Farm & Food File: Hemming and hawing in USDA report

After plowing through a new 57-page USDA report titled “Concentration and Competition in U.S. Agribusiness,” I asked an agronomist friend who had also read the report why it seemed that its writers used so much “hem-and-haw” language in analyzing, for example, the rise of today’s powerful seed companies.

“I’m less interested in the authors’ conclusions and opinions,” the friend emailed back, “and more interested in the data they show. I think it’s up to those of us outside USDA-ERS” — the U.S. Department of Agriculture’s Economic Research Service — “to interpret the data in a manner that’s less favorable to corporate agribusinesses.”

That’s good advice. There are reams of data in the report, particularly in three key focus areas: seeds, meatpacking and food retail.

We — or “us” outside of USDA — need to draw our own conclusions and push policymakers to do the same.

For example, according to USDA, “between 1990 and 2020, prices paid by farmers for crop seed increased by an average of 270%, while seed prices for crops grown predominantly with genetically modified traits rose by 463%, substantially more than commodity output prices.”

How would most of “us” explain this incredible, 193% price increase in GM seed over non-GM seed during this period?

No doubt, many of us would link the price increase to the tightening grip that one seed giant was having on GM traits in the U.S. corn, soybean and cottonseed markets.

USDA confirms this in its detailed analysis: “By 2009, GM traits owned or licensed by Monsanto were used on 95% of soybean acres, 81% of corn acres and 79% of cotton acres in the United States.”

But wait, the report hems, “the increases in seed prices reflected to a large degree the higher productivity of improved crop varieties and provided a return on investments in R&D by seed companies.”

So, which is it — the transparently evident tight control of GM traits by one company or the never-defined “returns on investments in R&D by seed companies?”

Both, haws USDA, because “higher seed prices reflect to a large degree the market power that firms derive from their (intellectual property rights) … and a return on company investment in R&D.”

That murky explanation reads more like a 2010 seed company press release than a 2023 USDA official report.

That’s the problem with this and other recent USDA reports on market concentration, notes Peter Carstensen, a professor of law emeritus at the University of Wisconsin and an expert in antitrust law and economic regulation.

The ag department often takes the middle road because “USDA has little role” in regulating any market anymore.

“The big villain here is the DOJ,” the Department of Justice, the government agency, explains Carstensen, “that failed to challenge, or settled on ineffective terms, the major mergers” in agriculture.

The report’s conclusions in other areas of its anticompetitive focus, meatpacking and food retailing — basically, grocery selling — are just as statistically solid and definitively inconclusive as its views on the seed market.

For example, the report notes in its summary, “economic theory and empirical analyses demonstrate that high concentration can facilitate the exercise of market power, with firms driving sales prices above — or livestock purchase prices below — the prices that would prevail in competitive markets.”

“However” — and you knew there would be a “however” on the horizon soon — “the relationship between concentration and market power is not tight, and high concentration can often result from factors like innovations or the realization of scale economies that improve productivity and reduce costs and prices.”

Austin Frerick, a Yale University fellow who researches ag antitrust and competition issues, agrees with Carstensen that DOJ could do far more to push tougher antitrust reviews and legal challenges.

But USDA — and, specifically, Secretary of Agriculture Tom Vilsack — could be doing more, too.

“Vilsack hasn’t done anything meaningful to address the concentration issues highlighted here in seeds, meatpacking and grocery stores,” notes Frerick. “He’s been doing a little song and dance … but there’s no substance there.”

There sure is a lot of hemming and hawing, though.