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THE NEW ROAD: Can it be built with today’s agriculture?

THE NEW ROAD: Can it be built with today’s agriculture? . Dennis Keeney Institute for Agriculture and Trade Policy Minneapolis. Institute for Agriculture and Trade Policy.

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THE NEW ROAD: Can it be built with today’s agriculture?

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  1. THE NEW ROAD: Can it be built with today’s agriculture? Dennis Keeney Institute for Agriculture and Trade Policy Minneapolis Dennis Keeney

  2. Institute for Agriculture and Trade Policy IATP is a non-profit organization based in Minneapolis. It was founded in 1986 as an independent research organization to address natural resource conservation and agriculture policies. IATP's mission is to foster economically, socially and environmentally sustainable communities. Dennis Keeney

  3. Iowa has been hit with a series of commodity potholes • A commodity is: standardized, produced at lowest cost and in open world-wide competition, lowest cost producer gets the sale • Corn, soybeans, cotton, rice, pork, chicken, shrimp, bananas, coffee, wheat, you name it, most of the world’s food and fiber are based on commodities, they are a key part of the world’s food systems Dennis Keeney

  4. But commodity potholes lead to: • Overuse of natural resources • Soil, water and air pollution • Decline in farmer income and rural communities • Competition among farmers leading to farm consolidations • Technology treadmills • Exodus of farmers Dennis Keeney

  5. IOWA ESTIMATED CROP PRODUCTION COSTS, 2003 (Duffy 2003) Dennis Keeney

  6. The commodity system led to the 1980’s farm crisis The Russian wheat deal of 1972 started globalization, industrialization, soaring food demand from infusion of petrodollars and rapidly increasing commodity and land prices • Which led to decline in demand, overproduction, over capitalization, and a collapse in the economic systems supporting agriculture • And to a complete change in the way we do business: the restructuring of agriculture Dennis Keeney

  7. Restructuring of Food Systems • Vertical Integration • Horizontal Integration • Globalization • Retailing • Food Clusters Dennis Keeney

  8. Vertical Integration Started with centralized animal production, growing on contract, starting with broilers and now in hogs turkeys, beef. Changes the “farmer” to the “grower” Grower provides buildings, land, equipment and labor Integrator supplies animals, feed, management, marketing Dennis Keeney

  9. Horizontal Integration Concentration within industries, limiting market access and controlling international markets Animals Beef packers: 81% by Tyson, ConAgra, Cargill and Farmland Pork Packers: 59% by Smithfield, Tyson, ConAgra and Cargill Pork Production: 46% by Smithfield, Premium Standard, Seaboard and Triumph Pork Group Dennis Keeney

  10. Horizontal Integration in Plant Products • Terminal Grain Handling: 60% by Cargill, Cenex, ADM and General Mills • Corn Exports: 80% by Cargill, ADM, Zen Noh • Soybean Exports: 65% by Cargill, ADM and Zen Noh • Soybean Crushing: 80% by ADM, Cargill, Bunge and AGP Dennis Keeney

  11. Top Food and Beverage Companies, 1999 • Nestle SA • Phillip Morris Companies Inc • Conagra, Inc • Pepsico, INX • Unilever • Coca-Cola • Cargill • Diaglo • Mars, Inc • ADM Dennis Keeney

  12. Top Grocery Retailers • Wal-Mart USA 10 countries $193 billion • Carrefour, France 22 countries $60 billion • Ahold, Netherlands 24 countries $49 billion • Kroger, USA • Metro, Germany 21countries • Target, USA • Albertson’s, USA • Rewe, Germany • Edeka, Germany Dennis Keeney

  13. Changing agriculture structure has changed definition of a farm, a farmer USDA: 300,000-500,000 farms, omits very small farms. Management, rather than labor, has become the key definition of a farmer. Large farms are becoming integrated into food system clusters. Farmers (operators) no longer autonomous because they do not make the management decisions and profits accrue to integrators and food clusters rather than the local community Dennis Keeney

  14. Does the US really need farmers? About half of the world makes less than $2/day and many are farmers. Land costs also very low in other countries and therefore US agriculture is not competitive on the global scale and must be subsidized The triumph of global capitalism is that more than half of the worlds 100 largest economies are centrally planned for the primary benefit of the wealthiest 1% of the world’s people Dennis Keeney

  15. Building the New Road Social forces are building here and worldwide for changing the global economic system leading to new opportunities • Connecting food systems to consumers • Recognizing environmental benefits of agriculture • Renewable energy • Marketing the landscape Dennis Keeney

  16. Connecting to Consumers • Organics (becoming a commodity?) • Community supported agriculture • Specialty crops (3rd crop) • Local foods (restaurants, institutions, grocery) • GMO-free crops (European) • Healthy meats (low fat, grass fed, special breeds) • Certification of green cropping systems (bio-plastics, energy) • Country of Origin Labeling (Opposed by Ag, USDA) Dennis Keeney

  17. Environmental Benefits • Government Programs • New Farm Bill has many conservation entitlements, but full funding not likely • Nutrient Trading • Selling BMP’s to point source industries • Carbon Credits • Tying carbon up in organic matter long term cutting down on atmospheric carbon dioxide buyers are smokestack industries • Watershed Protection • Municipalities paying for establishment of BMP’s Dennis Keeney

  18. Renewable Energy • Wind industry, in infancy but showing much promise • Biomass, many opportunities, but more technology needed. Largely for local electric and heat generation • Liquid fuels, primarily corn based ethanol • Some advantages to farmer owned cooperatives • Becoming a commodity, control by ADM, Cargill Dennis Keeney

  19. Marketing Your Landscape • Agro-Tourism • Farm Visits • Bed and breakfasts, farm stays • Pick your own • Hayrides, etc • Hunting, fishing, hiking • Regional Themes • Silos to Smokestacks Dennis Keeney

  20. THE NEW ROAD Current Attitude “In the long term we are all dead” New Vision “Work outside the commodity systems to establish new contracts with society” Many processors and marketers have been left out of the current agriculture structure, these offer opportunities for partnerships, contracts and new joint ventures Dennis Keeney

  21. Commodities are on the global superhighway • Ag cannot export its way to prosperity • There are ways to get off the highway, but the new road has lots of difficulties and turns • Need new partners, innovative thinking, regional, actions • Do it ourselves, do not count on the government • Connect with consumers Dennis Keeney

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