Corporate giant on the land poses some big questions
When Tenneco Inc., one of the largest agribusinesses in the United States, made this observation several years ago and started de-emphasizing its corporate farming activities, it had essentially repeated an old saw -- the one about "the shadow of the farmer on his land" being the key to successful farming.
Notwithstanding this frank admission, however, the double shadow of absentee ownership and corporate agriculture continues to spread across the American family farm at a rate that troubles many people.
Is this necessarily bad? Are "factories in the field," as writer and social commentator Carey McWilliams called them, a threat? Or are such critics merely romanticizing a Jeffersonian view of society that is as outdated as the mule- drawn plow?
These are complex questions that involve politics and philosophy as much as they do economics and technology. They are not new questioins, but new answers may be emerging, particularly as the US Department of Agriculture finishes its current comprehensive study on "the structure of agriculture."
Experts around the country agree that the number and size of nonfamily farms are growing. Sen. Birch Bayh (D) of Indiana figures that of the 30 million acres of farmland changing hands each year, more than one-third are sold to nonfarmers (including corporations and foreign investors that hire others to manage the land).
"The proportion of farms owned by nonfamilies is growing rapidly, even in the Midwest," says Phillip Le Veen, a University of California agricultural economist and director of Public Interest Economics West. "There's no doubt that the current economic conditions favor consolidation and smaller farmers getting out."
According to the USDA, 30 percent of all US farm and ranchland is owned by just 1 percent of the landholders. In the Pacific states, 5 percent of the owners control 70 percent of such land.
"That makes me nervous," says Susan Sechler, USDA deputy director, who heads the structure-of-agriculture study.
"Agriculture in general is moving more and more to contract production and marketing," adds A. William Jasper, general manager of the American Agricultural Marketing Association.
The association has estimated that by the end of the decade as much as 75 percent of all domestic food production could be controlled by "integrators," that is, corporations that vertically control the major aspects of agriculture -- from leasing out farmland or managing it by professionals to marketing produce through large subsidiaries like Tenneco's "Sun Giant" label.
David Weiman, a Washington-based agricultural consultant, also points out that "you don't have to own the land to control the industry." A "classic case," he says, is the patenting of seeds, which has been allowed for 10 years and may be expanded by Congress this year to include more varieties.
"A lot of people are worried about oil companies getting into the seed business," says a congressional source. Will such seeds, it is asked, be designed so they will need (or are already treated with) the fertilizers and pesticides that oil companies manufacture?
Big farm corporations, many of which are tied to oil companies and railroads, argue that "economies of scale" make large-scale agriculture more efficient and productive. But government and university studies over the years have consistently shown this is not necessarily true.As recently as this spring, the Interior Department concluded that even in the West (where massive irrigation projects and the biggest of corporate farms exist), there is "virtually no loss of efficiency with a farm operation limit of about 960 acres."
What has given agribusiness the edge, other point out, is the tax benefits, marketing mechanisms, and subsidies that have evolved over the years with government encouragement, if not direct involvement. Cheap water in California (subsidized by taxpayers) can increase land values $1,000 an acre and mean millions of dollars a year to individual corporations.
All of this is being argued in Congress at the moment and seems certain to result in fundamental changes to reclamation laws that will allow such subsidies to continue, if not expand.
As a "hedge against inflation," insurance companies and other businesses are increasingly buying up farmland and turning it over to absentee managers. A bank and stock brokerage in Illinois two years ago proposed a $50 million farmland mutual fund. The deal fell through when the Internal Revenue Service denied the promoters tax-exempt status. But other investors are now taking a similar route for a possible pension fund.
Tax breaks and the weakened dollar also make farmland attractive to foreign investors, who often turn over production to corporate managers. According to the European Investment Research Center, 30 percent of all foreign investment in the US in 1978 was for farmland.
Aside from the "economies of scale" questions, which are sure to be the subject of continued debate, what does corporate farming do to rural communities? Studies of such communities in California's agriculturally rich San Joaquin Valley show that towns surrounded by small-scale and family farms are markedly superior in terms of social activities (including churches and schools), political and civic participation, local business, and employment.
So while such things as taxation, marketing, and investment issues get increasing attention in Congress, the USDA, and elsewhere, it may just be that the key question is indeed Jeffersonian. Or, as economist Le Veen says, "The issue can't be argued on economic grounds, but comes down to values and what kind of society we want."