Before we can fix any problem we need to clearly identify what the problem is to begin with

Put simply, farmers are fragmented and have a lack of market power, which aversely affects them as they compete for profits in the commodities they produce. This lack of market power exists in both the cost of production and in marketing. Low farm profitability is a symptom of this lack of market power, which eventually trickles its way through the system until it affects our families and rural communities.

Over the last decade the problem of getting a fair return for the commodities we produce on our farms is getting larger. Farmers are losing the struggle for control over the marketplace to large corporations who are continuously strengthening their control through mergers and acquisitions.

The graph below allows us to see what is happening at the farm level.

The blue line represents gross farm receipts. Farmers have increased gross receipts significantly through better farm management practices, the adoption of new and innovative technologies, and through diversification. Whether the farmer is actually receiving a fair return on their commodities is not represented here, but it is no secret that they have not. The companies that compete with farmers within the profit chain look to maximize their profits by buying low and selling high. Ironically, these are often the same companies farmers take their advice from and market their products through.

The green line represents a farmer’s cost of production. This line is in control of the corporations that manufacture the products that exist in our farm’s production. Magically, it captures any gains made by a farmer regardless of where their gross profits come from. They simply price to what the market will bear.

The red line represents a farmer’s net profits. Over the last three decades it has been help at, more or less, the same value level, and yet the percentage of return compared to gross farm income continues to diminish. It is often unclear to many farmers who they are really competing with for profitability on the farm. Farmers are often pitted against farmers as competitors when in reality it is those that control the profit chain from farm gate to consumer plate that are the farmer’s true competitors.

However the bright light in all of this is that farmers working together have more power than all of the corporations put together. It is getting them to work together that will create the reversal of this market control and it is alliances between organizations like National Farmers and Farmers of North America that provide the essential catalyst necessary for farmers to do this.