Question

Using appropriate economic theory and terms, explain why the U.S. government has occassionally stepped in and restricted the level of concentration in food manufacturing and other industries.

Answer 1

Q- Using appropriate economic theory and terms, explain why the U.S. government has occassionally stepped in and restricted the level of concentration in food manufacturing and other industries?

Answer- Most social and economic outcomes reflect complex causal processes, and they can vary widely based on time period, spatial organization, market conditions, regulatory forces, and adaptive mechanisms of actors in the system. In this section, we outline major classes of social and economic effects that can be linked to characteristics of the U.S. food system and present summary information about the overall performance of the system. We focus on three broad classes of social and economic effects:

• Levels of income, wealth, and distributional equity;

• Broader indicators of quality of life, such as working conditions, job satisfaction, and freedom of choice to pursue taste and lifestyle preferences; and

• Associated impacts on worker health and well-being.

Affected individuals fall into three groups: (1) people involved directly in agricultural food production (e.g., farmers); (2) people involved in the rest of the food system (e.g., processing, manufacturing, food service, and retailing); and (3) consumers. Food production, processing, and availability also can affect community-level measures, such as economic growth and social infrastructure.Although social and economic dimensions of effects are distinct, they are more closely interrelated than other dimensions. For this reason, we are presenting them in one chapter. This chapter begins with an overview of the social and economic impacts of the food system on key sectors of the food system

POTENTIAL SOCIAL AND ECONOMIC EFFECTS ON THE FOOD PRODUCTION SECTOR-

Income, Wealth, and Distributional Equity

The food production sector includes farmers, ranchers, fishers, hired workers, their family members, and residents in the communities in which these individuals reside (primarily, but not exclusively, rural or small town). Occupations in this sector involve planting, caring for, and harvesting raw food items, livestock, and seafood (FCWA, 2012). About 40 percent of the U.S. land area is used for farming, with 2.1 million farm operations generating nearly $400 billion in sales (55 percent from crops and 45 percent from livestock) and more than $100 billion in net farm income in 2013

Quality of Life

Farm Owners

Because economic returns to agriculture have generally been volatile and below prevailing market rates of return to capital and labor (Cochrane, 1993), economists and sociologists have long sought to understand the motivation of farm operators to persist in farming (Gardner, 2002; Reinhardt and Barlett, 1989). Motivations to enter and remain in farming include a desire to maintain a family tradition, be one's own boss, work outdoors, and spend time with and teach work ethics to one's children (Barlett, 1993; Gasson and Errington, 1993).

Farm Workers

Hired farm laborers face particularly difficult working conditions and experience a quality of life that is well below that of most others in the U.S. population. Many farm workers live in substandard housing and have relatively little control over their work schedule or labor practices. About 15 percent of U.S. crop workers migrate from farm to farm to find continuous employment (Seattle Global Justice, 2014). This can disrupt family structure and educational experiences for children (Kandel, 2008).

Women and Racial/Ethnic Groups

According to the 2012 Census of Agriculture, almost 83 percent of “primary” farm operators in the United States are white and male (USDA, 2014b). However, women are the principal operators of another 14 percent of all U.S. farms, up from roughly 5 percent in 1982 (Hoppe and Korb, 2013). Moreover, when principal, secondary, and tertiary operators are counted, nearly 1 million women (of all races) were engaged in running U.S. farms in 2012 (30 percent of the total) (USDA, 2014b). The role of women in U.S. agriculture has always been significant, though their presence in official statistics has often underestimated their contributions because until recently the Census only enumerated characteristics of the primary farm operator on each farm (Hoppe and Korb, 2013).

Rural Communities

The economic performance and quality of life for farm operators and hired farm workers can be an important contributor for community life and well-being, particularly in rural areas where farming is a major driver of local social and economic activity. Researchers know that rural communities that rely most heavily on farming for their local economic base are more likely to experience economic stagnation and population declines.

Food Processing and Manufacturing

This sector is composed of first line handlers who receive, package, and store raw agricultural products in preparation for shipment to the next party down the food supply chain and of food processors and manufacturers who turn ingredients into edible, packaged, storable, and safe food for final preparation and consumption by consumers or food service establishments.

Many companies that buy farmers' goods do so through contracts that guarantee the purchase of a certain amount of product for a predetermined price, assuming that the raw goods meet the quality specifications of the buyer. The benefit of this arrangement is that it alleviates the farmer's risk of not finding a market and of not knowing what the price will be at harvest time. It also can provide an opportunity to hedge against price declines in case of unforeseen market circumstances. The companies' contracts also provide technical advice and set standards of quality and safety that help to ensure a uniform supply of product that will be accepted by the downstream market. The demand from processors and retailers for uniform size and quality of product plays a large role in the benefits from contract farming.

Structure of the sector Changes in the structure of first line handlers can affect competitive pressures and returns to farmers. One example is the livestock supply chain, where vertical coordination has led to changes in the business relationships. In the poultry industry, producers are paid according to their productivity relative to other farmers and have much less certainty about the price they will receive at the end of a season (Leonard, 2014). Concentration of market shares in the hands of few firms can also lead to potential loss in competition and decline in the transparency of markets.Food processors and manufacturers tend to be large corporations, and many are multinational in scope. They are focused on learning consumer preferences and designing foods to increase their market share. Food and beverage plants in the United States are widely distributed throughout the country, but some areas have seen a decrease in numbers since the 1980s.