By M. James Faison
COVID-19 has brought to the forefront fundamental issues within our food system; mainly that the “good” of providing inexpensive food is largely dependent on the “bad” of an exploitative agricultural system.
As Americans, we have constructed a system that allows us to spend the smallest percentage of our household income on food of any country in the world. To achieve this, Big Ag has relied on massive consolidation. Roughly four companies grew to control 71 percent of the pork market and 85 percent of the beef market, and five firms control 60 percent of the poultry market.
Monopolies can force vendors to accept lower prices because they have crowded out competitors from the marketplace and vendors have few other alternatives to sell their goods. Monopolies force purchasers to accept higher prices because the buyers will have few alternatives from which they can source their goods.
This is what has transpired during our current crisis. Large protein companies stand accused of price fixing to the detriment of cattlemen and ranchers by forcing them to accept lower prices for their beef. If one of the monopolies suffers a “shock,” it can severely impact food supply.
To date, two such conglomerates, Smithfield Foods and JBS have suffered disease outbreaks and have shut down facilities. The plant shutdowns were expected to reduce 25 percent% of the country’s pork processing capacity. Not only does this have the potential to impact consumers through shortages, but it is yet another blow to farmers. According to the National Pork Board, the Smithfield shutdown may result in a $5 billion loss for hog farmers.
Agriculture is particularly relevant to Virginia, as it is our largest private industry by far. It provides close to 334,000 jobs and has an economic impact of around $70 billion. Moreover, three of our five most valuable agriculture commodities are livestock: broiler chickens, cow/calf operations and turkeys. We are also home to Smithfield Foods, the world’s largest pork processor and hog producer. Cases at Virginia poultry plants have already spiked at Virginia poultry plants and they have the potential to have a devastating effect on the health care system in each of those communities.
Now is the moment for states to put forward bold plans to create a more equitable and safe meat supply chain. Gov. Ralph Northam and Virginia can and should be the leader in that effort. That could be accomplished through regulating meat packers as utilities.
We have a blueprint in both Virginia Natural Gas and Dominion Energy. In the United States, utilities arise where there is a “natural monopoly”; namely, industries that are characterized by high barriers to entry and enormous economies of scale. The benefits to society are that properly regulated utilities can provide reliable services and low prices that may ensure a reliable food supply chain. By treating agribusinesses as utilities, states can regulate the output of the businesses to match supply and demand, prices that are charged, infrastructure investment, securities offerings and employee wages through prevailing wage regulations.
The Commerce Clause grants Congress the authority to regulate commerce with “foreign nations, among the several States, and with the Indian Tribes” and agribusinesses frequently sell across state lines. However, Virginia can resolve these issues in two ways. One, as is true with energy utilities, Virginia would retain power over plants that provide foodstuffs for intrastate use.
Two, Virginia could create a robust market for foodstuffs sold by agribusiness utilities by favoring them in government purchases. Normally using regulation to favor in-state businesses to the detriment of out-of-state competitors violates the dormant Commerce Clause. The goal of the dormant Commerce Clause is to prohibit economic protectionism. However, an exception exists where the state acts as a market participant as opposed to a regulator. Virginia purchases large volumes of food for use in public schools and universities, prisons, parks and recreational facilities. In those instances Virginia is a market participant and could favor state utilities in purchasing without offending the Constitution.
Alternatively, Virginia could also band together with states such as North Carolina, Maryland and Pennsylvania to create multistate alliances. Such alliances could expand on the utility concept, by creating a geographic region where states that are willing to join the alliance would regulate the agribusinesses uniformly. Namely, they would establish uniform rules that would govern prices, wages, investment, output and other material issues. The states that are members of the alliance would have a larger variety of vendors to source from, and the agribusiness would have more markets to sell their foodstuffs.
This could create a virtuous cycle, where more agribusinesses would both push to become utilities and for their states to become members of the alliance so that these businesses could have greater market access as well as market stability as the alliance would help to determine production levels. Citizens would benefit as they would have a robust and secure meat supply, while farmers and ranchers could be assured of reliable markets, with stable prices, for their goods.
In many respects, this arrangement exists in the energy markets through regional transmission organizations. States have expanded on this concept to combat COVID-19, by forming coalitions to coordinate the opening of their economies. Food systems would be a logical extension. Admittedly, such an alliance would have to be reconciled with the Compact Clause of the Constitution, with reads that “no state shall, without the consent of Congress… enter into a any agreement or compact with another state.”
Though on its face the clause would require congressional approval for a multistate alliance, the Supreme Court has ruled that where such compacts do not expand state power at the expense of the federal supremacy, such agreements do not require congressional approval. Provided that a multistate alliance continued to grant the federal government the authority to regulate food safety, such an alliance should not require congressional authorization.
COVID-19 is further exposing structural issues within our meat supply chain that have bedeviled the nation for decades. Meat plants are shutting down, grocery stores have shortages and meat workers that are considered “essential” are reporting to work with low pay and few protections from the virus. As bad as this situation is, it has also created an opportunity for Governor Northam to position Virginia as a national leader through enacting progressive legislation that can create a more stable and equitable food system.
As said by Winston Churchill, “never waste a good crisis.”
M. James Faison is the founder of Milton’s Local, a sustainable meat business based in Richmond, a fourth generation farmer and former board member to the USDA Advisory Board on Young and Beginning Farmers and Ranchers.