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Mr. BIBLE, from the Select Committee on Small Business, submitted

the following

REPORT

together with

INDIVIDUAL VIEWS

I. INTRODUCTION

This is a preliminary report on the subcommittee's findings in a continuing investigation of the impact of corporation farming on small business and the economic and social structure of rural America.

The subcommittee is vitally interested in public policy implications of rapid movement of large corporations, including conglomerates, and other nonfarm interests into farming. The evidence indicates direct business involvement in agriculture is relatively new, becoming important in the 1950's and a significant trend in the last 5 years or so.

Preliminary study shows increasing corporate control by companies, many in the food and feed fields, of poultry, egg, and livestock production. This normally involves some degree of vertical integration with little or no actual ownership of land or direct operation of the agricultural enterprises involved.

The investigation also has turned up a large number of corporations buying and operating large tracts of agricultural land, particularly in the Great Plains States. These are farming companies that displace independent farmers and ranchers in a community.

1 These large corporations, including conglomerates, were cited by various witnesses (during the hearings or in material submitted for the record) as being engaged in farming : American Cyanamid, Bunge Inc., CBK Inc., Del Monte, Gates Rubber Co., Goodyear Rubber Co., Gulf & Western, H. J. Heinz Co., International Systems & Controls Co., Jewel Tea Co., Libby, McNeill & Libby, Massey-Ferguson, Minute Maid Groves, Oppenheimer Industries, Pacific-Gamble-Robinson Co., Pillsbury Co., Ralston Purina, Swift & Co., Tenneco, and Textron Inc.

(1)

2

A 1967 survey, completed with assistance from both county assessors and Federal officials, showed 452 corporations owned 1,633,529 acres of South Dakota farm land. The number of corporations involved in farming in Nebraska was estimated at 500.: A preliminary study in Minnesota shows at least 230 corporations engaged in farming in that State.

An Internal Revenue Service report showed 17,578 farming companies filed Federal income tax returns in 1965.5

A. SCOPE OF INVESTIGATION

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The investigation is designed to determine the effect of corporation farming on small business in rural communities, the impact on the sociological and moral environment of existing independent family farms and ranches, and likely patterns of use of water and other natural resources by corporate farm operators.

Incorporation by partners or families, usually done to take advantage of special tax provisions or facilities transfer of farm and ranch units from generation to generation, is not at issue in this investogation. It is estimated these farming corporations make up 20 to 30 percent of the total.

Several other important areas, related to corporation farmng and raised repeatedly in the testimony, also are not dealt with directly. One is the impact of corporation farming on consumer price levels. Another is the efficiency of different types of agricultural systems and the question of whether the family farm system deserves protection and support.

The subcommittee began the investigation after receiving reports, mainly from farm-oriented organizations, of widespread concern over th growth of corporation farming. Farm-rural spokesmen express concern that corporation farming is being accepted, and occasionally given Government support, without public discussion or questioning of its benefits or its consequences.

Several witnesses urged the subcommittee to push corporation farming controls to give policymakers time to consider its impact before it becomes an irreversible trend. To permit farm incorporation to proceed without control, one farm economist testified, appears to be an unjustified gamble. He said the evidence points to the need for a policy of cautious experimentation that includes explicit provisions for slowing farm incorporation until probable long-run consequences have been fully analyzed.

The investigation deals with the important policy question of whether this nation wants an agriculture made up of independent farmers and ranchers or whether it is willing to shift to an industrialized agriculture.

There is considerable opposition to the latter course. One farm leader termed growth of corporation farming one of agriculture's most urgent problems. A sociologist said this trend, if allowed to continue, will erode the social and economic strength of rural communities. Still

6

2 "Corporation Farming,” hearings before Subcommittee on Monopoly, Select Committee on Small Business, U.S. Senate, 90th Cong., second sess., Ben H. Radcliffe, p. 23.

3 Ilearings, Elton Berck, p. 44.
4 Ibid., Arnold Onstad, p. 264.
5 Ibid., Ben H. Radcliffe. p. 24.
6 Ibid., Prof. Philip M. Raup, p. 249.

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another witness predicted stepped-up farm-to-city migration, slowed economic activity in small towns and cities, more rural poverty, and monopoly control of food production if company farms become dominant.

The subcommittee, in opening the investigation, returned to a problem area last considered more than 20 years ago by the Senate Small Business Committee. That study, entitled "Small Business and the Community- A Study in Central Valley of California on Effects of Scale of Farm Operations,” was completed in 1946.?

The committee carefully compared the economic and social life of the Central Valley communities of Arvin and Dinuba, one surrounded by independently owned and operated family farms and the other by large corporation farms. Except for the difference in size and makeup of farming enterprises, these agricultural communities were nearly identical.

Despite these basic similarities, the study disclosed some striking economic and social differences. The family farm community supported 20 percent more people at a better standard of living than the corporation farm community. It had nearly twice as many individual establishments with 61 percent more retail trade. In addition the family farm community had more and better schools, churches, recreation facilities, civic organizations, and public services.

B. FIELD HEARINGS HELD

The subcommittee has held public hearings in two cities thus far. At initial hearings May 20–21 in Omaha, testimony was taken from 15 witnesses from nine States in the Great Plains. The subcommittee heard 19 witnesses from three Upper Midwest States at the second hearing July 22 in Eau Claire, Wis.

Witnesses included representatives of Farmers Union, the Grange, Independent Bankers Association, National Farmers Organization, and National Catholic Rural Life Conference. Farm economists and sociologists, farm cooperative and poultry producer representatives, church leaders, and other experts also appeared.

Most of the testimony centered on (1) exploitation of underground water; (2) federal tax favoritism; (3) corporate buying patterns for farm production items; (4) inflationary land acquisition practices; (5) government sales of large-acreage surplus installations; (6) corporate production of poultry, eggs and livestock; (7) erosion of the public livestock marketing system; (8) breakdown of rural institutions; (9) migration of farm and rural people to the cities, and (10) threat to banks, dealers and retailers in towns and cities in agricultural trade areas.

All of these issues are dealt with in detail in succeeding sections of this report.

C. LACK OF DATA

Preliminary subcommittee study indicated there has been no recent indepth, comprehensive investigation of either corporation farming or its implications. Questioning of witnesses about current research,

? Report, “Small Business and the Community-A Study in Central Valley of California on Effects of Scale of Farm Operations," prepared by the Special Committee to Congress, December 23, 1946.

8 See Appendix A for a summary of the Arvin-Dinuba study.

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whether by organizations or universities or individuals, clearly showed this to be the case. A few state or regional studies are underway but none deal on a national basis with the overall problem."

This issue has not had the attention its importance would seem to indicate, either in or out of Government. Howard Bertsch, administrator of the Farmers Home Administration, expressed dismay in his testimony at lack of public discussion of social implications of this basic change in agriculture's structure.10

The whole dialog of the social virtues and social values of family farming in this country had died. And I believe the most important product, perhaps of these hearings which this committee is conducting, will be the renewal of this dialog because if we ever get the American people talking about this issue and understanding this issue, I have the greatest faith in the ultimate outcome. But when we let dialogs like this subside, then we encourage evils like corporate farming

to grow.

Although the economic and social ramifications of this issue are important to farm and city people alike, the subcommittee found that it has had little attention and consideration in agriculture and almost none elsewhere. The Department of Agriculture has recognized, through public statements, that the issue needs attention. But there is no evidence the agency has done more than conduct some cursory surveys through field

offices. The record indicates this policy area needs much more attention from university researchers, too. Even the publicly-supported land grant institutions, which traditionally are looked to for farm-rural policy direction, have done little to build public awareness or understanding of this issue. As one university witness put it: 11

We need some research, we need it now, not next year, We need it tomorrow. We don't really know what the social impact is of this change that is going on. We can talk all we want to today but I am embarrassed, we have very few answers.

II. IMPACT ON SOIL AND WATER RESOURCES

A good deal of testimony at the hearings dealt with the impact of corporation farming on soil and water resources. The possibility that companies would “mine” both land and water to obtain rapid profits, then move on to new areas, was repeatedly suggested.

Heavy and unregulated pumping of underground water for irrigating large-scale company projects was singled out as a relatively new and critical problem area. The subcommittee concludes the fear of exploitation is based on sufficient experience with older coroprate farming operations in California and elsewhere to be seriously considered.

Most of the water problems cited in the testimony dealt with the Ogallala Basin, a vast underground reservoir underlying parts of

9 Examples are the Minnesota Task Force on Corporation Farming, a citizens study group, with work described on pp. 263–269 of the hearing record ; and a legislative council study, South Dakota Legislature, p. 20 of the same period.

10 Ibid., Howard Bertsch, p. 99.
11 Ibid., Douglas G. Marshall, p. 228.

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* * *

Nebraska, Colorado, Kansas, Oklahoma and Texas. This water resource has been built up over centuries and, until recently, was tapped only

Farm-rural witnesses emphasized that they oppose heavy withdrawal from the Ogallala because it is a closed basin that could be pumped dry in a generation or less. It is not fed by surface streams or lakes. Its recharge rate is several limited, coming solely from rain water seeping through the soil.

It is obvious to the subcommittee that both Federal and State agencies know too little about this basin or what is happening to it. The U.S. Geological Survey has sufficient data to estimate the basin's capacity at 80 million acre-feet of water. It has calculated that about 30 million acre-feet is recoverable through surface pumping.

The serious and long-term consequences of heavy pumping from the basin were suggested in this exchange:12

Question. (You say) the resource is replenished at the rate of less than one inch per year. How much is that in terms of this?

Witness. Well, the average annual rate of recharge is estimated at 430,000 acre-feet. But the recharge rate is not a sufficient factor in the development of the reservoir for beneficial use since the recharge is balanced by outflow. This balance in the reservoir has been established over many centuries. Consequently any withdrawal from the reservoir is, in effect, "mining" of the water. It begins to throw that reservoir out of balance

as it is tapped There is considerable concern over public policy implications if, through heavy pumping for irrigation, an underground water resource is exhausted. The long-term outlook appears grim for dryland areas now drawing on Ogallala Basin water.

That specific problem was described this way by a witness who has studied soil and water conditions in northeast Colorado for many years: 13

Many wells have been developed on sagebrush covered sand dunes, generally considered to be unsuited to crop production. By the heavy application of fertilizer, high yields of feed grains are being obtained. However, these soils under row-crop production will sift during the winter months without fall cover crops. If the water resource is exhausted, these fields will have to be abandoned and they will become barren,

blowing desert. Another witness told the subcommittee that heavy pumping for a new 40,000-acre corporation farm in northwestern Florida already has stopped the flow of artesian wells in the area.14

The subcommittee concludes that the critical policy question revolves around whether the water use will be regulated, how rapidly it will be exhausted, and who will benefit. It is clear that the entire Nation-not merely the farmers, ranchers and businessmen in these areas--has a stake in proper use of water from the Ogallala and similar underground sources.

13 Ibid., Amer Lehman, pp. 102-103. 13 Ibid., Amer Lehman, p. 105. 14 Ibid., Howard Bertsch, p. 98.

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