Consolidation in the Ag Sector
The Kansas City Fed holds an annual Ag Symposium each year in Kansas City and this year’s theme was on consolidation in the Ag Sector. James McDonald from the USDA Economic Research Center gave a presentation entitled “Consolidation, Concentration and Competition in the Food System“. Here are some interesting excerpts from the presentation.
- Over the last 25 years, the average dairy herd has grown from 80 cows to about 900 cows, whereas the average beef herd has remained fairly constant at around 100.
- The average number of hogs sold per farm has increased from 1,200 to 40,000.
- The number of farms has remained fairly constant due to an increasing supply of very small farms, however, the median acre size has about doubled from 600 to 1,200.
- Farming is consolidating, but it is not concentrating yet. Ag supply firms are in the concentration mode which is more of a concern.
- A very interesting chart shows the share of business for the largest 4 ag suppliers. For example, in 1977, the four largest seed suppliers had 60% of the volume. They now have 85%. Steer slaughter concentration has gone from 36% to 85%.
The presentation asked does rising concentration imply less innovation, reduced competition and lower efficiency. There was no conclusion, but if we asked most farmers, we know what the answer would be. YES!!!
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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