Between farmers and consumers Of the total food dollar in the U.S., 60 cents goes not to the farmer but to middle men-the processors, distributors and retailers of food-and nearly all the inflation in food costs in recent years has been in their sector. Even for raw food products like beef and fresh fruits, middlemen take a large and increasing share of the consumer’s dollar. But with more processing and packaging, the middleman’s share increases geometrically, which is why the major food manufacturers are doing all they can to encourage greater consumption of highly processed items. Here’s a list of several food products and the percentage of their retail prices that went to corporate middlemen during the second quarter of this year: Apples 59% Margarine 64% Beans, dried 63% Milk, in stores 45% Beef, choice 35%. Milk, evaporated 53% Beets, canned 94% Onions 62% Bread, whole wheat 92% Oranges 74% Butter ‘36% Orange juice, frozen concentrate 55% Cabbage 60% Peaches, canned 80% Carrots 70% Pears, canned 82% Celery 64% Peas, canned 80% Cheese 52% Peas, frozen 84% Chicken, fryers 42% Peanut butter 60% Cookies, sandwich 89% Peppers 55% Corn, canned 83% Pork 40% Corn flakes 93% Potatoes 71% Cucumbers 52% Potatoes, french fried 86% Eggs 41% Rice 69% Flour, white 69% Salad & cooking oils 70%r. Grapefruit 82% Spaghetti, canned 89% Ice cream 65% Sugar 56% Lamb 41% Tomatoes 52% Lemons 82% Tomatoes, canned 87% Lemonade, frozen 89% Turkey 48% Lettuce 60% Vegetable shortening 54% Within these categories, there are fewer and fewer competitors. In fact, the food industry already has become more concentrated than most other industries, with the majority of sales in the average product category being controlled by four or fewer firms. Such oligopolies \(or, every food line; in its July issue Progressive Grocer, a trade publication, reported the following astounding levels of market control by just the top three brands in various categories: Share of market held Product by top three brands Table salt 91.7% Flour 80.4% Catsup 86.1% Mustard 76.2% Peanut butter 78.6% Salad & cooking oil 85.5% Vinegar 84.1% Gelatin desserts 98.4% Whipped toppings 85.6% Canned evaporated milk 82.3% Marshmallows 98.2% Instant puddings 96.0% Shortening 81.0% Jams & jellies 75.2% Nuts 80.7% Honey 82.2% Frozen potato products 82.2% Frostings 97.7% Spaghetti sauce 85.9% Pickle relish 79.2% Instant tea 86.0% Frozen dinners 92.8% Corn & tortilla chips 86.7% Canned spaghetti & noodles 94.0% Ready-to-serve dips 81.5% Non-dairy cream substitutes 86.1% Pretzels 85.6% Dry milk 80.1% Add-meat dinner mixes 90.7% Canned stews 83.6% Instant potatoes 83.9% Pizza mix 86.6% Instant breakfast mixes 90.8% Picking up the tab Consumers pay dearly for this kind of market control. Once a few firms gain a monopoly position in a product category, the market for that category is considered to be “mature,” again using Wall Street’s patois, and the companies are able to “harvest” it, meaning that they can push up prices. Taking one product at a time, such artificial inflation doesn’t make a dramatic impression on shoppers-a few cents more on shortening, a little extra for the pizza mix. But when the whole market basket is pushed to the cash register, consumers have been nickel-and-dimed to death. These shared monopolies are the major cause of inflation in the food economy, which is one of the major, causes of inflation in the whole economy. In an extremely important but littlenoted study, two highly regarded economists, one from the Federal Trade Commission and the other from the Department of Agriculture, have teamed up to calculate the extra price that consumers pay for food because of these monopolies. Russell. Parker and John Connor figured the overcharge conservatively, using 1975 data and three different and independent methodological approaches. They concluded in a paper presented August 30 that “[c]onsumer loss due to monopoly in U.S. food manufacturing industries in 1975 was at least $12 billion.” That’s $55 a year given away to food conglomerates by every man, woman and child in America. For a povertylevel family of four, it means 10 percent of their total food budget is being misappropriated by monopolists. The industry’s structure has become more concentrated since 1975, so the problem is only growing worse-Parker and Connor estimate that “consumer loss for 1978 would be at least one to two billion dollars greater than the estimate for 1975.” A big chunk of this monopoly price-tag ends up in the coffers of the monopolists as excess profits-Parker and Connor calculate that $3 billion of the 1975 overcharge went for profits that the firms would not have enjoyed in a competitive world. Here are a few of the profiteers: $173 million in excess profits to the bread and cake purveyors, the top four of which are ITT, American Brands, Campbell Taggart and Interstate Brands $186 million to the breakfast cereal makers, the top four of which are General Foods, General Mills, Kellogg and Quaker Oats $333 million to the fluid milk marketers, the top four of which are Borden, Kraftco, Beatrice and Carnation $104 million to the canned specialties manufacturers, the top four of which are H.J. Heinz, Campbell Soup, American Home Products and Gerber $29 million to the frozen specialties firms, the top three of which are Campbell, RCA and Consolidated Foods $108 million to the coffee roasters, the top four of which are Procter & Gamble, General Foods, Nestle and Standard Brands $344 million to the brewers, the top four of which are Anheuser-Busch, Philip Morris, Schlitz and Pabst $343 million to the soft drink purveyors, the top four of which are CocaCola, PepsiCo, Royal Crown and Philip Morris $111 million to the shortening and cooking oil makers, the top four of which are Kraftco, Norton-Simon, Procter & Gamble and Esmark. Being this big and powerful may enrich the monopolists, but it does nothing for their efficiency. As Adam Smith long THE TEXAS OBSERVER
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