Odd Lots - The Mega Corporations That Control What Americans Eat

Episode Date: March 28, 2024

Walk into a grocery store today and there are seemingly endless shelves of product to choose from. But behind all those different options are a handful of agricultural giants that have grown to dominate the food industry. Companies like Walmart and Cargill are well-known at this point, but there are also dominant players in everything from berries to dairy to pig farming. In this episode, we speak with Austin Frerick, an antitrust and agricultural expert. His new book, Barons: Money, Power, and the Corruption of America's Food Industry, details the behemoths behind American agriculture and how they got so big. He talks about the choices that went into our current agricultural system, the impact of all that concentration, and what can be done to change it.See omnystudio.com/listener for privacy information.

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slash audio. That's vanguard.com slash audio. All investing is subject to risk vanguard marketing Corporation Distributor. Bloomberg Audio Studios. Podcasts, Radio, News. Hello and welcome to another episode of the All Thoughts podcast. I'm Tracy Alloway. And I'm Joe Wisenthall. Joe, you know what I'm excited about?

This could go anywhere, so I'm not going to guess. Just tell me. So we're recording this on March 19th. It is the first official day of spring. Oh. And that means that soon it will be berry time, specifically strawberries. I think many parents are talking about these days, but the berry budget that parents face. When you said that, I was like, smart people are talking about strawberry.

No, seriously, like many, this is like a persistent gripe among parents, like how much we have to pay for our kids' fresh berry habit. Strawberries, blueberries, blueberries, they're really expensive and kids just devour them. And kids these days are spoiled. When I was growing up, I had fruit roll-ups, which I don't even. think you could classify as a fruit product. And all these kids have organic, freshly grown blueberries and raspberries. So when I was a kid, like, yeah, we had like apples. And in this summer, we had stone fruits, you know, peaches and stuff. And then like grapefruit. And that was it. So where do you buy your strawberries from or other berries? Actually, before I answer that question, I want to say one other

thing about my childhood, you know, that may be relevant to this conversation, which is that my grandmother in Michigan, her husband, her second husband, she lived when I was growing up on a farm in elegant Michigan. It had dairy. It had cows and stuff. But I also had like all these orchards and the stuff there. Peaches and cherries and apples. And it was just like wonderful. And we had a great time as kids. We had gone to the orchard. So I did actually have a lot of fresh fruit. And I haven't been there in many years. But my understanding, I believe that farm is gone. and now it's just entirely like soy or some grain, like all of those orchards are gone. And it's just like one sort of like efficient unicrop farm these days.

It's a microcosm of America's agricultural evolution. All right. Wait, but you didn't answer the question. Where do you get your strawberries and blueberries and things from? I don't know. Probably Trader Joe's usually, I think. I don't know. Maybe I don't know.

Yeah, probably usually Trader Joe's. Can you remember the brand? It's that one. I don't remember the name, but it's that one very brand, I'm sure. It's almost 100% certain to be Driscolls. Yeah, that's right. And I specifically associate them with strawberries, but yes. So I think if you go into almost any grocery store in America,

you are likely to find Driscoll's berries of one sort or another. And the crazy thing about Driscoll's is, for me, they're pretty much synonymous with berries. You think berries, you think Driscoll's, there's a brand there. However, they don't actually grow any. of their own berries. I did not know that. That's really interesting. And it really is weird that there's like a brand that's the berry brand. You say that and it hadn't really clicked to me that there is like the berry company in America. But yeah, there's the berry company in America. It's

Driscolls. All right. So as excited as I am about berries this year and in the interests of equalizing corporate America, I am growing my own berry supply in Connecticut. So I will achieve Barry Independence this year. That's right. But I think. think it's sort of emblematic of a few themes that have come up on the show in one way or another. Number one is the decisions that have gone into creating America's agricultural landscape as it exists today. So you just mentioned the farm in Michigan, your old family farm used to have a fruit orchard, used to grow a variety of different things, and now grows a single unicrop, probably soy or something like that. we've spoken about this at various times on the podcast, so it keeps coming up.

The other big theme has to be antitrust and the concentration of power in a few specific areas. So how did it come to be that Driscoll's dominates the berry market? We have to ask these questions. I can't wait to find out the answer because I really like up until you sort of said that, it just had never occurred to me that, oh yeah, there's just this one. company that I associate with berries. You will never be able to escape Driscolls ever again. It will be in your mind every time you see a little plastic package of blueberries.

Every time we go to the grocery store and my kids want $20 worth of fresh berries. Actually, I should just say we do in fact have the perfect guests to discuss all this today. And after reading their book, I have come away with a completely different idea of agriculture that I cannot unsee in many ways. And it's kind of depressing because I do walk into. grocery stores now, and I start muttering to myself about the illusion of choice and dairy checkoffs and things like that. So I'm going to try to make everyone else more like me. You can't escape it. We're going to be speaking with Austin Frerick. He's the author of a new book. It's coming out this

month, Barron's Money Power and the Corruption of America's Food Industry. He's also an all-round agricultural and antitrust expert and a fellow of the Thurman Arnold Project over at Yale University. So Austin, thank you so much for coming on all thoughts. having me on. This is such a professional honor. My husband and I are big fans. We've been big fans since the Timber episode. Oh, thank you. I appreciate that. Let me just say to begin with, now you've been so positive. I'm just going to reiterate what a depressing read this was. Why did you decide to write a book on this topic? Honestly, this whole book started in a bar conversation in Des Moines, Iowa. It was 2018, and it was a big governor's race in the state of Iowa, and Iowa doesn't have campaign contribution

limits for state-level races. And this political operating, over a cheap draft beers was telling me how this hog farmer donate is the largest donor in Iowa, donated $300,000 to the governor's reelection campaign. And he was also telling me how they have a private jet. They fly back and forth between the only gated community in suburban Des Moines to Naples, Florida. And supposedly on this jet where the words been pigs fly, which to me in my head, part of it was, oh, this is good copy, but also this is such a powerful symbol of what happened to Iowa, what is going on when the most politically powerful person in the state is this hog baron. So I originally wrote an article for Vox with my buddy Charlie.

And then after we published the article telling this bigger story of how did power consolidate in the hog industry in my lifetime, I realized, oh, this story can be repeated through the food system. This isn't unique to hogs. And then also this Robert Barron framework to me is a fun narrative device to tell these bigger structural type stories. So I mentioned in the intro that I had this idyllic childhood of like, running through the farm that my grandmother was living on and picking cherries and eating them right off the tree. And we had, there were tart cherries and red cherries and the golden ones that are multicolored that were my favorite. And now that farm is gone. And it's just probably like one crop as far as the eye could see. I take it that it was not just my grandmother's farm.

No. I mean, this is the story of the American agricultural system. And what's to me the whole time, what I was thinking in my head when you're telling that story was, I kept thinking of a retirement portfolio. Your grandma had a diversified portfolio, different crops going on at once. And what happens now is the system's incredibly fragile because most farms are only one or two crops. Can I just say something, Tracy, is a personal regret. So my grandmother's husband, Jack, farmer Jack, if you were alive today, I would be so excited to talk to him. And I just think about, you know, ask him a million questions about like, how does dairy pricing work? And How do you get an agreement to get your, he also made cider.

How do you get your cider on the shelves? It makes me very sad that like when I was, you know, 11, I didn't know that I would be interested in all these topics. I never really talked to him about. This is a very good reminder, listeners, to ask your relatives, all the information that you want to hear about before it's too late. My aunt was quite senior at Countrywide. And she always promised to give me the inside scoop on what was going on pre-2008. and then she very sadly died early on of cancer. So yes, okay, we all have those regrets.

Back to agriculture. That was a slight diversion. How concentrated is the U.S. agricultural or food product landscape? Oh, to me, it's one of the most concentrated spaces. It's a combination of a few things. I mean, you can't look at a hog market the same way with like a search engine because you're not going to take a hog from Iowa and go butcher in North Carolina because of shipping cost. But you also have this whole dynamic of the illusion of choice. like you mentioned earlier.

I mentioned this briefly in my book, but there's like a peanut butter monopoly, essentially. One company has like roughly a 50 to 60% market share. But first of all, most consumers don't see that because they own different price points because that rich consumer wants to think they're getting a different peanut butter than the low-income consumer.

But on top of it, they tend to do most store brands, and you only find that out usually through recalls. So, yes, okay, there's a highly concentrated food supply. In America, on many aspects of, the food industry in America are highly concentrated with a few dominant companies. And we'll get into what some of these companies are and the distribution and the growing or the slaughtering, whether we're talking about meat. On the other hand, outside of the inflation that's hit a lot of categories in the world

over the last few years, we also live in a world of caloric abundance. And that seems pretty good. And in the grand scheme of history, like meat is very cheap and many people can afford burgers and many people can afford steak. And many people can afford fresh berries, which really we never had as a kid at all, or very rarely. Like, I don't remember my parents even, you know, buying berries. So could you make an argument? It certainly seems to me like maybe there are some costs and concentration of power issues, but we're in an era of food abundance.

So just a few things on that. The first is actually per capita, Americans spend more in food than Italians. So we actually, we've paid more and more for our food. This is even before the inflation stuff. according to USDA data. But that's also come with the expensive workers. I mean, that is like the hidden undercurrent of, you can get cheap berries year round because you have 12-year-olds

picking berries for other 12-year-olds in developing countries. I mean, there's been reporting how basically any produce that's labor intensive with these trade agreements in America has moved offshore. And kind of like a T-shirt, it's so hard for journalists, especially the state of American media, to go investigate that. These farms are basically modern-day plantations. And I would also last point on that is, is the obesity crisis in America. The undercurrent is we've never in the history of mankind

had the lower classes be the overweight classes. And that to me is because the way the food system is designed, and I really get at this, my grain baron, is you have to have money to eat healthy in America now because the food system picks favorites right now and we heavily subsidized processed foods. Yeah, I can't remember. You actually had a stat in your book specifically about this, and it was the price of fresh fruits and vegetables has gone up a certain amount since I think was from 1980, whereas the price of processed foods has gone down quite a lot. So each baron's really built around an idea. And to me, my grain baron, which is Cargill, is about the farm bill.

And to me, what I realize is, oh, this whole structure is designed to overproduce grains at the expense of everything else. And so in the econ sense, it's crowding out everything. So like your family farm is it's cheaper for people to plow up the orchards and put in corn than it is actually grow produce. What do you walk us through this specific? You hear people vilify the farm bill a lot. What do you walk us through some of the specifics of like,

what are the sort of policy underpinnings of the farm bill and what it does? Oh, man, Joe, this honestly, this reminds me of the tax code. The farm bill has all these interlocking parts. Okay. That took me a while to really get my head around. So to start off with, the farm bill comes from the New Deal. And that's from the Dust Bowl. These markets were oversupplied and yet massive environmental damage

because of people were pushing their land, engage in really destructive practices. So this New Deal farm work was really centered in supply management, what they call it. Sure, you can get subsidies, but you have to take land out of production. Most famously created all these reserves, grain reserves, cheese reserves, what have you. The government was trying to figure out the sweet spot for agriculture, for production. What you slowly see happen, especially in the 1980s on, is that framework kind of collapses to you're heavily subsidizing overproducing things.

And it's kind of done three different ways. Think of it like a three-legged stool. it's crop insurance, which like 60% of the premiums on crop insurance is subsidized by the government. You have the commodity programs, which it used to be you get a check, like a subsidy check. Now it's kind of done through like a loan forgiveness. And then you also have the conservation programs. To me, like the grains are the big ones here. And then also like the caps have been raised.

And also like even in crop insurance, there's no cap on how much crop insurance you can get. So it's really pushing you to do this kind of model of production. So talk about how that model of production and those decisions that were made through things like the farm bill, how that led to dominance in particular in grain industry. And I think your example in the book was Cargill. Yeah. Cargill to me is a fascinating company. I did not originally include this when I started mapping out this book. It's a largest private company in America. They're bigger than the Koch brothers. That's amazing. Yeah, they do like a think in my, I think I won fourth the world's grade trade. They're the middle man, though. Like I compare them my book to the

closest thing we have to modern day standard oil. But even at the end of that chapter, to me, they're more like the 19th century British Empire because the son never sets on the grain empire. So the original farm bill actually to pay for it was a tax on processors, companies like Cargill. So the family hated the original farm bill. They fought it. They didn't like FDR. Because what the farm bill is doing, the original one is limiting production. To me, it's politically brilliant to study because they use middleman. They don't usually engage in their political lobbying straight up. They give money to other groups to do their bidding. But you kind of uncovering the research is, oh, they want to remove this because they just want to keep, they just want tons of grain. And so what Cargale does, has been doing

slowly is buying up different parts of the supply chain. So, you know, they'll do like animal feed was a big part of Cargill and then they got into meatpacking. And then now that's just kind of their logic. So how does that actually feed into the antitrust discussion? Because on the one hand, if a huge company like Cargill is buying up other businesses. You would expect regulators to be looking at that. But on the other hand, if Cargill is saying, well, we're not necessarily getting more grain producers. We're getting something that's adjacent to producing grain. We're doing grain transportation or storage or something like that. And there are synergies involved. And the American consumer is going to benefit through lower prices. How do those conversations or debates play out?

Yeah. So, I mean, I start with two fundamental notions of no company buys another company for pro-competitive reasons. The goal of a corporate executive, and it's such a simple thing that I realized a few years ago is monopoly. So you have that fundamental tension in markets where, because competitive markets are ruthless. It's hard. Your goal is monopoly. So you're trying to get to a monopoly status. And so what you see with Cargill is they made a lot of these purchases 30, 40 years ago before the Robert Bork antitrust framework took hold that would not probably been approved. I can't remember off the top of my head, but there's quite a few I mentioned the book of large acquisitions they made. You mentioned the magic word just then, which is Robert Bork. Yes. And full disclosure, I had not realized what a influential figure Bork was in the world of antitrust. And I find it so interesting reading that chapter to compare and contrast the sort of Bork interpretation of antitrust versus what we think about today. And I'm trying to do this without mentioning hipster antitrust, but there is more of a, I guess, a throwback today to the idea of, well, is this particular corporate action good for Americans in the sense of labor, not just prices?

Whereas Bork basically argued that regulators and the courts should ignore harm to workers and focus purely on consumer prices, so the consumer welfare standard, which seems kind of nuts in retrospect. Yeah. I mean, what's so funny about that is, number one, kind of the undercurrent of this era are so much of the language it's designed to keep people out. These words don't really mean anything. So, like, Consumer Welford Standard has like 30 different definitions by different people. Those words are really hollow, but they sound smart. Two, it tries to reduce this stuff to simple math equations when really, like, this is about power and who has it. These are moral questions that we're trying to mask with pseudoscience. And for me personally, it was a coffee I had with

Commissioner Khan back in 2015 that really got me going on this. I was at the time a Treasury tax economist, and I had written a paper on the growth of super rents, which was just like econ speak for monopoly level profits into tax code. And I was like, huh, what's going on here? Why am I seeing a lot in agriculture? You know, anyone should build make pop or chips. And read an article she wrote in like 2012 on like chicken monopolies. She was a journalist before she became a lawyer. And I was like, oh, this really explains what I see going on back in Iowa. met with her and she, she kind of is the one who showed me, oh, there's this whole, there's been this fierce intellectual debate in America over how we conceptualized power

and kind of tell me that Bork history. And to me, I mean, there's a lot of talk on big tech, but to me, my, the goal, my book is really to, like, overlay that framework to agriculture in the food system. So I take your point about, okay, so a handful of extremely powerful companies have, like, come to have this dominant position within the agricultural system. On the other hand, it seems like this is a, partly, and you implied it, not unique to agriculture, which is just that we have seen the rise across many industries of like, you know, mega behemoth, global, we used to call them like in the 90s, like multinational corporations. There are also like economies of scale are a real

thing, I believe. You know, like how much of this is like a policy decision versus a sort of more like natural evolution of how many businesses have evolved of like companies figuring out scale and efficiencies. And I have to imagine that setting aside policy that whether we're talking about slaughtering hogs or whether we're talking about growing corn that you can save money and sell it at a cheaper price if you're a big company that has access to a lot of capacity. To me, it's a combination of both. I mean, the undercurrent of this book, too, is a lot of these companies got big, not through organic growth, but through acquisitions, that probably would not have been approved before. To me, the undercurrent two of this book is the whole negative externalities

of this market power is just, I mean, I think to me as an Iowa, I fell apart in my lifetime. It's the best farmland in the world. It should be the Italy of North America. Yet Iowa now is basically an extraction colony. Like 60, 70% of the waterways in Iowa you can't go into. This is because the hog runoff to put it politely goes into the water. Yeah, so Iowa has about 25 million hawks. A hog defecates like three times more than a human being. So you're talking about the manure of the population of 75 million people, like Texas and California combined. That regulatory system, because of my hog barons capture of the state government, has been gutted.

Keep in mind, Iowa's also number one in chicken eggs, a lot of cattle, like all this other manure. So you have too much manure for the environment. On top of it, you have this animals used to get their feet on land. cows would walk around, eat grass. They would fertilize their own feed. Now because we basically stuff most animals into these metal sheds, we have to use a lot of fossil fuels to grow their feed. So you also have all that chemicals entering the water supply system too.

And to add another layer to it is most farmland in Iowa is not owned by Iowans anymore. Grandma Grapa die. Kids move to California. They put it into a trust. They rent out the land. And you can always clock it when you're driving because they farm right up to the creek. So all those chemicals go right into the creek, including the manure. So what they do with these lagoons is they drain them.

They put these massive manure lagoons next to the buildings. Every few months, they drain the manure and they put it into the soil. And they'll do it in the winter, which is just awful. It's kind of illegal, but no one enforces that rule in Iowa. So you'll just see fields covered in snow with manure on it. And then just as the snow melts, it just goes straight into the water system. What were the specific Iowa regulatory changes? If the story is, okay, domestic, local political power, what were the actual regulatory?

changes that enabled this? The big one was the stripping of local control. This was back in 1996. Secretary Vilsack, Biden, Secretary of Agriculture actually voted in favor of this when he was a state senator. This whole thing, I mean, you had an open revolt in Iowa. I mean, this wasn't just efficiency took hold. It was people were fighting tooth and nail.

I mean. And no one wants to live next to a manure lagoon. That is like, it smells awful. I mean, I can barely smell. When you get near one of these things, it's awful. Your home value collapses. 10% of these pigs in these facilities die. So next to everyone is a big dumpster full

below a dead pig body. So you have vultures. But on top of it, just from a regulatory standpoint, if you treat pig manure like human manure, this model collapses. It's not efficient. It's efficient if you ignore all the negative externalities. On top of it, it's just cruel.

I mean, I'm not, that's the other thing too, is like, pigs are very social creatures. They're smart. And you're putting 2,000 of them into these metal sheds. And even lie, what the open secret is, if you build it below 2,500 pigs, they'll say it's 2,499. It's a different regulatory structure. But the open secret is they put 4,000 in them.

No one's checking. Yeah, I mean, this was one of the incredibly sad themes running through your entire book. Joe doesn't care about animals. Joe, if I had to choose. The thought of 4,000 pigs in a metal cage that's designed for 2,500 pigs disarves me. Let me put that on. That never see the light of day. Yes. Joe's worst personality flaw, if I had to choose one, is that when I show him a picture of a cute animal, he doesn't care at all.

That's actually a compliment, Joe. That's the worst thing I can think of that. Okay, so there is that incredibly sad aspect running throughout the book. There's also, you know, you mentioned the manure problem. One of the things I was really interested to read in the book is that often these big companies are rewarded for coming up with solutions to problems that, they essentially create. And I can't remember the specific name of the cow one. Fair Oaks Farms and Fair Life. Yes. Yes. Can you talk a little bit about that, like how companies are basically, you know, rewarded for doing this? Oh, that's such a, it's almost, it's so comical. It's so bad. So the big thing, any agriculture is like our second largest contributor to climate change. And especially with beef and dairy are driving it, along with the false fields used in food grain

production. So dairy, this is getting in the weeds, but, you know, normally used to be pasture family dairy farmers, you know, they have 60, 70 cows. The cow defecates and, you know, creates the fertilizer for its feet. When you put them into a metal shed, they pool the manure. Well, when that manure breaks down in a pooled environment, it creates methane gas that's not produced when it's on land. And so you have all this. additional, you know, climate change contributing gas being produced in this production model. So if the cows are in a field somewhere, pooping the normal way, that manure would end up on grass and it would break down. And there wouldn't be a lot of methane generated just

from that process. Bingo. So not only so when you put them inside, you create this methane, this additional methane, you're also using fossil fuels to grow their feed inside. So what the industry is trying to do is create some, these manure biogesters that are called. You basically pool the manure and you try to capture the gas coming, the methane gas coming off it. It takes an immense amount of subsidy. And that is USDA's big, one of the big, their big solutions to climate change right now is spending a ton of money on this. The problem with that is you're incentivizing a really destructive model. The dairy industry is fascinating to me. It's one of the most complex commodities in my opinion. The joke in the dairy world is only five people understand

the dairy system and four of them are dead. But our milk consumption is going down. But our dairy assumptions going up because we're eating more cheese and ice cream. Those aren't healthy things. And we're producing more. And we're also doing in regions that environmentally cannot sustain it. The Texas panhandle, New Mexico. Like my favorite little cocktail chatter is that New Mexico dairy does three times more dairy than Vermont. And so you have this system. This is being sold as a solution to a problem that created itself that didn't exist before. And that to me is like, I mean, they're trying to put ethanol in airplanes now. The conversation on ethanol is over, but that's the story of the modern agricultural system,

is you have all this money sloshing around, kind of corrupting an honest conversation. Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy. Bond markets are massive, murky, and let's be real. Lots of firms throw a couple flashy funds your way and call it a day. But not Vanguard. At Vanguard, institutional quality isn't a tagline.

It's a commitment to your clients. We're talking top grade products across the board of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders. These folks live and breathe fixed income. So if you're looking to give your clients consistent results year in and year out, go see the record for yourself at vanguard.com slash audio. That's vanguard.com slash audio. All investing is subject to risk vanguard marketing corporation distributor.

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Go to FactorMeals.ca and use code pro. That's 11 meals, free shipping, and free sides for life, but only with the code pro at FactorMeals.C.A. Factor. Canada's number one, ready-to-eat meal delivery service. In your life, and maybe even within the span of time that you've got interested in this specific subject it wrote the book, have you sensed a change in the politics of food? Because I feel like when I was a kid that being anti-factory farming, as it was called, animal welfare, multinational corporations, many of these things, I would have primarily associated with liberals or the left. And I get the impression that these days that actually like the sort of debasing of the food system, the poisoning of the food system, et cetera, is actually migrating a little bit and that you see more of this talk on the right. There's even something you've written about, which is that I think it was in like the 1996 primary.

Pat Buchanan making a lot of hay, so to speak, by talking about, thank you, not intentional changes in hog production, but that the dominant strain among mainstream, Republicans was like pretty like safely on the side of the big business. Can you talk a little bit about that political evolution? Yeah. I mean, that to me is like one of the most hopeful things about this, the food system right now is the by the chance for bipartisan reform movement. I mean, a lot of the ideas in this book started an article as I wrote in the American conservative. I mean, I was very intentional on that. But I mean, I think a few things are contributing to that. Number one, I feel like when most Americans go abroad now, one of the first things you always hear from them is food is better and cheaper abroad. And I lost weight while I was traveling.

Like, even though I was gorging on Italian pasta and bread and stuff like that. Yeah, yeah. That. And then also like the undercurrent too for a lot of these barons is, I mean, especially meat packing, they're not American companies. The meat industry. These are state-back monopolies. I mean, they're intentional development strategies of like in the beef packing.

My slaughtering baron is JBS. First of all, they became a monopoly through bribery. They admitted to it. And the fact that we let them keep their monopoly status is kind of incredible. But that was an intentional development strategy by the country of Brazil. to have a dominant player. And so that's why, I mean, the beef farmers right now have just been an uproar the last few years

because, I mean, if I could include one graph in my book, it would be on what you're paying in the store for beef and what ranchers are getting. It is diverged so much. Oh, these are the hacking margins, basically. Yes. Say more on that. So basically, the family farm has died in dairy and hog production.

Beef is the last one standing. And you have, you know, these animals are huge. You can't ship them far. So even though, you know, three companies might have, let's say 80% market share. When you're in Montana, you really don't only have one or two packers. And so what they're trying to do right now, besides only having one or two options, is they're trying to kill the spot market, which in my head I compare it to eBay. They want production contracts. And so you're having this combination of the U.S. cattle herd is at the lowest since

1950s. And part of that's because of the drought and the Great Plains. But also this is where I think is super fascinating is GPS has, it has production. It slatters animals on all the beef production regions of the world. Australia, Brazil, and America. And so it just kind of shuffles based on currencies the beef you're seeing in the store. So farmers are, they just don't have a lot of buying power right now. And the other thing, too, with beef is they haven't quite figured out the industrial production model with it. They're starting to. Industrial production model of beef sounds. Delicious. No. No. Dystopian. Thank you, too. So there are a number of moments in this book that are disturbing in very

ways. And one of the moments where I kind of gasped audibly had to do with the dairy industry and the checkoff system. And a lot of people will never have heard of checkoffs, but they will have heard of advertising campaigns like got milk. So could you maybe explain what those are and how they tie into, I guess, the structural decision to overproduce certain commodities and then you have to figure out ways to ramp up consumption. Yeah. No, I'm so glad you asked about Chuckoffs because it's one of those things where I was so determined to put them in my book, but it's so hard to explain it to people. So Chuckoffs go back to the 1930s. They come out of Florida. It was basically these tiny little things that Florida oranges, way to advertise a commodity. They were

a little tax on producers. They rarely started ramping up in the 1980s as this, what I call the Wall Street Farm Bill took hold, where as they were overproducing a few things, how do we stimulate demand? became the goal of a checkoff. So I tell the story how farmers could vote to create one, and they create one. There's a whole different conversation over farmers could vote to end one, but USA won't allow it. And I kind of tell that story with hogs. They threw out the vote in the late 90s. But so you have this, most of them are kind of small.

There's like 20 or 30 checkoffs, Christmas tree checkoff, popcorn checkoff. They're mostly under a month. So the Christmas tree farmers basically get together and they say, we're going to, you know, pool like a certain amount of money and that money is going to go to promoting Christmas trees and getting people to buy more. Yes. But dairy is a different one. Dairy, we're talking about a $600 million annual budget.

So you're taking a tax on dairy farmers and it was, you know, got milk is the famous thing. But they realize, though my conversations with people is that didn't stimulate demand or didn't really work. So what I argue has happened is instead of I'm trying to do advertisement, it's moved to financing junk science. A lot of the science over these minor digesters is being financed by these chuck-offs, the dairy chuckoff. To me, it's filling the void as we privatized our colleges, universities, America, especially the land grants in the middle of the country, the checkoff dollars have filled that

void. And so that to me is why the agricultural markets have partly have gotten so concentrated is you have this whole pot of money, collectively $800 billion. We don't even know, by the way, because USA is atrocious that keeping track of it. There's tons of government accountability reports getting on them to do something. They don't do anything. But it's a revolving door. So a lot of USDA officials go work out of Chukoff, they come back. Secretary Vilsack did that. So between administrations, his job was, he was in dairy export lobbyists. So his job was Canada has a supply management dairy system.

So his job was basically gut it so we could dump our surplus cheese into their markets. But that to me is such a key thing. So my dairy baron, I tell the story of how he actually first financed a lawsuit to end the checkoff. Because what he realized what happened with Hogs in Iowa was he need to have a branded thing. or else he's going to die like the hog farmers. He tested out in Texas at the grocery store, H.A.B., like a bougie milk product. And he was upset. Why finance my competitor, this generic milk product?

So he financed a lawsuit, didn't it, and basically tell the story of how he seemingly made peace with the checkoff. And he was able to use some checkoff dollars to finance not only, you know, these manure digesters, but also this branded drink he helped create called Fair Life. If you go to any gym in America, young men love it because it's super high protein content, to go to Planet Fitness. It's just full of kids drinking that stuff. Something to replace Celsius. Yeah, that sounds good. Yeah. That's my first thought. I was like, oh, I'm going to try one tomorrow when I go to the gym.

You mentioned that so much of the land in Iowa is not owned by Iowans anymore. You know, like I said, I was born in Michigan. I lived for many years in Illinois, but I didn't want to stay in the Midwest. I wanted to come to New York City and be a professional podcaster. And I get like sentimentally, like I said, oh, my idyllic family farm in Alligated in Michigan, it was so beautiful in the berries. But like ultimately, like, I didn't want to stay, you know, I never aspired to be a farmer. Like how much of this is just like structural changes in people's preferences that are just sort of maybe even much bigger than food. And yeah, you know, we remember fondly these small farms, but the next generation doesn't want to stick around. I mean,

That's a really key point to remember. And that's something, I mean, I wrote this book over five years. Yeah. And the beauty of doing that is you write a little bit, you walk away. And we romanticize that a gory and pass a lot. Yeah. I don't want to go back to that new deal supply management system. Because in the day, I'm at the point now we junk the farm bill.

Take that money. It's too corrupted. Put into conservation programs. Because every farmland is different. The way you do farmland, Connecticut, it's different than Hawaii than Iowa. Also, the growth of robotics in agriculture has been really underappreciated. You go to a farm show now. these things drive themselves.

I mean, they cost like $600,000, and they're going to happen before cars. So, like, most, there's a very good chance that most row crops are going to be robotics very, very soon. But to me, animals is the key thing here. I really want to put animals back on the land. Because the whole thing, too, to keep in mind is this model makes pretty bad tasting food. When I was writing this book, I was doing little, like, I would do milk tastings. This is how you get the steak officiados on board. by saying you'll have like more abundant good quality meat by fixing the system.

Oh, like my wedding. My husband and I got married in Iowa, and I was insistent we had pasture meat and dairy. My mom's one of 12, Irish Catholic, you know, Taylor's all this time. And we served pork. And the amount of people in my Iowa family was like, this is the best tasting pork. It was just like, we kept hearing that. And it's just like, oh, you're used to like when an animal stands inside a metal shuttle that needs corn from a ceiling.

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Yeah. So one of the things that gives me hope is the movement to EVs, electric vehicles and cars is going to kill ethanol. I think ethanol has been one of the most destructive things to happen to the Midwest. It actually pushed a lot of cattle farmers out, you know, pushed them off their land. Instead of having cattle on pasture, they put in corn. And also the thing to keep in mind is the single largest juice of cornhouse ethanol. And that transition is going to happen fast when it happens. And so how do we kind of start pivoting? So as ethanol dies, then we slowly phase out these industrial animal facilities.

But animals back on the land, it's a good jobs program, you know, for rural America because there's only so many animals one person can do. I think using school meals is a really good procurement way to, like, drive the supply chain. Like who doesn't want Wisconsin kids even drinking pasture milk, you know, stuff like that. And then what started this whole conversation over berries is that model of berry production is rooted in sharecropping. And just ban that. Like you can't explain more. What is the specific berry model? So the berry model actually comes out of chicken.

I didn't even, when I started writing this whole. The tournament system, Joe. It's the tournament system. So when the meat regulations were written a century ago in response to the jungle and all that stuff, chicken wasn't written to the right. Because there wasn't it, you didn't buy chickens at the store, you just had one in the backyard and you killed it. So this model comes out of the south where, have you guys defined the tournament system before? No, or we need a new. Remind us.

Yes. Okay. So they call it the southern model. If you're a chicken farmer in America, you don't actually own your bird. You're given the bird by the company, the feed, toll it feed to use, whatever. You basically babysit the bird. You then sell, you give it back to the company. They weigh it. You're paid on tournament systems.

whoever adds the most weight gets paid the most. So if Joe, you're not behaving bad, if I don't really like you as some company, I give you the run of litter, you get paid the lease, you know, you're not making that much money. Also, you have a ton of debt. These stats are a little old, but it's like 70% chicken farmers on America live in poverty.

And so you have this model take hold in the South with chicken production. And because of that, where you're shifting all the externalities and really abusing farmers and labor, chicken's really cheap to produce. So it gains massive amount of market share in the protein markets. Well, instead of USA, instead of forcing chicken to behave like the other meats, what we see as a race to the bottom.

So starting the eastern shore of North Carolina, the hog markets in the poor black areas starts doing this model. To me, this is the best example of structural racism in the food system is you have these poor black areas, North Carolina, full of these industrial hog facilities. And because of the water table levels in North Carolina, they can't, and usually in Iowa, they take the manure and they inject it into the field. In North Carolina, they spray it.

the air. You have all these stories of like, you know, poor black churches having to repate their steeples every few years or they're dry, you know, you can't do laundry outside, dry it out. That's bleak. So this model then replicates across the food system, most notably the berries. And I tell this story how the, the Drisco brothers were, they were smart to realize the rise of Walmart of Walmart wants one company to do four berries year round. So what they started doing is, so most berries, berries are, strawberries are really fickle. Historically, a lot of them were grown on the California coast. So they grew up. So they grow. them on the coast and they realize that it's more efficient to have that sort of outsource labor,

right? Outsource labor, well, you have the cost of housing increase in California. That's a very short growing window on the coast. Historically, it would move up the, I cannot remember if it moves up or down the coast, but the production region was shift from city to city for the berries. Well, they started moving production to like Morocco, to Baja, California, to the point now where Driscolls grows berries on every single continent except Antarctica. But part of it is by moving offshore.

there's less labor standards, there's less environmental standards. I spent a lot of time in the book talking about how a lot of berry production is in Baja, California, in a region that is just as dry as Death Valley. They drained the aquifers. Then they build a desolization plan on the ocean. A lot of these are indigenous workers. And no one really knows what goes on in these places. I mean, there's these, you see stories here in there enough where it's like the tip of an iceberg where you see like, I mean, there's a story in Reuters a few years ago, how the gangs, Mexico, gone to avocado. You just don't know what's going on when these supply chains get that long. This is part of the Bitcoin avocado correlation conspiracy that the reason that correlation exists or used to exist because it's broken down has something to do with financing Mexican mafia.

I just have one last question, but since you brought up Walmart and of course for years and even still, but for years, the sort of grocery store system in the U.S. was famously fragmented. There really weren't any sort of dominant national. chains, there were, you know, regional chains, obviously, just sort of big picture. Like, what is the existence of this dominant nationwide grocery store, biggest grocery store company in America? What are the ripple effects in terms of, you know, you mentioned berries, but in terms of creating concentration of power elsewhere across the food supply chain from the existence of this one powerful end seller? Oh, the Walmart chapter, that might be my favorite chapter of the book. It's twice as long as any other chapter. I mean, I also just love

grocery stores. Let me start there. Same. But I also never thought of Walmart as a grocery store when I started this book, even though 60% of it sells grocery. I love this little antidote where Sam Walden got the idea from Walmart from a French company Car For. If ever been to Europe, you see these car fours everywhere. He saw on vacation. He's like, I'm going to copy that. Because it gets you in the store. You need grocery every few days. Well, Walmart, at the same time, Walmart's starting to rise, you see this whole framework, Robertson-Patman Act, lapse. These basically competition protections in the system between suppliers and vendors like Walmart. And so as Walmart's market power gets bigger, it's able to basically squeeze its supplier more and more.

And to me, the stat, this little nugget I found, I love reading trade press and like these little regional business publications, you find the best nuggets. In Northwest Arkansas, there's a business publication I spent a lot of time with and they report how Walmart has a rule with its vendors. that you cannot get more than 30% of your sales from Walmart, which I didn't understand at first. I'd ask around people in the grocery industry, why do they have that rule? And that's a supply chain risk management rule,

because Walmart knows it's such a vulture, that it puts more than 30% of your market, you know, sales come from Walmart, you're putting the company into a fragile space. At the same time, too, so that really puts a lot power on Walmart's hands. I kind of compare it to like supply and command. My husband rejected this idea,

but I really want to kind of frame this around like the closest thing we've ever had to, like, an American Politburo. He's going to laugh when he hears that. But the Walmart family, their power is just, I mean, they're the richest family in the world. And this whole chapter's framed around Walmart and Amazon had been this epic battle centered in grocery the last few years. And I kind of came away thinking Walmart's winning. And the thing about the Walmart to keep in mind is Jeff Bezos only owns like 10% of Amazon. The Walmart family owns a majority of Walmart. I mean, they've been selling some shares lately.

I think it dipped finally below 50%. But Walmart's goal is like, when Walmart comes to town, you don't buy more milk. You just shift your production. So Walmart has this goal basically capture every dollar of America is under class. You know, they're putting these banks inside Walmarts. They're putting these healthcare clinics inside Walmarts, but they're also making vertical plays into the food system. They just announced a few weeks ago that they're building their third dairy plant in Texas. They're making a big beef operation in the planes.

And from my conversations with people is Walmart was so kind of fed up with being, gouged by the other barons that it is making these vertical play so it has an insight the cost structure so that way when it bargains with companies and knows like no no no don't don't toy us around yeah tired of baron so it became a baron it's um baron versus baron joe you and i went to bentonville in arkansas and you definitely get a sense of walmart's power in that particular town austin that was so interesting and fascinating thank you so much for coming on odd lots and listing your barons behind America's agricultural concentration. Thank you so much. Yeah, thank you for having me on.

Joe, I want to ask if you enjoyed that conversation, but that doesn't seem like the right question. Let me ask, are you going to be walking into grocery stores muttering about antitrust and concentration and the illusion of choice like I am now? Maybe. I think probably, to some extent, I'm definitely going to pay more attention. You're going to be dancing down the aisles going, the steak is on sale. So my takeaway from this conversation is that a lot of it is really about values. We can have a calorically abundant, hyper-efficient food supply chain where maybe it's not the best tasting meat, but a lot of people can afford steak and hamburger meat and even fresh berries

on a way that may not have been the case 20, 30 or 40 years ago. But A, there are clearly environmental externalities. Someone is going to pay the cost. and there are big structural changes to society in the sense that do we want a handful of companies, say, owning a huge swath of the land in Iowa or Michigan or elsewhere? Like, these are pretty legitimate debates to be having and what is the optimal tradeoff and what is the optimal mix. So I do think there is a lot of fertile ground for figuring out, like, well, where do we want to, like, calibrate that dial? I think that's a totally fair way of putting it. Absolutely, it's a value judgment about what kind of system you want to see. I do think there is a tendency not just with agriculture, but we talk about this all the time in finance, this idea that you kind of think certain things are inevitable, like the existence of money markets or euro dollars, that those kind of just happened. But of course, they were the product of conscious decisions and there were reasons to do them. Same thing with agriculture, something like the farm bill might have made sense. when it was first proposed, maybe it doesn't make as much sense now.

One thing I think about now, though, is I guess the experience of the past few years of inflation, so much of which was in food prices. And I can kind of see on the one hand, okay, maybe that leads us to reevaluate things like antitrust. So maybe people start to wake up to the idea that, oh, well, companies are pushing through price increases because there's not as much competition as there used to be. on the other hand, if we want to get really cynical about it, it seems like people just really hate high food price. Sure. Yes. And so you could also see people going like, well, we want to make those prices even lower. So let's have more efficiencies.

Let's have bigger supermarkets. Let's do less environmental protection because that's expensive. So it feels like it could go either way. Totally. And you know, you mentioned, you know, in the early part of the conversation, this gas. between, you know, fresh foods and fresh vegetables versus processed foods. And, you know, on some level, it's not surprising, right? Historically, I mean, if you went back a long time, there were like mass famines and food would cost infinite amount because the food did not exist. And so to some extent, we've reduced that volatility in the price of food by essentially reducing the amount that the end product is actually directly related to a food commodity at all. And so, you know, if you think about a frito, there's some amount of corn in there, but mostly it's the process of an industrial process.

But you don't have these big, you know, swings in the price of fritos the way you're going to have in swings in the price of corn because it's the end product is only partially related to the commodity. There are some nice things about that, right? That is the most impassioned defense of fritos I've ever heard. That actually makes a lot of sense. Right? Like, it's like, it's sort of like a built in price. But I do think a lot of these things, like, I didn't want to, you know, stay in the Midwest. I was never really like, there was no prospect of me ever, I don't think, working on my grandmother's farm.

But I think a lot of these things, like, strike about, like, deep questions about our values at a society. And I do think it's interesting that there is the sort of change maybe a foot in the politics of food that is sort of maybe bipartisan or trans-hnegeological. Well, that's my big question because you feel like a lot of the environmental. environmental concerns, like depending on how you couch them, could have bipartisan appeal. So, you know, there are a lot of people in Republican states that enjoy going out to the great outdoors and presumably don't want to see a manure lagoon when they do that. And so you feel like it could have wider appeal just depending on how it's sort of presented. But Joe, you should come visit my place in Connecticut. I've got, I've never invited me. No, you probably have. I have. It's just hard to get out there.

I've got fruit trees. Okay. I've got raspberries. Great. I've got strawberries, which will be ready in June, and I'm planning blueberries right now. Bring some in, and I'll give it so I can give them to my kids and save some money. I brought you tomatoes last year, but I'll bring strawberries this year. All right.

Shall we leave it there? Let's leave it there. This has been another episode of the Allot's podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway. And I'm Joe Wisenthal. You can follow me at the stalwart. Follow our guest, Austin Furrick.

He's at Austin Ferrerick. Follow our producers, Carmen Rodriguez at Carmen Armin, Dashel Bennett at Dashbot, and Kel Brooks at Kel Brooks. Thank you to our producer, Moses Andam. For more Oddlots content, go to Bloomberg.com slash Oddlots, where we have transcripts, a blog, and a newsletter. And you can chat about all of these topics in the Discord 247 with fellow listeners, Discord.g.g.

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