the origins and history of agribusiness

The Origins and History of Agribusiness: From Vision to Reality

The origins and history of agribusiness can be traced back to 1957 when John H. Davis and Ray A. Goldberg published A Concept of Agribusiness. Their pro-corporate stance argued that the private sector, rather than the government, should be responsible for the stabilization of the agricultural sector. They believed that flaws in the agricultural sector were perpetuated by New Deal policy, i.e. government intervention, and outlined a way to use the political economy to shift the sector towards privatization. Moreover, they claimed that large corporations were key to revolutionizing the food and fiber economy.

Realizing their vision of agriculture was, however, not dependent upon on-farm activities. Instead, they purported that what is happening off the farm is key in agribusiness. In other words, they outlined how external industries, like the finance and retailing industry, would play a fundamental role in driving change in the agricultural sector.

Funneling power into the private sector established a strong, practically unbreakable, relationship between the industrial and agricultural sectors. This ensured that each would depend upon each other, establishing a “too big to fail” scenario.

Policy Shifts, Industrialization, and the Rise of Corporate Farming

A starting point for this was changing agricultural policy. By the 1970s, the government started to become more conservative with growing support for neoliberal ideologies. The then Secretary of Agriculture, Earl Butz, was particularly in favor of this approach and encouraged farm policy that heavily favored large-scale, industrialized production and actively disfavored small and family farms. He was quoted once as saying, “Get big or get out!”.

Shifting towards centralized, industrialized production required that the farm operations upgrade. This involved new machinery, modern seeds, and chemical inputs. Agribusiness partnered with universities to develop these new technologies and shift the approaches to learning towards corporate interests [e.g. focusing on the business of farming rather than actual farming].

Farmers needed to rely on financing to afford new technologies. To make the payments and have enough land for collateral, the farmers were forced to consolidate. This was the same time that financialization became mainstream, thereby enabling speculation and reducing the need for investment in general-purpose technologies and infrastructure.

For a short while, farmers benefited from these changes. However, when the farm real estate bubble burst and the Farm Crisis of the 1980s ensued, almost half of all farmers were forced to go out of business, which enabled corporate agriculture entities to fill the void. Since that point, corporate agriculture has maintained dominance in production and output.

The Modern Agribusiness Landscape: Corporate Dominance vs. Government Intervention

In a sense, Davis and Goldberg’s vision for agribusiness has been realized. However, it is also arguably convoluted.

On the one hand, corporations now dominate the sector. The classic family farm is considered a thing of the past [at present] that has been replaced by super-sized production factories.

• A handful of corporations control a significant majority [>75%] of the agricultural input industry. The number of players will be even fewer as the corporate giants merge.
• Monsanto and Bayer were allowed to merge in 2018 and Dow and DuPont merged in 2017.
• Syngenta has been allowed to merge with ChemChina as of 2018.
• In the consumer product category, household names like Coca-Cola, Nestle, Mars, and General Mills control a significant share of the consumer market with many of the brand relationships being unknown to the average consumer.

On the other hand, despite corporate dominance, there is still a great deal of government intervention in the agricultural sector, which fundamentally contradicts Davis and Goldberg’s argument in favor of ending government intervention.

For example,

• In 2018, 22% of the USDA’s budget of $146 billion, i.e. $32.12 billion, was spent on commodity programs.
• Lobbyists spent a total of $133,368,581 to influence the distribution of these funds.
• Many large corporations also receive grants, tax breaks, and subsidies even with million or billion dollar profit margins.

However, the agricultural sector is still inefficient, if not more than before.

This begs the question – are there inherent flaws in government intervention, or does the influence of non-government entities overshadows the influence of the government? What do you think? Share in the comments!

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sources:

• Barnett, B. (2000). The U.S. Farm Financial Crisis of the 1980s. Agricultural History, 74(2), pp. 366-380.
• Davis, J. H., & Goldberg, R. A. (1957). A Concept of agribusiness.
• Hamilton, S. (2016). Revisiting the History of Agribusiness. Business History Review, 90(3), 541-545.
• https://www.usda.gov/sites/default/files/documents/usda-fy19-budget-summary.pdf
• https://www.opensecrets.org/lobby/indus.php?id=A