Recently the U.S. Federal Reserve Bank issued a report which stated that evolution of bigger intensively capitalized buyers can actually help the farmers. According to the current scenario, the farmers are restricted to supply chain which is held by fewer companies. There are only two giant grain companies which take care of more than half of the wheat in Canada; there are only a handful of packers and only two railways to move the bulk of the products. So, the mega-mergers seems frightening to many farmers. They feel they would lose all their bargaining powers in the process.
However, the situation may not be as frightening as it looks like. In fact, it can even turn out to be better for the farmers according to many experts. Tina Saitone and Richard Sexton, University of California economists stated in their paper, “Farmers can fare very well in modern procurement markets if conditions are right for them to establish a symbiotic relationship with a downstream supplier.” James MacDonald, chief of the U.S. Department of Agriculture’s also stated: “increased concentration does not necessarily imply reduced competition.”
Traditionally the farmers fear the appearance of too-big buyers and suppliers. In the 20th century in North America, the farmers were frustrated with the locally dominant buyers and suppliers. They used to exert a monopoly on the farmers.
In 1919, the U.S. Federal Trade Commission formed Big Five packers in order to manipulate the market and hurt the farmers and consumers. This ultimately resulted in the formation of Packers and Stockyards Act in 1921.
Why it now might be different?
Things might not be the same as it used to be in the 20th century. Nowadays, bulk production, marketing of commodities can be replaced by specialized and highly refined production. These days, the farmer, food companies as well as the marketers wish to run the industry with maximum efficiency and little uncertainty. So, a steady flow of product would be established with minimum complication. This is the reason, there is nothing to fear with this mega takeover by giant companies.