New Internationalist

Squeeze Play

Issue 108

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AGRIBUSINESS [image, unknown] The farmer's lot

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Squeeze play
A look at the forces knocking farmers out of business.

  1. Farmers are the last of the 'rugged individualists'. They are determined to be self-reliant and independent. Though they are the ones who produce our food their actual power is minimal.
  2. Farmers are largely pricetakers. They are squeezed on both sides by price-makers. If a tractor manufacturer or fertilizer company has increased cost, they are passed on directly to the farmer who can do little but pay the price.
  3. The other pricemaker is the marketplace. The farmer is unable to just pass on his increased costs to the consumer because competition amongst farmers is fierce.
  4. Farm prices are determined largely by supply and demand and not by the farmer's costs of production. He must take what he can get.
  5. But this cost-price squeeze hits small farmers harder than larger ones. Large farmers can make up in volume what they lost in price. A small farmer even if he is more efficient will receive the same unit price and may not be able to survive.
  6. So lower income margins favour size. The small farmer must try continually to grow larger or be forced to sell out.
  7. With profits per acre falling, farmers must increase production (either by increased mechanization, fertilizers and pesticides or larger acreage - or both). And more production in order to maintain a steady income.
  8. It's a vicious circle and the consequences for everyone are disastrous:
  • Efficient farmers fold, then leave the land while large farmers grow larger.
  • Farm property values rise to levels prohibiting the entry of new farmers and a new land-owning aristocracy develops.
  • The scramble to produce destroys the ecological balance of the land exhausting the soil, contaminating groundwater and reducing the variety and quality of foodstuffs.

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