THE NEW ROAD:
Can it be built with today’s
agriculture?
Dennis Keeney
Institute for Agriculture and Trade
Policy
Minneapolis
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Institute for Agriculture
and Trade Policy
IATP is a non-profit organization based in
Minneapolis. It was founded in 1986 as an
independent research organization to address
natural resource conservation and agriculture
policies. IATP's mission is to foster
economically, socially and environmentally
sustainable communities.
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Iowa has been hit with a series of
commodity potholes
 A commodity is: standardized, produced at lowest
cost and in open world-wide competition, lowest
cost producer gets the sale
 Corn, soybeans, cotton, rice, pork, chicken,
shrimp, bananas, coffee, wheat, you name it, most
of the world’s food and fiber are based on
commodities, they are a key part of the world’s
food systems
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But commodity potholes lead to:
Overuse of natural resources
Soil, water and air pollution
Decline in farmer income and rural
communities
Competition among farmers leading to farm
consolidations
Technology treadmills
Exodus of farmers
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IOWA ESTIMATED CROP PRODUCTION
COSTS, 2003 (Duffy 2003)
Corn After SB
Machinery
$79.55
Seed, Chemicals 125.10
Labor
23.40
Land
135.00
TOTAL
363.04
$/bushel
$2.42
CBOT, 3/1/03
$2.31
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SB after Corn
$43.88
84.47
22.05
135.00
284.90
$6.33
$5.77
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The commodity system led to the
1980’s farm crisis
The Russian wheat deal of 1972 started
globalization, industrialization, soaring food
demand from infusion of petrodollars and rapidly
increasing commodity and land prices
– Which led to decline in demand, overproduction, over
capitalization, and a collapse in the economic systems
supporting agriculture
– And to a complete change in the way we do business:
the restructuring of agriculture
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Restructuring of Food Systems
Vertical Integration
Horizontal Integration
Globalization
Retailing
Food Clusters
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Vertical Integration
Started with centralized animal production,
growing on contract, starting with broilers and
now in hogs turkeys, beef.
Changes the “farmer” to the “grower”
Grower provides buildings, land, equipment
and labor
Integrator supplies animals, feed, management,
marketing
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Horizontal Integration
Concentration within industries, limiting market
access and controlling international markets
Animals
Beef packers: 81% by Tyson, ConAgra, Cargill and
Farmland
Pork Packers: 59% by Smithfield, Tyson, ConAgra
and Cargill
Pork Production: 46% by Smithfield, Premium
Standard, Seaboard and Triumph Pork Group
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Horizontal Integration in Plant
Products
• Terminal Grain Handling: 60% by Cargill,
Cenex, ADM and General Mills
• Corn Exports: 80% by Cargill, ADM, Zen
Noh
• Soybean Exports: 65% by Cargill, ADM
and Zen Noh
• Soybean Crushing: 80% by ADM, Cargill,
Bunge and AGP
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Top Food and Beverage
Companies, 1999

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







Nestle SA
Phillip Morris Companies Inc
Conagra, Inc
Pepsico, INX
Unilever
Coca-Cola
Cargill
Diaglo
Mars, Inc
ADM
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Top Grocery Retailers
•
•
•
•
•
•
•
•
•
Wal-Mart USA
Carrefour, France
Ahold, Netherlands
Kroger, USA
Metro, Germany
Target, USA
Albertson’s, USA
Rewe, Germany
Edeka, Germany
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10 countries $193 billion
22 countries $60 billion
24 countries $49 billion
21countries
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Changing agriculture structure has
changed definition of a farm, a farmer
USDA: 300,000-500,000 farms, omits very small
farms. Management, rather than labor, has
become the key definition of a farmer.
Large farms are becoming integrated into food
system clusters.
Farmers (operators) no longer autonomous because
they do not make the management decisions and
profits accrue to integrators and food clusters
rather than the local community
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Does the US really need farmers?
About half of the world makes less than $2/day and
many are farmers. Land costs also very low in
other countries and therefore US agriculture is not
competitive on the global scale and must be
subsidized
The triumph of global capitalism is that more than
half of the worlds 100 largest economies are
centrally planned for the primary benefit of the
wealthiest 1% of the world’s people
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Building the New Road
Social forces are building here and
worldwide for changing the global
economic system leading to new
opportunities
Connecting food systems to consumers
Recognizing environmental benefits of agriculture
Renewable energy
Marketing the landscape
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Connecting to Consumers
 Organics (becoming a commodity?)
 Community supported agriculture
 Specialty crops (3rd crop)
 Local foods (restaurants, institutions, grocery)
 GMO-free crops (European)
 Healthy meats (low fat, grass fed, special breeds)
 Certification of green cropping systems (bioplastics, energy)
 Country of Origin Labeling (Opposed by Ag,
USDA)
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Environmental Benefits
 Government Programs
 New Farm Bill has many conservation entitlements,
but full funding not likely
 Nutrient Trading
 Selling BMP’s to point source industries
 Carbon Credits
 Tying carbon up in organic matter long term cutting
down on atmospheric carbon dioxide buyers are
smokestack industries
 Watershed Protection
 Municipalities paying for establishment of BMP’s
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Renewable Energy
 Wind industry, in infancy but showing much
promise
 Biomass, many opportunities, but more
technology needed. Largely for local electric and
heat generation
 Liquid fuels, primarily corn based ethanol
 Some advantages to farmer owned cooperatives
 Becoming a commodity, control by ADM, Cargill
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Marketing Your Landscape
Agro-Tourism
Farm Visits
 Bed and breakfasts, farm stays
Pick your own
Hayrides, etc
Hunting, fishing, hiking
Regional Themes
Silos to Smokestacks
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THE NEW ROAD
Current Attitude
“In the long term we are all dead”
New Vision
“Work outside the commodity systems to establish
new contracts with society”
Many processors and marketers have been left out
of the current agriculture structure, these offer
opportunities for partnerships, contracts and new
joint ventures
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Commodities are on the global
superhighway
Ag cannot export its way to prosperity
There are ways to get off the highway, but
the new road has lots of difficulties and
turns
Need new partners, innovative thinking,
regional, actions
Do it ourselves, do not count on the
government
Connect with consumers
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