Friday, March 22, 2019

Walmart and Costco move to control production and distribution of chicken and milk could hurt farmers

Alan Guebert
Retail giants Walmart and Costco have made recent ventures into agriculture that could have a huge impact on farming, columnist Alan Guebert writes.

Both companies took over production and distribution of some products. In 2018, Walmart began bottling its own milk in Fort Wayne, Indiana, for 500 stores in surrounding states. At the same time, Costco built its own poultry barns near Fremont, Nebraska, to grow, slaughter, and distribute 2 million chickens a week to sell at all Costco stores west of the Mississippi River, Guebert writes.

It makes sense that the retailers would want to cut out the middlemen for chicken and milk, since groceries usually sell those items for little to no profit to lure shoppers into their stores, Guebert writes, but the move could hurt farmers by reducing industry-wide competition, and has hurt dairy farmers: When Walmart decided to no longer buy milk from Dean Foods, Dean Foods terminated the contracts of more than 100 small dairy farmers because it was no longer cost-effective.

John Hansen, president of the Nebraska Farmers Union, warned Guebert that farmers could hurt themselves in the long run by signing up as contract producers for the retailers: "I have said that farmers who sign these contracts are volunteering to get run over by a bus because total integration means the total elimination of markets. The integrators become the only market."

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