Resolved: That the United States should substantially change its federal agricultural policy.
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|Source: Feedstuffs, Sept 13, 1999 v71 i38 p8(1).
Title: U.S. agriculture needs leaders, not populists, to survive.
Full Text COPYRIGHT 1999 Rural Press Limited
The extent to which agriculture's leaders, rural advocates and politicians are embracing populism in response to the farm crisis is becoming increasingly concerning.
Certainly, the crisis is real and farmers need assistance in getting past the corner. However, the problem is due to two factors: A decrease in international trade, as previously explained on this page (Feedstuffs, Aug. 23), and a need to encourage farmers and livestock producers to establish and/or join food production systems with processors, retailers and other parties who have interests in food production.
Contrary to populist theories, the problem has nothing to do with consolidation and issues such as price discovery, and the solution is not the traditional cash infusion and other rescues that leaders call for in every farm crisis and politicians rush to hand out, nor is it ranting and raving about corporate producers who are big and getting bigger.
If those were solutions, farm crises would have been "eradicated" several crises ago. If those were solutions, government would not have spent billions of dollars in rescues. Those were not solutions. Those were old, populist responses to save leadership face and win votes.
Importantly, more people are starting to see through the failures. Consumers and taxpayers who have listened to the rhetoric and paid the bill are growing tired of being called on every few years to rescue agriculture because it lacks the competitiveness and efficiencies that all other producers have had to develop to stay in business. Public policy economist Steve Taff at the University of Minnesota recently stated the issue this way: "The urban people aren't going to continue to buy ... (these) crises every few years."
He is absolutely correct, and if leaders really want to save the family farm, they had better realize that there is a crack in agriculture's pedestal.
As previously stated, government must expand agriculture's opportunities to trade in the world, and getting negotiators to the table with fast-track authority is a critical first step.
Second, leadership - at agribusiness and food companies, at agriculture trade associations, at the U.S. Department of Agriculture and in Congress - must educate farmers, livestock producers and others of the need to fold all of U.S. agriculture into production systems that would be few in number and larger in size. This is critical, and there are two primary reasons it is.
* In the future, consumers everywhere in the world won't buy food - from fresh meat to further-processed products - that is not branded. The brand will be the consumer's guarantee that the food he or she buys is healthful, nutritious, good tasting, safe and a price value and was produced in an environmentally sensitive way, and if it's animal derived, that the animal was raised humanely.
The consumer will not buy a commodity, non-branded food product and will not purchase a brand that he or she doesn't trust.
For food companies, restaurants, retail stores and international trade, the brand is essential, and to achieve the brand, there must be control of the product from corn seed to livestock operation to packing plant to plastic wrap to store or dock. To achieve the brand, a food product must be produced in a highly coordinated production system that has the expertise to identify what consumers want and integrate that knowledge into the genetics and management practices required.
This cannot be done in the kind of uncontracted agriculture industry that exists today.
* American agriculture and its brands must access the world. More than 95% of the world's consumers are outside North America, that marketplace will expand 52% to 10 billion people in 50 years and there are only four regions in the world with the potential - the land and soil - to respond to that growth: Canada's prairie provinces, Argentina/Brazil, Eastern Europe and the Midwest and Plains of the U.S.
However, the activity on that land and soil must be linked to big, branded production systems, because to achieve the market, the brand must be produced in sufficient volume to be available everywhere in the world to compete with the Canadian provinces, the pampas and the steppes. If American agriculture is not competitive worldwide, it won't have the capital flow and other resources to even protect the home market from the large production systems that will be developed elsewhere in the world.
Accordingly, size counts and size leads.
It is essential that American agriculture - from the farms and livestock operations themselves to feed manufacturers, packers and other suppliers, processors and merchandisers - continue to consolidate because consolidation establishes the competitiveness of scale and the volume that will not only lead American agriculture in the global marketplace, but will lead agriculture into large production systems - either by example or by forcing the hesitant to play the hand.
The larger a grain merchandiser becomes, the more American grain can compete in the world; the larger a pork producer becomes, the more American pork can compete in the world, and the larger a packer/processor becomes, the more American grain and meat products can compete in the world. The larger companies and cooperatives become, the more they can link other producers to their production systems so that all producers can compete in the world.
If farmers and livestock producers and their leaders, agriculture secretaries, attorneys general, politicians and others resist and seek to stop consolidation, the more they will disqualify American agriculture in the world.
Based on the best estimates of analysts, economists and other sources interviewed by this publication, American agriculture must now quickly consolidate all farmers and livestock producers into about 50 production systems (Feedstuffs, Feb. 8). Each system, depending on its brands - its products - would include thousands of grain producers and other farmers, thousands of beef cattle producers, thousands of hog producers, thousands of dairy producers, egg and poultry producers, fruit and produce producers, feed manufacturers and other suppliers, packers, processors, distributors and probably restaurants, retail stores and exporters.
Each production system would include several "lines," e.g., a system may be a beef/milk/produce system. These systems may well cross borders to include members from two or more countries and may themselves link with other systems to unify brands and competitiveness of size, e.g., a beef/milk/produce system may link with a pork/egg/turkey system.
These systems will be built by existing interests (by one or more producers, suppliers, processors, retailers, or, ideally, a combination thereof) who have already achieved and seen the success of brand, market and size and realize that, in a globally important marketplace, their best interests are tied to others who will link with them.
These systems will have precise production protocols from genetics to animal health and nutrition to processing, packaging and shipping technology to merchandising strategies that members will contract to honor to create and defend the brand's integrity.
These systems will produce high-quality products that will command higher value and return that to members, using criteria such as level of investment or risk.
These systems - not cash infusions, mandatory price reporting or investigations of marketing agreements and mergers - will save the family farmers and ranchers, independent producers and small suppliers, processors and merchandisers, who have made a decision to become even more entrepreneurial by joining such systems.
These systems will solve the farm crisis once and for the last time.
However, putting these systems together will be a Rushmorean task that must begin now and be done with a sense of urgency. It is time to say to the voices of anger and fear and resistance that they either need to join the process or get off the mountain.