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Vertical Integration

In addition to seeing to fewer firms control more of a given market, there has also been a

trend towards firms controlling more of the process; from field to table, in given markets.

This form of consolidation is called vertical integration. Vertical integration involves linking

firms at more than one stage of the food chain such as upstream suppliers or downstream

buyers. For example, a seed manufacturer might be able to buy a chemical firm that supplies

fertilizer used in the process of producing the seed and be able to use some research and

development investments in both processes.

The advantage in vertical integration is having an assured supply in case of a tight market.

The disadvantage, however, is that there are high levels of leverage-if economic

developments depress one industry, this may ripple through the value chain, compounding

the problem.

Global Expansion

This is an attempt by agri-business firms to increase their market share worldwide. This is

most apparent on the retail end of the food chain, as some analysts have predicted there may

soon be only few global food retailers. A massive wave of mergers has been occurring in this

industry recently, spurred by the recent entry of Wal-mart into food retailing and its

expansion to other continents.

Effects of Consolidation in Agribusiness

Among the problems with consolidation in the agribusiness industry are agricultural

dumping, loss of family farms, increased corporate influence over public policy, and

environmental erosion.

1. Agricultural dumping: the process whereby an agricultural company in one countryexports its product to another country at a price that is lower than what it actually cost

to produce the product is known as agricultural dumping. A high level of

consolidation is one contributing factor to dumping. When few agribusiness firms buy

goods from thousands of farmers, they are able to drive down the prices they pay to

producers. Since the agribusiness firm then controls the processing of the good, it is

able to sell the product abroad very cheaply because of the low price it paid to the

farmers.

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2. Loss of family farms: high levels of agribusiness consolidation hurt family farmingin two ways:

i. First, the seed industry is highly consolidated, which means that seed prices areoften very high.

ii. There are thousands of farmers who produce a given crop or animal product, butthere are only a few agri-business firms who buy those crops and animal

products. this gives agri-business firms incredible power in setting the prices they

will pay to farmers. Farmers are often paid extremely low prices for their goods.

Farmers are getting squeezed from both sides: paying high prices for their inputs, such

as seeds and fertilizer and receiving low prices for the goods that they produce.

3. Corporate influence: an increased level of agribusiness consolidation also means thatagribusiness corporations have incredible influence over agricultural policy decisions.

Through donations and lobbying, agribusiness firms make sure that government

policies will not restrain their ability to make profits.

4. Environmental Impacts: there are serious environmental impacts of agribusinessconsolidation. Consolidation contributes to soil and water contamination due to

increased dependence on pesticides and other chemicals, soil erosion from producing

only one crop, as well as loss of biodiversity. For those who care about environmental

sustainability, consolidation is a serious issue.

Conclusion.

Heightened levels of consolidation within the agri-business industry have negative impacts

on small farmers and consumers worldwide. Consolidation also increases the influence of a

small number of profit-driven corporations in the policy-making process. A decentralization

of power within the agricultural system is an important step in ensuring the livelihoods of

small farmers worldwide and promoting an agricultural system where everyone has a right to

food.