The Inevitable Outcome

Yesterday, I was in Slayton, Minnesota (pop. 2,000) talking to a large group of community leaders. It was inspiring to see so many people who were concerned about the future of rural America and how dedicated they were to improving that future.

During the much-needed breaks in the day-long meeting, the hot topic revolved around Worthington, MN- a town of 11,000 or so about 30 miles south of Slayton. Worthington is home to one of the area's largest employers- a Swift meatpacking plant. Many scorn such plants, but they do provide substantial income to the area; just maybe not as much as they should.

On Tuesday, it was announced the Swift meatpacking company was purchased for $225 million. Cash. By a Brazilian company. This was the topic du jour in Slayton, and there was general surprise that a Brazilian company could buy out one of the top meatpackers in the United States. From the Greeley Tribune (where Swift is currently headquartered):

A South American company has bought Greeley-based Swift & Co., which could make the operation the largest beef processor in the world.

Swift, the world’s third largest processor of fresh beef and pork products, was sold Monday for $225 million in cash to JBS Friboi, Latin America’s biggest beef processor, which also will assume some $1.2 billion in Swift debt and transaction expenses.

Even more distressing was the news that JBS Friboi is not particularly interested in the US operations of Swift. They really want Swift's Australian operation, which can export to Asia, a serious growth market. Currently, Brazilian beef cannot be exported to Asia due to the existence of hoof and mouth disease in Brazil. That disease has been eradicated in Australia. Here's the JBS CEO:

Acquiring Swift ``is a major step for our group in establishing a global presence,'' Batista said in a statement. ``More importantly, Swift will provide us with access to the Pacific region.''...

Analyst Jonathan Feeney:

``Swift Australia clearly was too important for JBS to pass up, with a once-in-a-lifetime chance to access Pacific markets where most of the world's population growth is happening,'' he said.

Of course, JBS Friboi made all the appropriate noises about keeping plants open, but in their press release is this line:

Swift would retain its organizational identity, customer and supplier relationships and substantially all of its employees and leadership team

Substantially. Huh.

This is the inevitable result of globalizing our food system. We already have processed food with tens (if not hundreds) of ingredients that nobody knows the origin or quality of. Who knows how many countries are involved in the production of an average TV dinner? This is what happens when you treat food as just another commodity to be freely traded around the world. Jim Harkness, President of the Institute for Agriculture and Trade Policy, says it better than I can in a recent editorial:

Our food system's increasing dependence on imports is no accident. Import dependency is a defining characteristic of an industrial food model driven by U.S. farm and trade policies over the last half century on behalf of agribusiness. U.S. farm policy has encouraged the mass production of only a few cheap crops largely used as food ingredients, animal feed and exports. U.S. trade policy has aggressively pushed for the removal of trade barriers paving the way for the global food trade.

This is free-trade economics at work. We shouldn't be surprised. Free trade is neither inherently evil nor inherently good, but let's be honest about where our current policies are taking us. If we continue down the path we're currently on, consolidation and concentration of food processing and production is the inevitable outcome.

And in fact, if you ask mainstream agriculture economists, they are completely honest. Erica Rosa, an ag economist with the Livestock Marketing Information Center in Denver:

"Given the economy and the nature of that type of industry, it is something that we will see come more and more," predicted Rosa.

But Rosa isn’t alarmed. She compared the macro-economic forces driving global meat packing consolidation with those that have driven consolidation within the auto industry.

"Consolidation is something that is not unfamiliar in any type of industry," Rosa explained.

Speaking for myself, I am alarmed. I'm alarmed at allowing the same macro-economic forces that drive the auto industry to control the future of an industry responsible for providing the food that literally keeps us alive.

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