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GAO-09-746R 1 (2009-06-30)

handle is hein.gao/gaobaanoj0001 and id is 1 raw text is: A 0 .Accountability * Integrity * Reliability United States Government Accountability Office Washington, DC 20548 June 30, 2009 The Honorable Herb Kohl Chairman Subcommittee on Antitrust, Competition Policy and Consumer Rights Committee on the Judiciary United States Senate The Honorable Charles E. Grassley United States Senate Subject: U.S. Agriculture: Retail Food Prices Grew Faster Than the Prices Farmers Received for Agricultural Commodities, but Economic Research Has Not Established That Concentration Has Affected These Trends Over the past 25 years, farmers have received a decreasing share of the consumer food dollar. Some analysts and farm interest groups are concerned that this decline can be attributed, in part, to increasing concentration in agriculture. They believe that firms in highly concentrated markets may be able to exert market power by raising retail food prices while also depressing prices farmers receive for agricultural commodities. Others have argued that concentration has facilitated changes, such as technological innovations, that have improved productivity and served to lower food prices while increasing some farm incomes. The influence of any one factor, such as concentration, in determining agricultural commodity and retail food prices (commodity and food prices) varies and is difficult to isolate. Our prior work has noted that concentration may be one of a number of factors that can influence prices along the food marketing chain from farms to food processors, retail stores, and finally, consumers.2 To better understand the impact of concentration on commodity and food prices, economists have used a variety of analytical techniques and data sets. However, their work has been complicated by various issues, such as the difficulty in fully accounting for shifting consumer demand for food products, the introduction of new 'Concentration is the extent to which a small number of firms controls most of the sales or purchases in a specific industry or market. The term consolidation is closely related to concentration, and refers to the organizing of farms, food processors, or retail stores into fewer, larger firms. For the purposes of this report, we have focused on concentration because the relevant economic literature has assessed its role in market power and commodity and food price manipulation. 2GAO, Dairy Industry: Information on Milk Prices, Factors Affecting Prices, and Dairy Policy Options, GAO-05-50 (Washington, D.C.: Dec. 29, 2004); Economic Models of Cattle Prices: How USDA Can Act to Improve Models to Explain Cattle Prices, GAO-02-246 (Washington, D.C.: Mar. 15, 2002); and Beef Industry: Packer Market Concentration and Cattle Prices, GAO/RCED-91-28 (Washington, D.C.: Dec. 6,1990). GAO-09-746R Concentration in Agriculture

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