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Dr. John Ikerd: An Economist’s Take on Efficiency in Agriculture

by Rootstock Radio

Oct. 22, 2018

by Rootstock Radio

On this episode… 
Dr. John Ikerd, Professor Emeritus of Agriculture and Applied Economics at the University of Missouri, talks about the transformation of the agriculture industry in the Midwest. His expertise in both agriculture and economics allows him to present a clear-eyed survey of the “state of the union” in agriculture and to share some incredibly thoughtful insights. 

This is also not Dr. Ikerd’s first rodeo here at Rootstock Radio! His other episode addresses the specific limitations of industrial agriculture and is certainly not one to miss. 

Tune in to hear about… 

  • How the calorie count in our food is skyrocketing as the nutrient content plummets
  • How the loss of independent agriculture producers is NOT cyclical but rather a fundamental transformation of the system (and why you shouldn’t believe anyone who tries to convince you otherwise)
  • How large operations are gaining market power and then overproducing—and the problems this creates
  • How we have sacrificed so many things in our food system by chasing a very narrow definition of efficiency
  • The Iowa Alliance for Responsible Agriculture
  • How we can put personal connection back in our food system

Listen at the link below, on iTunes, Stitcher, Google Play or wherever you get your podcasts.

Rootstock Radio Interview with John Ikerd
Air Date: October 22, 2018

Welcome to Rootstock Radio. Join us as host Theresa Marquez talks to leaders from the Good Food movement about food, farming, and our global future. Rootstock Radio—propagating a healthy planet. Now, here’s host Theresa Marquez.

THERESA MARQUEZ: Hello, and welcome to Rootstock Radio. I’m Theresa Marquez, and I’m honored today to be here with Dr. John Ikerd, who is a professor emeritus of agriculture and applied economics at the University of Missouri. And John also authored six books, but one that’s quite interesting to all of us is the 2014 regional report he did for the United Nations Food and Agriculture Organization that we refer to as FAO, called “Family Farms of North America.” Please join me in welcoming family farm advocate John Ikerd.

JOHN IKERD: Thank you. I appreciate the opportunity to be here with you today.

TM: Well, John, I was reading a lot about the demise of the family dairy farm in Wisconsin. What disturbed me was that 20 percent of the dairy farms that we had five years ago are now gone. How is ag changing? Especially those of us who are so wanting to help change food, it seems like a trend in the wrong direction.

JI: Right. I think what we’re seeing now in the dairy industry is very similar to what we’d seen earlier, not so much in the poultry industry with the consolidation and larger operations because we just had mainly family farm flocks, but certainly we saw the same kind of thing in the on-farm feeding of beef cattle, when we saw beef cattle move into the large feedlots and the high plains in the West and things of that nature, and disappear from the family farms. But most notably, something very similar to what we saw in the hog business, when we saw it transform from the independent family hog farms to the large confinement animal feeding operations under corporate control. And I think it was very predictable that that is what was coming in dairy, and it just followed on the heels of poultry and beef and pork.

And in each of those industries before, and what we’re seeing in dairy now, as we transform from the independent family farms that were producing those products before to the large-scale corporately controlled confined animal feeding operations, we’ve lost at least 90 percent of our independent producers in the process. And I think that’s what we’re going through now in dairy. It’s not a consequence of just natural cyclical overproduction, which does occur from time to time. This is a fundamental transformation of the dairy industry. We see the large confinement operations increasing in numbers and new ones being built, in the midst of this glut of dairy products on the market that’s driving the independent producers out of business.

TM: Well, I heard a chilling statistic, and I don’t know that it’s true or not, and I haven’t had anyone to confirm it, but that we’re looking at 40 to 45 new CAFOs—as you described them, confinement and it’s feedlot, right?—operations in Wisconsin. Maybe you could say something about, why was the pay price for dairy being driven down so low?

JI: Right. And I think it’s part of a strategy to basically squeeze out the last of the independent producers. And I think the very similar situation that we had in the 1990s with the hog operations, when we saw the CAFOs came in there. The first step is that the large operations and the dairy processors and retailers (now we have Walmart involved in dairy processing as well), when they get a sufficient control of the market under their control by contractual arrangements—and generally that means that they get enough of the large operation that they can kind of depend upon for at least full supply of milk coming in at all the times—and when we get into a period then when you have overproduction and you’re continuing to build CAFOs, rather than.. In the typical competitive market, then when you have overproduction then the prices will fall, you will get unprofitable prices for the producers and you will have a reduction in production, you’ll have a reduction in cow numbers, and you’d cut back, and then eventually milk prices will come back up. But if you’re in the process of gaining market share and basically taking control of the market, and if you’re involved not only at the production level, as they are now through the operations, the big operations that are selling and have direct relations with them, but they’re involved in the processing and in the retailing level as well, so they’re able to keep the wholesale and retail prices of milk, in this case, even though they’re low by standards of the past few months and so on, they’re able to keep those high enough that it keeps the raw milk price below cost of production long enough to drive the independent producers out of business, while they’re still making their margin of profit on the difference between what they’re paying for raw milk and what they’re getting at the wholesale and the retail level for milk.

And that’s what we saw in the pork industry in the late 1990s. It wasn’t a matter of the large operations being more efficient than the remaining independent producers. It was a matter of the large operations having the market power to force and hold market prices below levels that the independent producers could survive. And it’s just a matter of gaining market share. They want control of the milk market, the same way they have control basically of… The poultry’s totally integrated now with the large operations, integrated all the way through production, increasingly going all the way to retail. In beef it’s a little bit different—it’s what they call captive supplies, rather than contract production, but the effect is basically the same. And then pork is more than 90 percent contract operations or integrated operations. And that’s where dairy’s going too, and it means that fewer and fewer independent dairy producers are left, just like we see in other animal agricultural sectors.

TM: Yeah, we’re seeing a lot of that out in Iowa. Can you describe a contract operation?

JI: Well, there’s different kinds of contractual operations. You know, the classic, which is in the poultry business, which is common, where the integrator or the feed company or the processor actually owns the birds and they provide the feed, and you have to build buildings to their specifications, and they provide the medication and the veterinary services for the birds. And that’s largely true in hogs. In some cases, it’s a little bit different kind of contractual operations where they work it out so that technically the hog producer might own the hogs, but there’s a kind of a guaranteed return per head, rather than taking the market price.

And so it’s operated in different ways, but basically what they want to do is they want to control the whole process. They want to go and control the breeding stock that’s used, the feed that’s used, the nature of the animals, the veterinary service, the nature of the building. They want to control that whole process so that they can make the production end of the process, meaning what happens on the farm, then they can coordinate that with the processing distribution end. That’s what they’re looking for, is to control that whole, what we economists would say, that whole vertical system or that whole supply chain.

And so any way you can do that. I’m not sure what the contractual arrangements are now in the dairy operation and to what extent they’re alike and different than they have been on the poultry and the hogs. And there still may be a variety of different strategies that they’re working through to control that system. But the key thing is that they get into a position where they can control their supplies of the raw product that’s coming into the market on a continuous basis. And then, when they get in an overproduction situation, after they’ve gained control of the market, when they get in an overproduction situation, then if they do need to cut the supplies then they’ll do it on the back of the contract grower. And their contract producer is the one that will take the losses during periods of overproduction, rather than the company that’s contracting with them.

TM: Oh, boy, the farmer is always the one that gets it!

JI: Yeah, and it’s turning out to where farmers trying to, increasing in contract operations—and again, we’re still in the process of determining how it’s going to shake out in dairy and exactly what kind of arrangements that we’ll have. But in the other animal agriculture industries, and I would expect dairy to follow, what it ends up is that in an effort to kind of shift some of the risk that’s inherent in livestock production to the processor or distributor, whoever they’re contracting with, then basically they’re giving up the opportunity, the producer is giving up the opportunity to do anything much more than just be, kind of take care of the facilities and be an overseer of the animals. But there’s very little left in those operations that have any semblance to being actually farming operations. They’re basically custodial situations where the producer will provide the facilities and the producer has responsibility for getting rid of the manure and the dead animals; and then they get a return per head or return per cow for doing that. But basically they’re just working for a fee of a certain amount for whatever production moves through their facility.

(10:42)
TM: So, John, I can just hear the folks who I might like to debate with about this particular model of farming, saying, “You see, it’s efficient, it’s going to give you the same product day in and day out; it’s kind of like a system and one size fits all.” Tell us more about why this, what’s happening to us now, might not be ideal agriculture.

JI: Right. Well, I think the focus was on increased efficiency. And as I’ve told people and have written on many occasions, I supported that kind of approach to agriculture through the first half of my 30-year academic career as an agricultural economist because I thought it made sense. We’d really improve the efficiency of agriculture, we’ll break down the cost of production, it’ll lead to reduced costs for food, and we’re gonna have good food for everyone. That was basically what I was working toward. It was the 1980s whenever I discovered it certainly wasn’t working for farmers. That was another period where it wasn’t just the livestock producers, like dairy producers now, but we were in a real crunch. And we may be headed to something similar for agriculture in general, that the farmer’s going broke as we move to the larger, more what I call industrial kinds of operations.

And so we come into that, but the point is that it seemed to make sense at the time. And there was a period of time through which we had a declining percentage of our income spent on food—we basically cut that in half between the ’70s and the late ’90s. But for the past 20 years, more than 20 years, food prices have risen faster than the overall Consumer Price Index. And what we’re seeing now is, even though the farm-level production cost may be going down—not significantly over what we could have produced before and not significantly less than before—but even though those continue to go down, at the same time we’re seeing the processers and retailers taking larger margins. What they’re doing is basically turning the cheap agricultural raw materials, whether it’s corn and soybeans or whether it’s pork or beef or chickens or whatever, they’re turning those into kind of manufactured projects, which give them a much higher return and profitability, but it results in the products that we’re buying at the retail stores actually being higher priced than they were at earlier times, and actually rising faster than the overall Consumer Price Index.

And I think the thing that I point to more and more is that whole system basically failed to do what it was intended to do, and that was to provide, as I said, good food for everybody. It was basically justified on the basis of domestic food security, and all of our farm policies basically have supported this industrialization of American agriculture. But it was supposed to provide good food for everybody by making food less expensive. Well, it didn’t work. We have a higher percentage of people now that are in this country that are classified as “food insecure” or “hungry” than we had back in the 1960s, before these final phases began with industrializing agriculture. We’ve got about one in eight people in this country, about 13 percent, are classified as food insecure, and about one in six, or almost 17 percent, of our children in this country live in food-insecure homes. So cheap food didn’t feed the hungry people.

And I think, even more important, particularly low-income people but all of us to a certain extent, is the food that we’re getting out of that system now, with its focus on just maximum all-out production, the nutrient—and there are studies that show this—the nutrient density of the foods is going down. We’re getting foods that are higher in calories but they’re lacking in essential nutrients that are essential for good health. And so, as a result, we’ve got an epidemic of obesity and diabetes and high blood pressure and heart disease, and a whole range of other issues, a whole range of other health problems that are associated with the American diet. When we, the period of time when we cut what we were spending on food in half, we doubled, more than doubled what we were spending on health care in this country.

So that whole system that’s being justified as being more economically efficient, it is a very narrow, myopic view of efficiency. It doesn’t take into account the fact that we aren’t providing food for those people that need it most, and the food that we’re getting out of that system is not as healthy as the food we were getting before. And in addition to that, we could have produced just as much or even more, had we maintained our independent family farms and paid them a decent return.

(15:51)
TM: If you’re just joining us, you are listening to Rootstock Radio, and I am Theresa Marquez. And I’m here today with Dr. John Ikerd, who is a professor emeritus of applied agriculture and economics but also is a real family farm advocate.

John, I also know that you have been working in Iowa. You’re still in Iowa, aren’t you, in Fairfield, in that little corner of Iowa?

JI: Right.

TM: Yeah, and the last time we talked, you were, I think, on the board of the Jefferson County Farmers & Neighbors.

JI: Yes, Jefferson County Farmers & Neighbors, yeah.

TM: Yeah, that are trying to talk to local people. How is that going?

JI: Yeah, I think, I want to point out that the comments I make are basically my comments as an individual. Because I’m on the board of directors of the Jefferson County Farmers & Neighbors (JFAN), and I’m very much impressed with what’s going on in Iowa. And they have people organizing in opposition to what’s happening to Iowa agriculture, the industrialization of it, the large confinement animal feeding operations, but also the negative impact of the monoculture or biculture or whatever, of corn and soybeans, the negative impact that’s having on water quality in the state, and various other areas. So when they come into communities then the local groups tend to get organized, and JFAN and other organizations work with them. But now there’s a collection of almost 30 different organizations now that have come together to form the Iowa Alliance for Responsible Agriculture. And probably half or more of those 30 organizations are these local groups that have organized within their communities to fight back and protect their communities from industrial agriculture.

So I think that’s a good sign, because we’re not—in my opinion, again—we’re not going to get the changes that we need from the state and federal level, because the large agribusiness corporations and farm organizations that support industrial agriculture, such as the American Farm Bureau Federation, the corn producers, soy producers, hog producers, wheat producers—all of those single-commodity organizations are in support of this industrial approach because it’s about specializing in particular commodities rather than diversified family farms. So these are the people that control the political agenda and agriculture policy at the state level and at the federal level, USDA. And so in order to address these threats that are being posed upon our rural communities—and I’ve written papers recently about how we’re colonizing our rural communities, we’re basically extracting all of the wealth and leaving the pollution in these areas. But these people at the local level are organizing, and I think that’s what’s ultimately going to bring about change, because local people are participating in local democracy and they’re standing up and saying, “Look, nobody else is going to protect our community, so we’re going to do it.” And if we build enough alliances, if we get enough people at the local level involved in coming together and building alliances and networks, then we can begin to have the political impact that it takes to change public policy at the state and federal level.

You know, you mentioned that I’m a proponent of independent family farms. And the basic justification, if you get right down to it, is that traditionally, farming, the family farm, was not just a business. It was a business but it was also a way of life. And there was a commitment on the part of those farmers to take care of the land and to pass it to the next generation—you know, the land is productive and healthy as it was and a clean and natural environment that could be passed on. And there was a commitment to those family farms as responsible members of the community. They wouldn’t go in and build an operation that was going to destroy their neighbors’ quality of life, or threatening the quality of water and polluting your neighbors’ wells, or anything like that. The traditional family farmer wouldn’t have done that. They had to make a living, and that was an important part, but making the economic living was simply a means of them living a life that they wanted to live, as responsible members of community and caretakers of the land.

And that’s the reason I’ve continued to support that, because I think, if we don’t have those values—I’m not talking about “going back” to the ’40s or ’50s in farming, but we’ve got to have those family farm values of stewards of the land and responsible members of the community, and then find some way so those farmers that have those values can make a decent living on the farm. That’s the challenge we’re facing.

(21:00)
TM: John, you are such an inspiration for me. You have been doing this for so long and you still have this positive attitude, and you’re actually really making an impact. And I’m really excited about the Alliance. For our listeners, John has written a really beautiful piece called “Is a Civilizational Collapse Inevitable?” When I read it I was very moved and very inspired by it, and so I’m recommending it to our listeners. And you can find it at JohnIkerd.com, on his blog.

JI: Thank you.

TM: And I have one other topic I must talk with you about because I can’t help it. I understand you just got back a week ago from Terra Madre, which is the Slow Food, Carlo Petrini concept. And I wondered if you could tell us just a few things about Terra Madre and what that was like and what we all just are jealous that we weren’t there.

JI: Well, this is a big international event that really started with the Slow Food movement. But it was started in response to a McDonald’s, the hamburger place, opening up at one of the historic facilities in Italy. And so there was a fella there, Carlos Petrini, come in and started the Slow Food movement. Anyway, Terra Madre today is, there’s thousands of people come in there from all over the world.

And the basic theme of the Slow Food movement, which attracted me in the first place, was good, clean, fair food for everyone. That’s what attracted me to it: good food that tastes good, nutritious food, healthful food; clean food produced in an environmentally sound way that treated the animals humanely, and things of this nature; then fair food was a commitment to a fair return for the farmers that produced the food, and the farm workers, and the people in the food industry. And most important, good, clean, fair food for everyone, which meant that it’s a commitment to making sure that the hungry people were fed. And I think that’s the roots that the Slow Food movement international is coming back to with the Food for Change and inclusiveness and diversity and food justice, focusing on these issues.

And my participation in the movement, in Denver and in Italy, really focused on recommitting the Slow Food movement to making sure that everyone had enough good food. And I pointed out, as an economist, the market simply won’t do that. If we simply rely on markets, as we have in the U.S., like I was talking about: “Well, we just make the cost of production go down and the markets will make sure everybody gets good food.” It simply hasn’t worked for 400 years, ever since the enclosures, when we made private property out of farmland where people had been meeting their own needs; and it hasn’t, it’s not working now. What happens is you get into situations where those of us—and there’s a lot of others in the same category—that have the money to compete for basically, whether we’re thinking about it or not, how farmland is used, we end up using 40 percent of the corn land in this country, of the corn crop, for fuel for cars, while there are hungry people here that can’t afford to compete with us for ethanol. Or we can afford to—talking about “we” collectively, not you and me individually—but we can afford to buy food that we throw away, so we waste about 40 percent of the food while there’s people that need that food for their children to have sustenance. So we’ve got to find ways that we can make sure that there’s food for people, for the hungry people.

And again, I say we have to come back to the local level, because our government programs for food assistance programs at the national and state levels aren’t working, basically for the same reason that markets don’t work. Markets are impersonal. We have to be able to buy, sell, and trade things, which means there can’t be a personal connectedness to something that has economic value. And the markets, the economy is indifferent to need. It’s all about scarcity rather than necessity. And the government programs, the ones we have now, they have that same impersonal characteristic. There’s no sense of personal connectedness between the taxpayer that pays for those programs and the people that receive the benefits. And the people that receive the benefits don’t see this as coming from a particular person and therefore have to use it responsibly; and the person that’s paying the taxes doesn’t see the connection. So while we have, basically we’ve got close to three times as much hunger as we had in the 1960s, and we’re talking about cutting the food stamp programs, or cutting the SNAP programs, they call them now, because there’s no sense of connectedness, there’s no sense of personal responsibility.

So what I’m arguing for is we’ve got to go back to the local level. And I’ve suggested something like maybe a community food utility. You know, we make sure everybody has enough water by having the utility and electricity and gas and sewer. All of those are public utilities. Why don’t we have local public utilities that make sure everybody gets enough food? I’m really excited about the possibility that a large international organization like this can really get committed to this cause, because there’s an international food sovereignty movement that’s about very much the same thing. It declares food as a basic human right and says everyone has a right to enough good, culturally appropriate, healthful food to support  active lifestyles. And it says that everyone has a right to determine their own food system.

So all of these forces are kind of moving us toward a relocalization of the food system, and hopefully a relocalization of the economy.

TM: And I think, as you say in your essay, too, this great turning, that we might actually gather our common sense and our solutions together and do it right this time. That would be pretty wonderful.

JI: I think so. I think we have the possibility to move to a fundamentally better place. And sometimes it’s really hard to give up on the place that you’re leaving to get to the new one, but I think we have an opportunity here to move on to where we put much more emphasis on the value of relationships, and just having a sense of purpose and meaning, and really believing that what we’re doing is good and right. And I think if we could move to give greater emphasis to those dimensions of quality of life, which we all individually know that our quality of life is about relationships and it’s about a sense of thinking that what we’re doing is making some positive contribution, that if we have enough material well-being or economic well-being to allow us to do the things that we really feel we ought to be doing, then we can have a good life. And there’s no limit to how much we can improve. At least I speak for myself—I’ve got plenty of room for improvement in those dimensions of life that don’t have to do with economics at all.

TM: John, that was so well said. And I want to thank you so much for your positive contribution and inspiration. And especially, you know, you just keep on doing it, and you find room in your life for it. So thank you so much.

JI: Well, I will for as long as I can. I tell people, as long as I feel that I’m kind of doing something that I feel is worthwhile, then I’ll continue to try to do it. So I thank you very much for the opportunity to visit with your listeners today.

TM: Thank you so much, John.

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