While farmers struggle to break even on their returns from the market, agribusiness corporations are reaping record profits, according to a new study by the National Farmers Union.
The NFU analyzed the 2004 financial performance of 75 corporations involved in every aspect of the agriculture and food business, from oil companies and fertilizer manufacturers at one end of the chain to food retailers and restaurants at the other.
It found that 58 of the 75 corporations earned record profits, with many others near record levels. Only one lost money.
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That same year, Canadian farmers lost a combined $7.7 billion on returns from the market, according to the NFU analysis.
“It’s not just that we’re suffering and they’re taking record profits,” said union president Stewart Wells. “We’re suffering because they’re taking profits.”
The study pegged farmers’ realized net income from the market (a figure that excludes government payments) at negative $10,000 per farm in 2004, the second worst on record.
The average realized net market income has averaged negative $323 per farm over the past 10 years, and been below $5,000 in 15 of the past 20 years.
As a result, farmers are going out of business, rural Canada is being depopulated and taxpayers are being forced to pay billions to support farmers.
“We don’t want to see the agribusinesses also receiving negative return on investments like Canadian farmers are,” Wells said.
“But we need to get to a place where Canadian farmers have a positive return on investment as well as the companies.”
The report said other explanations put forward to explain agriculture’s financial woes don’t hold water. For example, farmers are more efficient and productive than ever, per-unit production costs are at record low levels, food exports are at or near record high levels, global demand continues to increase and world grain consumption consistently outpaces production.
“These facts are comparable with only one explanation of the farm crisis, ” the report said. “The rewards of farmer productivity, efficiency and cost-cutting are being seized by more powerful players in the agrifood chain.”
The report goes on to describe a number of ways in which large corporations have a stranglehold over the profit margins available from food production and sales.
- Passing costs on to farmers: For example, grain companies and railways have abandoned elevators and rail branch lines, forcing farmers to bear more of the cost of transporting grain.
- Setting prices according to what the market will bear: For example, fertilizer companies raise prices when grain prices go up.
- Creating production systems in which farmers are forced to purchase certain inputs to produce a crop: For example, farmers were once self-sufficient in seeds, but now private corporations have taken over the business of developing and marketing seeds.
- Using market power to try to drive non-corporate competitors out of business: For example, co-operative grain handling companies have disappeared and multinational grain corporations campaign tirelessly to drive the Canadian Wheat Board out of business.
- Merging with corporate competitors: For example, one company owns half of Canada’s beef packing capacity and just four companies control grain export terminals at Vancouver and Prince Rupert.
- Lack of pricing transparency: In recent years more pricing information has shifted from public marketing agencies to private, confidential contracts. Farmers lose market intelligence and the ability to bargain.
Wells said there is a glimmer of hope that policy makers may be recognizing some of the issues raised by the report, as evidenced by attempts by Parliament to get at the meat-packing industry’s financial records, this summer’s report by MP Wayne Easter that identified an imbalance of market power between producers and agribusinesses and efforts by the federal competition bureau to bring more competition to grain handling activities at the West Coast.
“There is just the beginning of some sort of awakening along those lines with the last government that was in place,” he said.
