Our Food Is Being Hijacked by Monopolizing Corporations

If you are opposed to the Walmarting, Monsantoing, and Archers Daniel Midlanding of the food supply, Wenonah Hauter, executive director of Food & Water Watch, presents a meticulously researched argument for a massive restructuring of a system that allows a few companies to determine what we eat, from the farm to the dinner plate.

Even many products called natural are less than meets the eye, aimed at increasing profits but not necessarily delivering on healthy sustenance.

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Truthout talked with Wenonah Hauter about her exposé on how the food industry is becoming a dangerous monopoly of corporate interests.

Mark Karlin: One of the fascinating points you detail in your book is how the “natural foods” marketplace has: 1) become dominated by a few big chain stores (of course “Whole Foods” leads the pack) and distributors; and 2) many of the items that they sell are no more natural than a conventional chain supermarket, just more expensive. Can you elaborate on that?

Wenonah Hauter: Over the past 20 years, Whole Foods Market has acquired its competition, including Wellspring Grocery, Bread of Life, Bread & Circus, Food for Thought, Fresh Fields, Wild Oats Markets and others. Today the chain dominates the market because it has no national competitor. Over the past five years its gross sales have increased by half (47 percent) to $11.7 billion, and its net profit quadrupled to $465.6 million. One of the ways it has achieved this profitability is by selling conventional foods under the false illusion that they are better than products sold at a regular grocery store. Consumers falsely conclude that these products have been screened and are better, and they are willing to pay a higher price.

The distribution of organic foods is also extremely concentrated. A little-known company, United Natural Foods, Inc. (UNFI) now controls the distribution of organic and natural products. Publically traded, the company has a contract with Whole Foods and it is the major source of these products for the remaining independent natural food stores. This relationship has resulted in increasingly high prices for these foods. Small manufacturers are dependent on contracts with UNFI to get their products to market and conversely, small retailers often have to pay a premium price for products because of their dependence on this major distributor. Over the past five years, UNFI’s net sales increased by more than half (55.6 percent) $5.2. billion. Its net profit margin increased by 88 percent to $91 million.

Mark Karlin: We have this great national myth of the family farmer putting food on our table. What’s happened to the family farmer as the consumer food industry continues to shift to a few behemoth corporations?

Wenonah Hauter: Ever since the Reagan Administration pulled federal anti-trust cops off their beat, the federal government has been allowing giant mergers between competitors. As a result, massive consolidation has taken place in the food industry, giving the meatpackers, grain companies, food processing conglomerates and the grocery industry unprecedented economic power. These companies stand as a bottleneck between fewer than a million farmers and more than 300 million consumers. They lower the prices that farmers receive and increase the prices that consumers pay, keeping more of the profits for themselves.

Meanwhile, the cost of seeds, fertilizers, fuel and other inputs is continuing to rise as these industries also become more monopolized. Most farmers are scratching by, trying to hold on to their land and eke out a living. We are losing small and midsize farms at a rapid rate, resulting in the consolidation of smaller farms into larger corporate-style industrial operations with full-time managers and contract labor.

Mark Karlin: You have a chapter on “Walmarting the Food Chain.” How does Walmart represent the evolution of the food industry in terms of the tail wagging the dog: giant food companies increasingly monopolizing consumer choice?

Wenonah Hauter: No single company has more impact on what and how food is manufactured than Walmart. Today, over half of Walmart’s business comes from grocery sales and one out of every three dollars spent on groceries in the US goes to the chain.

Walmart is so big that it has unprecedented power in the food industry. It demands volume, because it sells an incredible amount of each food product – much more than a small or medium-sized company could ever supply. For instance, Walmart buys one billion pounds of beef each year.

For a company obsessed with increasing efficiencies in its supply chain, it makes more sense for it to have an arrangement with a giant meatpacker. But, even these big suppliers of food products from Tyson to Kraft must bow to the will of their largest customer – Walmart. These companies must comply with Walmart’s demands. And the company’s logistics and distribution model is all about sucking money out of the supply chain. The logistical operations are run through shifting costs and responsibilities to its suppliers who must adopt Walmart’s data-sharing programs and manage their own inventory, even on store shelves. The company even exercises control over the design of products, from ingredients to packaging. And contracts with Walmart are nonnegotiable.

Mark Karlin: Perhaps the most ominous section of your book is “Corporate Control of the Gene Pool: The Theft of Life.” Truthout has extensively covered genetically engineered foods, seeds and animals. Now, when food becomes genetically modified, the companies patent it. Are we creeping toward a time when big agriculture will literally own the patents on the food that we eat and therefore food itself?

Wenonah Hauter: Corporations have gained a frightening amount of control over food by manipulating the genetics of life-forms ranging from bacteria and seeds, to fish and animals. They have literally gained control over the basic building blocks of life, threatening the integrity of the gene pool and our collective food security. Today, because biotechnology is essentially unregulated, it is moving far into the realm of science fiction as scientists actually seek to create life. It’s time to put a stop to this irresponsible pursuit of science for profit.

Mark Karlin: On pages 234-235 of your book, you have a big graphic of Monsanto’s acquisitions. Is Monsanto the key Pac-man of the food industry, with its attempt to force patented seeds on growers around the world among other monopolizing business strategies?

Wenonah Hauter: Monsanto is a ruthless and despicable company that cynically pontificates about feeding the world, while its core business is about controlling the gene pool. Its long-term strategy is to force farmers across the world to pay for both patented seeds and co-branded chemicals.

Mark Karlin: Why does the corporate food industry love to sell us endless quantities of junk food?

Wenonah Hauter: It’s all about profit. Ninety percent of Americans’ food budget is spent on processed food, which is where the big food processing conglomerates like PepsiCo, Nestle and Kraft make their money. The industry has worked with food scientists to develop foods using fat, sugar and salt that affect brain chemistry and are literally addicting, making people continually crave junk food. The ingredients that give junk food their taste and texture are relatively cheap. These sweeteners, oils and chemicals are big business – derived by the giant multinationals like Archer Daniels Midland from corn, soy, cottonseed and sunflower seeds.

Mark Karlin: In discussing corporate ownership of the milk product and distribution system, you mention a fascinating detail. The spot pricing for cheddar cheese on the Chicago Mercantile Exchange is what the federal government uses to determine government milk price formulas. How is the spot pricing manipulated?

Wenonah Hauter: The prices dairy farmers receive for their milk are actually based not on what it costs to produce but on an arcane formula that is tied to the speculative agricultural commodities markets. This makes fluid milk prices especially vulnerable to manipulation by commodities traders. The federal government’s milk price formula is based on the spot price for cheddar cheese on the Chicago Mercantile Exchange.

Spot prices are the price a company would pay to actually buy a shipment of cheese at any given instant (hence spot). But these prices are closely related to the commodity futures prices, where Wall Street banks and agribusinesses can essentially bet on what the prices for corn, wheat or cheddar cheese will be in six months or a year (hence futures).

But while there are many traders for oil, gold, corn or wheat, there are very few participants in the cheese market. About a half dozen firms with about 40 total brokers make all the trades on the cheddar exchange, which covers 80 percent of all cheese sold in the United States. The cheddar trading desk is only open for half an hour each week.

When only a few traders (mostly representing big dairy company interests) effectively control the majority of cheese sales, the potential for mischief is very high. Since there are few players, it is easy for even one or two participants to manipulate the price of cheddar cheese on the futures markets by hoarding or dumping cheddar cheese futures.

This is not a hypothetical problem. Dairy Farmers of America (DFA) is the largest milk handler in the country. It buys milk from dairy farms and delivers it to milk processing companies that make cheese and ice cream and butter and pasteurized milk. If it also manipulates the cheese futures market, it is effectively able to lower the prices it would pay to farmers. In 2008, DFA (which once described itself as “a company that happens to be an agricultural cooperative”) and two of its former executives were fined $12 million for attempting to manipulate the price of fluid milk through cheddar cheese purchases at the CME.

Mark Karlin: What happens to the small dairy farmer in a system such as this as far as price determination for milk?

Wenonah Hauter: We’ve lost 52,000 dairy farms over the last decade because dairy farmers are not even making the cost of production. Very little of the money that is paid by consumers for milk ends up in the hands of farmers. The growing spread between what consumers pay and what farmers receive is captured by the dairy processors and retailers that dominate the industry. Most dairy farmers market their milk through corporate-style cooperatives that allow producers to pool the product and participate in the pricing set by the federal dairy marketing order that was first established in 1937. These cooperatives determine how to distribute the milk payments and they discriminate against smaller dairy operators by giving price premiums to the largest producers. Dairy farmers are very vulnerable because of the alliance between these cooperatives and the milk processing and manufacturing industry. Dean Foods, the largest milk processor in the country, and the four top dairy cooperatives control 80 percent of all fluid milk sales.

Mark Karlin: Dare I ask, what are the most salient points Truthout readers should take away from your chapter, “Poisoning People?”

Wenonah Hauter: Be careful if you eat meat. We should be outraged about the way that animals are raised in confined feeding operations, being fed antibiotics, and then are slaughtered in meat processing plants that run at the speed of light. Since Bill Clinton allowed deregulation of inspection in the mid-1990’s, the situation has been getting worse with growing numbers of recalls of meat products. Ground meat products are especially dangerous because the process of grinding meat in centralized locations and shipping it long distances invites contamination. An example of the kind of problems we are seeing was Cargill’s giant recall of 36 million pounds of turkey products because of a strain of bacteria called Salmonella Heidelberg that sickened 76 consumers and caused one death. It’s also important to note that Salmonella Heidelberg is an antibiotic-resistant bacteria, which is more proof that we need to end the use of antibiotics in livestock production.

Now the poultry industry is pushing to further deregulate inspection so that they can increase slaughter line speeds to 200 birds per minute. The only way that the industry prevents more food poisoning from poultry is by using chemical washes to kill the bacteria. But, I doubt if Americans want to eat sanitized fecal matter even if the bacteria has been rendered harmless by tri-sodium phosphate or chlorine washes.

Mark Karlin: Of those who are aware of the perils to our food supply that big agriculture represents, I think it’s safe to say that many are dismayed but feel helpless to create public policy that will ameliorate the circumstances. The final part of your book is entitled, “Building the Political Power to Challenge the Foodopoly.” Do you have some closing tips on how to achieve this goal?

Wenonah Hauter: Breaking the foodopoly and fixing the dysfunctional food system requires far-reaching legislative and regulatory changes that are part of a larger strategy for restoring our democracy. Food activists must engage with other progressives in building the political power to reform and restructure public policy. This means overcoming the deep apathy and cynicism that discourage people from becoming involved in the political system.

Our movement must deepen and expand our strategy for moving people into political action by organizing across the country in each state and in a majority of congressional districts. We must organize and mobilize people around the issues that affect people’s lives because most people come to politics via their interest in an issue – based on perceived self-interest. We see this beginning to happen with issues like the labeling of genetically engineered food, which is driving large numbers of people into political action. And food activists are joining with other progressive movements.

For instance, we can take heart from the growing movement to challenge the undue influence of money on elections and public policy. Momentum is building for passage of a 28th constitutional amendment to overturn the latest assault on fair elections, the US Supreme Court’s 2010 ruling on Citizens United.

Support Truthout’s mission. Foodopoly (hardcover edition) is yours with a minimum donation to Truthout of $35 (which includes shipping and handling) or a monthly donation of $15. Click here.