#Cargillgate Dissonance

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So the big, recent drama in the world of agriculture was that Cargill partnered with the Non GMO Project to certify their non-GMO products as non-GMO. Conventional farmers and their allies are furious. I find this is both understandable and puzzling at the same time.

Cargill is the third largest privately held company in the world, with revenues of $107B in 2016. That compares with a mere $13.5 billion in revenue for seed and herbicide giant Monsanto in 2016. It is one of the biggest 800 pound gorillas at the center of the food system. They broker the commodity crop markets, buying corn, soy, wheat and other crops from farmers and sell them to food processors. They are a massive player in livestock production, especially in beef and pork. They also provide financial services for managing risk in the commodities markets. Why critics of industrial food production are so hung up on Monsanto completely escapes me. Cargill and it’s competitors ADM, Tyson, Swift – that’s where the real leverage is in the food system.

The Non GMO Project is the dominant third party non-GMO certification service, which explains why Cargill would partner with them in certifying their grains and soybeans to capture the premium that market delivers for goods. The problem is that the Non GMO Project hasn’t been content to market themselves on the integrity of their certification services. They have invested a lot of time and energy in spreading misinformation, fear, and doubt about biotech crops in their marketing and outreach programs. This has rightly earned them the enmity of conventional farmers and their allies.

So when Cargill touted their existing relationship with the Non GMO Project on Twitter, all hell broke loose. Especially on Ag Twitter.

I could see why farmers would be annoyed that Cargill would partner with an organization that routinely throws the average American farm under the bus. On the other hand, I can see why Cargill would partner with a non-GMO certifier  that has greater brand equity and might be able to deliver a larger niche price premium than more technocratic industry third party certification services.

What surprised me was the depth of the anger and sense  of betrayal. What Cargill was doing was a pretty straightforward business decision aimed at fattening the bottom line, one that might even deliver better bushel prices to farmers selling into that market. As farmers are apt to tell anyone that has suggestions on how they might do farming better, at the end of the day, it’s the bottom line that keeps the lights on. There are a few reasons I think we saw such a highly agitated response to a rational business decision by privately held, profit maximizing firm.

The first and most obvious to me is the sense of betrayal at a firm whom farmers see as a coalition partner. The ag producer community sees itself in a coalition with the big ag input companies (Monsanto, Syngenta, John Deere, etc), the big middlemen (Cargill, ADM, Tyson, etc); and the big food processors (General Mills, Proctor and Gamble, etc) against consumer and environmental groups. The big firms fund a lot of agricultural advocacy and they are lobbying partners on various pieces of legislation relating to GMO labeling, animal welfare standards, environmental protections. The partnership of Cargill with the Non GMO Project violates the shared priorities in this coalition in a fundamental way.

This is all the more striking against the backdrop of nearly complete apathy in the ag producer community to any interest in market concentration or antitrust concerns. While farmers became grievously exorcised about Cargill partnering with the wrong third party certifier of non-biotech crops, concerns about market concentration sapping their bargaining power as price takers in the commodity markets mostly generates yawns outside of press releases and congressional testimony from the head of the National Farmers Union. Market concentration is most often expressed as the percentage of the market controlled by the top four firms in a “CR4” score. A CR4 of 80% means that the top four firms have a combined market share of 80%. Institutional economists consider it a rule of them that any market with a CR4 score of above 40-50% as “non-competitive”. Cargill operates in the top four of several markets with CR4 scores well above 50%.

Beef Slaughter – CR4 – 82
Turkey Slaughter – CR – 58
Flour Milling – CR – 52
Wet Corn Processing – CR – 87
Soybean Processing – 85

… to name a few. The literature on how much the effects of this kind of market concentration bears down on farmers is noisy but hard to deny that the arrangement doesn’t tilt things in the favor farmers. It certainly puts them at a greater disadvantage than the price premium that the non-GMO commodity market has delivered to farmers during a period of low commodity prices.

Which leads to another oddity here: I haven’t seen any demands for farmers who sell into the non-GMO market to explain what they are thinking. Most of them grow biotech and non-biotech to diversify their mix of risk and their mix of products. They are delivering a product to the market at the best price they can get, even if that product ends up at Whole Foods festooned with a bunch of bullshit fear mongering and marketing.

Why does Cargill get a pass for being a part of an oligopolistic commodity market, but raise such ire when partnering with an organization that is helping commodity farmers turn a profit in a market where most are price takers?

I think the answer lies in the fact that this was betrayal of tribal coalition loyalties. Most farmers are culturally and politically conservative (although, not when it comes to farm policy). Then within those cultural identities, David and Goliath stories that cast Big Business as Goliath don’t carry much resonance. They are far more often activated by David and Goliath stories involving Big Government in the role of Goliath. That might explain why they tend to have a pretty fatalistic attitude towards being sandwiched in between oligopolies (concentrated sellers with many buyers) of input and equipment suppliers on one side and oligopsonies (concentrated buyers with many sellers) of commodity brokers and meat packers on the other.

On the one hand, they are allied with those big businesses against environmental and consumer groups. In the past several years this coalition has been particularly united in combating attempts by consumer and environmental groups to block mandatory GMO labeling laws , with the big ag companies footing the bill for those campaigns. It would be hard to think of a transgression that cuts to the quick more than hopping into bed with an organization that represents the annoying, entitled, know it all/hopelessly misinformed affluent consumers that drive farmers batty; even it that partnership resulted in putting more money into the pockets of farmers. 

The problem isn’t that the partnership is that big a deal in terms of it’s impact on empowering the Non-GMO Project to spread their propaganda. The issue is the betrayal by a coalition partner and more importantly a member in (previously) good standing in the Tribe of Ag. It’s breach of a taboo.

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