Healthy soil and sustainable growing

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Wal-Mart Comes to the Farmers' Market
As the ground shifts under their feet, food giants experiment with new 
strategies
By Tom Philpott
11 Jul 2008
http://www.grist.org/comments/food/2008/07/11/index.html

For more than a generation, the major corporations that process and sell the 
vast bulk of our food have had it pretty easy.

They've had access to cheap energy to ship food over globe-spanning distances 
and run giant food-processing plants; reveled in cheap inputs like corn and 
soy, transforming them into everything from breakfast cereal to chicken 
nuggets; and relied on low-paid, abundant, and politically disenfranchised 
workers to do the dirty jobs. Together, these elements formed a kind of 
tripod propping up the industry's enormous profits even as food's retail 
price barely budged.

These companies fattened themselves on what economists call "monopsony" -- 
monopoly's shy but cunning cousin. When a few companies dominate a market and 
collude to jack up prices for their customers, they boldly risk incurring 
punishment by antitrust authorities. But when they quietly perform the 
opposite dirty trick on their suppliers and workers -- use their market power 
to force down prices and wages -- federal authorities tend to look the other 
way, as Barry C. Lynn showed in an important 2006 Harper's essay.

Now the food industry's holy trinity of cheapness is threatening to collapse. 
The price of diesel fuel -- which keeps those food-stuffed refrigerated 
18-wheelers thundering down the highway -- has more than tripled since 2002. 
Corn and soy continue to trade at rates unimaginable just three years ago. As 
for labor costs, overall wages remain stagnant, but the anti-immigrant 
crackdown is forcing the food industry to struggle to fill the least 
desirable jobs on the mega-farms and meatpacking plants on which it relies. 
As a result of all these factors, the industry is scrambling to shift its 
rising cost burden onto the very consumers it's conditioned to expect 
dirt-cheap food.

In other words, we're watching a massive industry muddle through a 
once-in-a-generation crisis -- one that presents opportunities as well as 
threats to those who'd like to make the food system more just and sustainable.

Wal-Mart Goes "Local"

No company leveraged the cheap fuel/input/labor tripod to reach greater 
heights than Wal-Mart. The retail giant stocked its first grocery shelves at 
a Missouri "supercenter" less than 20 years ago. Today, Wal-Mart takes in 21 
cents of every food dollar spent in the United States, Paul Roberts reports 
in his new book The End of Food -- far more than any other supermarket chain.

Wal-Mart rose to dominate the food-retail landscape through a ruthless and 
constant focus on undercutting its competitors. Using its vast supply 
network, the company scoured the globe for the best deals on everything from 
produce to processed food, hauling the goods hither and yon in its armada of 
18-wheel rigs. The effect on its suppliers has been stark. U.S. 
processed-food giant General Mills now sells nearly a quarter of its output 
through Wal-Mart. Largely dependent on the whims of one big customer, General 
Mills has little leverage to pass on higher costs to consumers. So what does 
it do to maintain profitability? It becomes a mini-Wal-Mart itself, squeezing 
its own suppliers to cut costs (by dumping U.S. farmers in favor of cheaper 
stuff from China, for example). And it scales up in an attempt to make up on 
volume what it's losing on profit margin.

According to Roberts, the severe price pressure applied by Wal-Mart and 
competitors like Costco and Safeway led to the consolidation boom that has 
swept through food processing over the past decade. "Today, in the categories 
of breakfast cereals, snacks, and beer, three-quarters or more of all 
products are generated by the top four companies," he writes.

If huge corporations like General Mills struggled to reinvent themselves to 
survive Wal-Mart's transformation of food retail, farmers have had an even 
tougher time. As Wal-Mart and its few competitors globalized food sourcing, 
they drew in a flood of cheap imported produce -- and severely undercut 
large-scale U.S. produce growers. The most stark example involves garlic. 
Between 2003 and 2007, imports of Chinese garlic tripled and the wholesale 
price of garlic plunged, forcing California's once-thriving garlic growers to 
cut production by 30 percent, NPR reports. In population-dense regions like 
California, such setbacks often mean not a switch to new crops, but to new 
land uses altogether. After the garlic shakeout, much productive farmland now 
sprouts condos and strip malls.

Now, with diesel prices swinging upward, news comes that Wal-Mart is 
rethinking its hyper-global food-retail strategy. Over the past two years, 
the company revealed in a recent press release, it has been aggressively 
seeking out nearby farms to supply its regional distribution centers. 
"[P]artnerships with local farmers have grown by 50 percent over the past two 
years," the press release boasts." Then it adds triumphantly: "Wal-Mart [has 
become] the nation's largest purchaser of local produce."

Now, there will and should be plenty of debate about precisely how Wal-Mart 
defines "local"; evidently, the retail behemoth considers food grown and 
consumed within the same state to qualify. That definition might shine in 
smallish states like, say, Vermont. In large states like Texas and 
California, it begins to lose luster. The word "regional" probably makes more 
sense to describe Wal-Mart's new produce-sourcing strategy.

But we do need a revival of regional food distribution. As I've written 
before, we're not going to have a truly sustainable and just food system 
until we find a model that works for mid-sized farms -- the very ones that 
have been under severe economic pressure from globalization for decades. The 
real question is, will Wal-Mart provide that model, or will it revert to its 
traditional bare-fisted, bully-the-supplier tactics? If the former, Wal-Mart 
could make its first contribution to supporting a food system that works for 
more people than just its shareholders. If the latter, the company's new 
rhetoric about "supporting local economies" will prove a bitter farce.

Hog Hell

While Wal-Mart responds to changing conditions by experimenting with more 
regionalized business models, the few companies that dominate our meat 
production are looking longingly across oceans.

Pork giant Smithfield and all-around meat titan Tyson have both seen their 
share prices drop nearly 40 percent over the past year as spiraling prices of 
corn and soy -- the primary feed for pigs, chickens, and cattle -- eat into 
profits. The companies haven't had much success passing on higher costs to 
U.S. consumers, because overall demand for meat in a developed economy like 
the U.S. grows slowly.

That's why these companies are increasingly hanging their hopes on emerging 
economies in Asia, where demand for meat is growing steadily as income rises. 
Last year, Smithfield and Tyson both inked deals to export millions of pounds 
of pork to China -- a fraction of their output, but the start of what they 
hope will be a beautiful relationship.

And just last week, Smithfield cemented its ties with China by selling 5 
percent of its shares to the state-owned company COFCO Group, China's largest 
food importer and exporter and a budding pork producer. As part of the deal, 
Smithfield will lend COFCO its industrial hog-production expertise.

Forbes reports that COFCO now slaughters a half a million hogs annually, 
"under contract with small producers." In partnership with Smithfield, COFCO 
hopes to boost production to between 10 million and 15 million hogs within 
three to five years. Here the kicker: they'll be "raised in accordance with 
standards and practices prevailing in the United States." I hope populations 
surrounding these farms know what they're getting into. Rather than die the 
inglorious death it deserves, our meat industry is managing to replicate 
itself halfway around the earth.

With the ground shifting under the food industry's feet, we're likely to see 
more shuffling and flailing as these mega-companies grope for new business 
models. Many of them, like Wal-Mart, will wrap themselves in green as they 
try to identify new profit opportunities. Sustainable-food advocates 
shouldn't dismiss these efforts reflexively -- nor should we mindlessly 
cheer. Amid a brewing global food crisis that could revive sustainable 
agriculture or stamp it out, the need to carefully scrutinize what the giants 
are up to has never been greater.

Likewise, the need to support and broaden access to farmers' markets and CSAs 
and other direct farmer-consumer links only grows. After all, with Wal-Mart 
barreling into the local-food market, small and mid-sized farms will need all 
the buyers they can find -- to defend themselves against the corporation's 
expected attempts to play hardball on price.