The modern food industry is highly concentrated in the hands of a limited few corporations such as Nestle or Pepsico. Click here for a visual map of the 10 companies that control a huge amount of consumer brands. To truly understand how the American food industry arrived at this point, let’s go back in time and start with America’s industrialization.
Our industrialized food system has been around for less than a century, yet has undergone a huge transformation in that time. To begin, in the early 1900s, agriculture consisted of rural communities¹ where farmers cultivated a variety a crops and raised livestock. As agriculture became more industrialized, farmers started to separate crops and livestock and started to specialize. Specialization was based on the idea that by focusing on fewer crops or solely on livestock, farmers would be more efficient and therefore more productive.² For example, consider two farmers, each producing corn and beef. According to the idea of industrialization, both farmers would be better off if one of them specialized in producing corn and the other on specialized in producing beef. Each farmer could then invest in the equipment and skills necessary for only that one product and therefore be more efficient. ³ As agriculture and raising livestock became simpler, machines began to take the place of human labor for routine tasks, such as sowing or harvesting.⁴
These monocultures (producing only one crop) required the use of synthetic fertilizers and chemical pesticides to manage the nutrients in the soil and control crop pests respectively. Therefore, by 2008, agricultural chemicals were being used 5x more than in 1948.⁵ As for livestock production, the use of hormones and antibiotics began to be used to speed up the growth of the animals. The result of using chemical in monocultures and livestock production was that production then became much more predictable and reliant.⁶
Economies of Scale
As agriculture and livestock production became more and more industrialized, they also became larger so that they could profit from economies of scale. Economies of scale refers to the advantages that these businesses can obtain from expansion.⁷ In other words, these businesses start to mass produce in an attempt to outproduce their competitors. Therefore, many smaller operations are forced to go out of business. Since 1950, the average U.S. farm has doubled in size and less than half as many farms are in operation.⁸ This consolidation of the food industry was of course very successful in providing cheap food in enormous quantities. These successes hide some very important externalities though. The hidden costs have been damage to the public’s health, animal welfare and the environment.
As these businesses consolidated and grew, agriculture and other food industries became concentrated into the hands of a small amount of companies. They companies bought out their competition or merged with other large competitors. As a result, food industries ranging from seed and chemical manufacturing to food processing to fast food restaurants have come under the control of a few companies such as Monsanto or Cargill. While concentration in the food system is motivated by a need for greater efficiency, it also leave farmers and other citizens with less autonomy over how food is produced, processed, shipped and sold.⁹ Other farmers can be pressured into following their practices and may have limited control over how they raise livestock or what fertilizers they use. As well, many of these dominant corporations have food lobbies and are able to influence government regulation and policies that pertain to them.
¹Ikerd JE. Sustaining the profitability of agriculture. In: Economist’s Role in the Agricultural Sustainability Paradigm. San Antonio, TX: University of Missouri; 1996.
²Ikerd JE. Economics of sustainable farming. In: Crisis & Opportunity: Sustainability in American Agriculture. Lincoln, NE: University of Nebraska Press; 2008.
³Ikerd JE. Real costs of globalization. In: Crisis & Opportunity: Sustainability in American Agriculture. Lincoln, NE: University of Nebraska Press; 2008.
⁴Gliessman SR. Agroecology: Ecological Processes in Sustainable Agriculture. Boca Raton, FL: CRC Press; 2000.
⁵ USDA Economic Research Service. Agricultural Productivity in the United States. 2010. Available at: http://www.ers.usda.gov/Data/AgProductivity/ [Accessed 29 April 2013].
⁶Ikerd JE. Economics of sustainable farming. In: Crisis & Opportunity: Sustainability in American Agriculture. Lincoln, NE: University of Nebraska Press; 2008.
⁸Hoppe RA, Banker DE. Structure and Finances of U.S. Farms: 2005 Family Farm Report. USDA Economic Research Service; 2006