how the agency is responding to recent government reports which were critical of its activities. Doug Ross, Special Counsel for Agriculture at the Department of Justice Antitrust Division, presented on the history of antitrust law in agriculture. He also discussed recent cases undertaken by the Antitrust Division in the grain processing, farin equipment, and crop seed industries.

The last panel was a presentation of divergent views on the preferred structure of agriculture. Roger McEowen, professor of agricultural law at Kansas State University, told of how the law reflects, over the long term, the values and preferences of the citizenry. His overarching point was that there are many public policy considerations in legislating in the agricultural arena. Economic efficiency is merely one of the considerations. Concepts of fairness, the environment, hunger, rural community viability, worker safety, etc. are some of the many other considerations.

Luther Tweeten, professor of agricultural economics (now emeritus) at Ohio State University, discussed the successes of agribusiness in this country. “Farmers should get down on their knees each day and give thanks for agribusiness,” he said. His experience in Russia and the third world showed that major problems with hunger and food distribution result from the lack of a strong agribusiness infrastructure. However, in this country, the agribusiness sector has provided plenty of food, efficiency and profits.

OCM received much praise for the quality and content of the conference. The participants consisted primarily of decision makers in the government, leaders in the nonprofit sector and food producers active in the policy making arena. One immediate example of impact comes from Oklahoma. The state agriculture commissioner from Oklahoma participated along with the chair of the state senate Committee on Agriculture from that state. They are now actively exploring the establishment of a state Food Policy Council to promote Oklahoma grown food. There are also efforts to start a Food Policy Council in Massachusetts.

Anecdotal evidence, through comments from participants, reveals that the conventional and “alternative” agriculture communities found more common ground than they realized they had. Some conventional farmers who had dismissed niche markets as irrelevant are now considering them as a potential alternative. State senators from Nebraska, Oklahoma and South Dakota are incorporating small agriculture and direct marketing into their thought processes in policy work.

Further, the consumer groups present are now considering competition policy in the agriculture sector as relevant to consumers. Art Jaeger of the Consumer Federation of America (CFA) is now moving towards the position that concentration can cause upward pressure on food prices and that consumer choice is a significant consideration. OCM representatives will hold a follow up meeting with CFA on September 10, 2001 in Washington to look at the commonalities of interest between farmers and consumers with regard to the red meat sector.

More generally, the conference exposed people to others not in their networks. There were significant informal discussions and exchanges of information outside the formal sessions. OCM believes that participants left with a broader view of food and agriculture, commonalities of interest with others in the sector, and a clearer understanding of industry structure dynamics.


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