This article by Larry Waterfield, Washington, D.C. Editor, appeared in “The Packer,” March 5, 2001.
he produce industry is at a crossroads. Several pathways have converged at this crossroads:
- the low prices and economic distress of many producers;
- continued globalization and consolidation;
- the need to rewrite the 1996 Farm Bill to create new policy; and
- the growing pressure on suppliers to create perfect food at a low price, and meet the fee and service demands of retailers and distributors as well as the regulatory demands of government.
That’s a full plate. At stake is the kind of industry that will exist in the future. Will the produce industry continue to be a dynamic, consumer-oriented business dependent on trade and the free market? Or will it become an industry relying on government handouts and tax appropriations to offset low prices and losses exacerbated by the excessive demands of buyers, retailers, and government?
The issue has yet to be settled. However, the trend now is toward ever-greater government intervention. Some producer groups are looking to government to insure their survival through government payments. At the same time, government continues to make greater demands on producers and packers to meet high labor, pesticide, and food-safety standards. This includes everything from salmonella to ergonomics.
Retailers, who sell the bulk of fresh produce, have discovered that produce is ripe for picking in the form of shelf fees, demands for services, and an assemblage of creative ways to shift costs down the supply chain.
The produce industry, which once prided itself on its independence and market reliance, could become like the dairy industry -- dependent on government largesse and programs to survive even as its numbers decline. One can imagine the day when the produce industry goes hat-in-hand every year to Congress to seek government payments, supports, subsidies, purchases, and loans in a desperate attempt to remain viable in a world where producers cannot survive on their own.
What’s the solution? Well, Ann Veneman, the new Secretary of Agriculture, has just outlined the Bush administration’s policy directions. Veneman concedes that the U.S. agricultural economy is less than healthy and beset with weaknesses, including rising input costs and stagnant prices.
Her policy goals will include increased food exports, more trade agreements, support for biotechnology and other technologies, regulations based on “sound science” in food safety, and development of an economic safety net ‘”that is consistent with a market-based farm economy.”
Veneman speaks of a globalized, high-tech, world farm economy dependent on both consumer demands and a spirit of cooperation and “partnering.” At the same time, she notes that government must carry out certain tasks, including “protecting farmers and the public against unfair and uncompetitive markets.”
Veneman’s view of the modern marketplace may not always jibe with reality.
“Today, the interests of the various links of the food chain are more closely aligned than ever,” she says. “Retailers cannot survive without processors and farmers. Farmers cannot survive without processors and retailers.”
That’s true in a textbook sense, but in the real world, we see suppliers and retailers fighting over claims of unfairness, possible violations of fair-trading laws, and accusations that buyers are abusing market power and making outrageous demands on suppliers.
That’s a far cry from the ideal world of partnering and interdependence in which everyone pursues the goal of selling more produce and satisfying consumer demand. Requests for money to build a warehouse or the payment of fees to let produce remain on a store shelf may not be in the spirit of happy and fruitful cooperation.
Free and competitive markets don’t just happen. Everyone’s instinct is to try to crush the competition, control markets, dictate terms to suppliers, and maximize profits. Inside every free-marketer is a monopolist trying to get out. That’s true in produce, retailing, and in business newspapers. No one wants to be Number 2 in the market, and certainly not Number 7.
To have free, open, competitive markets, some standards must be set. There have to be rules of the game.
In fact, those rules were just as likely to have been written by Republicans as Democrats. Republicans have usually favored a marketplace that leaves room for the new player, the innovator, the hard-charging entrepreneur.
Such a marketplace has no place for predatory market power or abusive buying practices.
The larger question is this: What kind of a food and agricultural economy do we want? That’s a fundamental question for any civilization, because the answer determines what kind of towns we have, what the countryside looks like, what kind of food supply we have, and who controls it.
Yes, we need retailers. Yes, we need farms. But we need farms more than we need retailers. If every supermarket closed tomorrow, we’d still eat, provided the farms remained. But if the farms failed, we’d be about three weeks from starvation.
Anyone who can’t tell the difference between the need for farms and the need for supermarkets has become--sadly--an Epicurean fool.
You may e-mail Larry Waterfield at: <lwaterfield@thepacker.com>.
Return to May 2001 Vegetable Production & Marketing News
