Mega surprise on mega ag mergers

You know there’s something up when you give farmers the chance to complain about grain companies and they don’t take it.

I had that experience recently when I ran a Twitter poll asking farmers about their experiences with grain companies and whether that relationship had gotten worse in recent years.

To my surprise few farmers (of the 316 people including a few non-farmers who responded) seemed to feel think the situation had worsened in the last 15 years. Almost two-thirds of respondents said things were unchanged or better than before.

I was surprised because today’s two giant grain companies and the handful of medium-sized grain companies in Western Canada now seem to have much more concentrated power than they did in the era when there were more and better balanced competitors in the industry, and before the Canadian Wheat Board disappeared.

There are new competitors, but not with the market power of the more balanced system 20 years ago.

We’ve always thought that would create a dire situation in which farmers would be exploited and squeezed by the big players because they wouldn’t need to compete with each other.

But the lack of farmer outrage I found was a hint of what some of the economic study of this issue reveals: it’s not such a simple matter any longer.

I was digging through recent research on this subject not only because of grain company concentration but also because of the dramatic shrinkage of competitors in the seed/chemical complex, which is now dropping from six major global competitors to four, with often only two or three present in any one crop area.

Surely, I thought, this portended a grim future of economic vulnerability for farmers. It seems pretty obvious.

But considerable research suggests this is not necessarily true now, even though it might have meant that in the past. There are circumstances in which fewer competitors don’t actually add up to less competition, or to less aggressive interest in paying farmers reasonable prices for their crops and livestock.

I lay out that analysis in a spread in this week’s paper, in Mega-merger aftermath examining the fallout and Making the case for modernized crop contracts

I also discuss the issue in my weekly markets column here: Farmers learn how to get along with grain companies

I was quite surprised to find this work, and as a journalist, there’s really nothing better than finding your comfortable assumptions overturned or at least challenged. So often the news and issues we journalists cover ends up being the restating of longstanding assumptions and comfortable positions, with everyone from interest group representatives to politicians to commercial players to ordinary people not getting beyond comfortable old positions, and the discussions and debates not shining any real new light on the issue.

So when something fresh and new about an issue arises in the reporting of a story, I say Hallelujah!, and delight in putting it out there.

We’ll have to wait a few years to see how things actually work out, and to see how farmers are actually affected by the dramatic consolidation of recent years.

But it’ll be more interesting to watch, I think, since some of our comfortable assumptions might not be sufficient any longer, and we might need to examine the issue with fresh eyes in order to grasp it.

ed.white@producer.com

About the author

Comments

  • ed

    That probably tells you quite a bit about farmer’s level of understanding as to what is happening to them. The loss of the CWB pretty much halfed the price of their wheat at the farm gate and they are actually happy about that. The less you give them, the more they like it???

explore

Stories from our other publications