Episode 114: The State of the American Food System with Austin Frerick

Hi, friends, this is John. Welcome back to the Regenerative Agriculture podcast where we usually talk about agronomic science and all the fun things that are related to producing healthier, higher quality food for people. But one of the important pieces is that it doesn't do. It's not enough to just grow healthy and high quality food. We actually have to transfer that efficiently and effectively from the people who are growing it into the hands and the mouths of the people who are eating it in a way that facilitates stewardship of the landscape. And one of the things that that means, fundamentally, is that we need to reward people who are good stewards and who are doing a good job of producing food. And as we know, the food supply web is massive. It's complicated. There are lots of actors, lots of moving pieces and parts, and usually one of the results in today's world, at least here in North America, is that the people who are producing out in the field end up with a very small piece, a very tiny piece of that overall pie. And that I'm of the persuasion that that is not. That that is because we have limits to market access and that growers are not able to access markets very well because of regulatory oversight and so forth. So this episode, we're going to have a different conversation. I'm really excited to be having a conversation with Austin Frerick. He has a new book coming out that is titled Barons. I want him to speak a little bit about that. Subtitle is Money, Power and the Corruption of America's Food Industry. I read an advanced manuscript and I was pretty intrigued with the depth of monopoly that exists. I was certainly aware of a great deal. All of us are aware of the monopoly power that we have in beef processing, other areas, but the depth and the breadth of how that exists in the food supply chain was unfamiliar to me. So, Austin, thank you for being here. Thanks for being willing to write these stories and to do some of the investigations and. And to come up with a story.

What.

What got you started down this pathway?

First of all, thanks for having me on, John, but what got me started was, I'm not joking, a conversation at a dive bar in Des Moines, Iowa. This was 2018. I was shooting the shit with a political person I know. And they were telling me that the largest political donor in Iowa was a hog baron. Iowa doesn't have campaign contribution limits. And so this one hog farmer gave the governor over $300,000. And he was also telling me this hog farmer has a private jet. It's remembered that on it he wrote, when pigs fly, gets a home down in Florida, he flies back and forth. And part of me was like, first of all, that's good copy. But the second is this is such a powerful symbol. What happened to Iowa? And so I started investigating, researching, how did one hog farmer become the most politically powerful person in the state of Iowa? I wrote an article about him and there's a story told, you know, so much now in agriculture that, oh, it's because of efficiency, blah, blah, blah, blah, blah. And it's like, no, this is really just old fashioned political corruption. This person's willing to cut a bunch of corners other people weren't willing to cut. And what I realized after writing that article was, oh, what I see in hogs, I see across the food system. And so put together this book, spent the last five years writing it of just telling, hey, what you see in hogs, going on in berries, going on in dairy, going on in grocery stores. I find them to be fun ways to tell these bigger structural stories, like the one that always blows people's minds is Driscolls. Driscolls is my berry baron. They sell one in three berries, but they don't grow a single berry. They engage in the chicken product sharecropping model where they own the IP of the berry, but they contract out the growing the actual berry to other people. And that has basically resulted in berry production moving offshore where you can squeeze labor, cut a bunch of corners in the environment. And then what ends up happening is it really undermines people doing it right because they can't compete fairly on price to people cutting corners.

Another of your barren examples, in fact, the one that probably intrigued me the most was Cargill. And what most impressed me about Cargill, the story about Cargill, is that so often when you have these facilitators, these market access facilitators, I'll call them, so often the nature of the relationships that they develop with producers is, is very intentionally and very deliberately a very extractive relationship where they are seeking to extract as much as they can from the marketplace and to sustain their own safety, to corner their own safety. And usually that extractive mentality is associated with very short term thinking or relatively short term thinking of how do we optimize for this quarter this year and for the next decade. But Cargill has had a vision that began with the founders that has been a decades long and arguably even a centuries long vision of how they maintain their own safety. You know, I found this intriguing because I've spent a lot of time Thinking about what are the roadblocks? What are the barriers that prevent the adoption of healthier agricultural models on a large scale? And we know that the crop insurance and the price support programs that are in place are. They are maintained at a level that is just enough to keep the farmers in business and to keep them kind of hooked on that train. But realizing the long term vision, the depth of vision that Cargill has had in writing the farm bill for their own benefit, not for the benefits of farmers, but for their own benefit. That story really intrigued me.

Let me start off by saying one of my favorite things to ask people when they read the book is who's your favorite baron? Because I thought there'd be a clear winner and there's not. I love Cargill too. I mean, the Cargill one is. I mean, I have to be honest with you, that wasn't in my original book proposal. I didn't know much about Cargill, even though I grew up around it. Cargill. There's a Cargill factory next to my soccer field, next to my church, next to where the church I was born. But it wasn't until I started researching and I think it was the book Merchants of Grain that really tipped my hand to what Cargill is. And then you start digging and they're the largest private company in America. I mean, they're bigger than the Koch brothers. But you're right, their power is hidden. And I compare them to the closest thing we have in the 21st century to standard Oil. Cargo is all about owning the middle. And because it's not consumer facing, people don't really hear much about it. You don't see much about it. And the family, until very recently, we don't know who they are. You know, I mean, like, we don't see pictures of them. They're not public figures. They're not giving like massive campaign contributions like the Koch brothers. But I mean, Cargill's kind of brilliant in that it uses, I call it the middleman strategy. They give secret money to people, and those people then do their bidding for Cargill, though going back, they have this phrase, and it took me a while to see it. They commissioned their own internal history by some ivy League historian. 1600 pages, very poorly written, very dense. But I kept seeing this phrase, endless belt. And that was a strategy they've had for a century. That just means control the whole supply chain. And so what they generally do is I call it the beachhead strategy. They buy a little bit of a company and they kind of see how the industry's going. And either they commit to it or they, you know, they pull back. But the story of the farm bill is companies like Cargill, they want to move and process as much grains as possible. And the history of the farm bill was it comes out of the dust bowl and it was supply management. It was, you're purposely restricting the productions of certain commodities like grain in order to find some ecological balance. And so Cargill from the get, I mean, hated the New Deal farm bill and from the get go has tried to kill it. And so now we have a corrupted farm bill, what I call the Wall Street Farm Bill because it's designed for Wall Street. It's designed to overproduce a few things at the expense of everything else. It's picking winners and losers and it benefits companies like Cargill.

So as you have looked at these, the seven barons that you highlighted in your book, Seven Different Industries. You know, it's been a while since I read the manuscript. I don't recall. Did you include the beef as well? Because beef is kind of top of mind for lots right now with all the conglomeration that we have and the lack of a competitive marketplace. But I guess maybe that's the next question when I use the phrase a lack of a competitive marketplace. What is the key point that you wanted to communicate with the book, that you wanted to be more widely known?

The simple notion, let me start with the goal of every corporate executive is monopoly. They don't want competitive markets. I mean, profit is in monopoly. So you have an inherent tension. A business wanting monopoly and government wanting competitive markets for innovation, for farmers, for workers, for what have you. I tell the story of jbs. JBS is my. My slaughtering baron. We have never had a meat company this big in the history of mankind. But to me, the undercurrent of that chapter is really, is my anger at Secretary Vilsack. I mean, to me JBS is just, it's just a classic bully where it's never really faced consequences for its actions. So it keeps pushing the envelope. I mean, I argue it's the closest thing we've had to a modern day mafia company in an American corporation. I mean, they admitted to bribing over 1800 politicians to become a monopoly. And the fact that we let them keep their monopoly, I mean, that's wild. Imagine you could just bribe your way to monopoly status and then you just pay a fine. But that's the story of jbs. And I mean, Vilsack, I've never seen such a bipartisan pinata As I see now of confronting, especially in beef, the concentration crisis and his inability to like, not only do anything, but like, the fact that the meat markets have gotten more concentrated these last four years tells you everything. Besides my bigger point of, you know, you have this inherent tension between corporations wanting monopoly and government not. My other big takeaway of this book is there's no such thing as a free market in the food system. Everything you eat is subsidized. The question is, to what degree? And right now, I mean, we are subsidizing, we robber barons and they capture the political system and they're reinforcing their bottom line. And my big goal at the end of this book is it doesn't have to be this way. I mean, we've dealt with robber barons before. I mean, that's kind of why I like using this robber baron framework is, you know, it's something you learn about growing up in high school where, oh yeah, you think of Teddy Roosevelt, the Gilded Age, all that kind of stuff. So I really want to hearken back to that. The kind of show that we've been here before. We can conquer these giants.

We can if we have the collective political will. And I think that is the key question in my mind is we have such a hyper partisan and such a polarized political sphere. Do we actually have the collective political will? And particularly when you consider the, as you're calling them, the robber barons, political contributions and the level of government capture, regulatory capture that they currently enjoy, Is there a pathway forward, Is there a reasonable expectation to have a pathway forward to resolve these issues in our current political environment?

Yeah, I mean, the two things I think of is one, I don't think people appreciate agriculture. What the movement to electric vehicles is going to do to ethanol, it's going to kill ethanol. I mean, ethanol is the single largest use of corn right now in America, and that market will transition fast.

I'm not sure I agree with you. I did agree with you 10 years ago. In fact, I first started saying that 10 years ago. But the reality is that ethanol is already dead from a making sense perspective. Like ethanol doesn't make sense from a carbon footprint perspective. So it is purely being kept alive by politics. It's purely a political weapon at this point. And when I look at the impact that electric vehicles will have, they will have an impact, but it'll be less than 10% of our overall fuel consumption. So it's not insignificant. But when you have something that is politically entrenched, common sense no longer necessarily applies. If it did Ethanol would be dead already.

I don't know if it'd be 10%. I mean, China is producing EVs at incredibly low cost right now. I mean, that's a whole conversation over industrial policy. China unfairly subsidizing the heck out of that industry in the day. Oil is just a middleman. If you can somehow get EVs, people argue if you think it's going to be 10% or not, I think cars are going to move to EVs. That's just, that's the assumption I'm making when I say this. But that's also why you see the ethanol industry trying to put it ethanol and airplanes. Now, even if we lose 10%, that's still, that's still a lot of corn.

Yeah. So just so that I communicate clearly, I think that EVs are going to be much greater than 10% of the fleet. I think EVs are going to end up being, well, I don't know exactly, but if I had to speculate, probably greater than 90% of the fleet, given enough time, give it a decade or two. But my understanding of looking at the math is that our automotive fleet, our personal vehicle fleet, specifically our gas fleet, represents only 10% of our total fuel consumption.

True, but I'm just talking like from the pure use of, from corn. I mean, if you're going to have the auto fleet and then you assume another 10 years after that where cars turn over, people trade in at some point, 20 years from now, you're not going to need ethanol for cars. Trust me. That's what everyone at Iowa State's figuring out now is what can we do with the surplus corn? Because I go back to the fundamental notion is every year is about growing more corn, more and more corn, increasing yields. And so instead of just growing a different crop and the market's not there, they'll keep creating artificial government supported programs to prop that system up. Even though we talked earlier about how Cargill engages in long term thinking, which is its brilliance in general, I don't find this industry to really think that way. I think it engages in massive short termism and I think it's because of the influence of Wall street capital. I mean, you see a lot of industrial dairy production in the Texas Panhandle and that's, you know, no one's thinking long term there when you're mining water. You know, it's regardless of ethanol is, I think there's going to be a come to Jesus moment on that at some point. I mean, 20 years is pretty soon in agriculture. But also I think just politically. I mean you have Josh Hawley and Elizabeth Warren talking about that. I mean those are two different ends of the political spectrum. People see it in the store. I mean they see the prices of beef and then you talk to beef farm and they're screaming for help. There's going to be some smart politician comes along and sees, oh, I can run the Teddy Roosevelt playbook here. It's just such an easy win win. I mean Walmart, I mean Walmart's my grocery baron. And Walmart's making aggressive moves into beef right now because it's sick of being shortchanged by the beef packers and it understands its consumers. When you go to a grocery store, meat and dairy are like the main things people look at for quality and price and it's just collapsing and people see it. So I, maybe I'm a little optimistic there, but I just see that's just a pinata that I just haven't seen in a while. Politically that gives me hope.

Well, when you invoked Teddy Roosevelt in the Gilded Age a moment ago. So is there really the political appetite and the collective political will to engage in trust busting and to revoke the monopolies that exist?

I mean you're seeing it now in big tech. I mean the appointment of Commissioner Lina Khan to the FTC is incredible. I mean you have this young woman who is bringing all these monopoly cases against Google, Amazon, Apple, Facebook. I mean she stopped quite a few mergers. She stopped the, the Kroger Albertson merger. She just stopped. What was the one this week a big hotel chain was merging. She's also good copy. I mean, she just kind of reads like she's sticking it to the man. So the problem here is USDA has antitrust carve out authority for meatpacking. I mean I'm personally a fan at this point of stripping USDA for parts, including giving that antitrust authority and meat back to the ftc. I just, I don't have a lot of hope for usda.

Can you explain that? When you, when you say you don't have a lot of hope for the usda, why is that?

To get in the weeds. I blame checkoffs. Checkoffs are those, you know, those government mandated taxes. And it comes out of this Wall street farm bill where now that we're over producing a few commodities, checkoffs have been around since the New Deal, but they really ramped up to stimulate demand. You know, your got milks, your pork, the other white meat kind of thing. And most of them you Know, they were just advertising campaigns, but you've seen them really transition. I argue my dairy baron is really about this. How my dairy baron really captured the dairy chuck off is not only it's to me, it's really corrupted and captured the land grants. A lot of the checkoff money is now used to finance junk science. But more importantly it creates this revolving door in D.C. where like take Vilsack, I mean, between assistants, the secretary, he was working as an industrial dairy lobbyist. And so to me, the checkoffs really control the conversation over agriculture in America. A lot of the agriculture publications rely on checkoff money. I mean, the Government Accountability Office has issued several reports on just how broken this arm of the USDA is, but nothing changes. We're talking over like a billion dollars here that there's very little transparency over. I know ranchers hate it the most because they're the ones being really shortchanged. But I think because of the control checkoffs have or the usda, I don't really have a lot of hope for usda. The way Secretary Perdue under Trump reorganized the department to put the meat antitrust authority under the same branch of government as the meat promotion, the checkoff authority. And that to me it's really nerdy. But like that you're having both the person who's promoting the industry also being the cop, that just doesn't work out.

Yeah. Speaking of the promoters also being the cop, this actually leads me to another question that I wanted to ask. But I'm going to go back first to the trust busting conversation. When I asked you the question about the current political climate, the current political will you answer the question in the framework of. Well, what is happening currently is we're preventing mergers from happening. And that's a very necessary and important component. But actually what needs to happen now I would argue is we need to go back and break up some of the monopolies that exist. We need to repeat the Standard Oil experience and not once and not twice but many times with a number of different organizations. And is there the political will and the political appetite for that?

I really think so. I mean this. You're talking about a. Since the election of Reagan, we've been under this pro monopoly framework. I talk about my book Outcomes from Robert Bork, Nixon's Hatchet Man. This intellectual framework really validated the consolidation we see in the American economy. This young woman wrote a paper in college that went viral saying we need to break up Amazon. She's returning to that old Brandeis Teddy Roosevelt thing. It Takes a while. I mean, you have to. I mean, the big thing we face right now in breaking up companies is you have. The courts are so captured by industry, such a pro industry, the Federalist Society, that you really have to overcome a lot of case law. But here's the thing. She's the hot young thing. Every young lawyer wants to be like her. I mean, she goes into law school, any law school in America, It's a packed room to come see her. So you're getting a lot of young lawyers in America being trained to have this breakup mentality. You're going to see, hopefully down the road, this breakup mentality in the judiciary if the right people get appointed. But I mean, keep in mind with Teddy Roosevelt, he was president by accident. I mean, these things can change on a dime. So you got to lay the groundwork now. And so you can, you know, just shift these ships. And so, I mean, that's. We have two presidential candidates that are super old. Who knows what could happen a few months from now.

We have two that are super old and we have one who's independent, who has a track record of doing exactly the types of things that we're asking for.

Yeah, I mean, we live in such a volatile time. I'm not a big believer in long term plans. And so you don't look at that. I mean, this independent person could win. Who knows that both candidates will be there at the last day. You don't know. You might not be a big believer.

In long term plans, but Cargill would beg to differ. Actually, I want to shift to a slightly different piece that I want to capture in here as well, which is, I would argue that while it's true we need to break up some of the monopolies, the other piece that the USDA is responsible for, going back to a point that you made about the regulators also being the promoters, is that if we just simply remove the regulatory barriers, if we made it easier from a regulatory perspective for, let's say, smaller scale meat packers and processors to thrive and they didn't have the significant regulatory burdens, just give people more market access that would drive innovation in a remarkable degree. To a remarkable degree.

I believe you need to do the structural things first. Because it's like, that's the whole Michael Pollan thing. Like, sure, you can remove it, but JBS has not given you an ounce of market share and it's a ruthless company. It will destroy you or it'll buy you out. I mean, that's the whole changing the system with your fork mentality you have to go after these companies with a hammer. I mean, you're right. And you got to break them up. You got to break them up in order to allow these people, these innovative companies to thrive. Or else will this be stuffed out. Like that's. To me the modern story of the American food system is anything that's challenging, the system just, just gets drowned in the bathtub.

Yeah, I'm not sure I agree with you. I think that there's some of both. I agree with you in the sense that yes, the breaking up the monopolies definitely has to happen. And I think if you remove the regulatory barriers. If a farmer wanted to process his own chickens and his own beef and go direct to consumers or to work with a local butcher shop to do that, and that was easy to achieve from a regulatory burden they couldn't catch up with playing whack a mole because they have now created such a monopoly that they have. There are so significant price advantages for people doing their own butcher shop that they would, they would lose to competition. You can't buy out a thousand competitors that would proliferate in the next five years if they didn't have a significant regulatory overhead.

Yeah, I mean, just which comes first, chicken or the egg? I just feel like it's. As long as meat companies are this powerful, they're going to capture the government agencies and the agencies will do their bidding. That's just what I go back to. I mean, you have to do both at the same time. But I would do the breakup companies first. I mean the fact too, let's keep in mind with these meat companies, they're not American companies. I mean that's like the whole wild undercurrent here is they're foreign backed state monopolies. I mean, these are very intentional strategies by Brazil and trying to have monopolies in this space. And like, what's even wild about the checkoffs is like the largest owner of hogs in America is a Chinese company. They're also the largest hog butcher, Smithfield. And so you have. The voice of the hog farmers is really the voice for a Chinese multinational corporation. I mean that is wild. And that is like, that's where we are. I mean I, I'm kind of on the radical side too in this aggressiveness because I come from Iowa. I mean Iowa broke in my lifetime. The family farm essentially died. You drive around growing up in Iowa, you see animals and land. Those are gone. I mean, now what used to be family farms are now low wage workers for these robber barons. And Basically, Iowa is an extraction colony. It's producing the most wealth that's ever produced, but it's being taken elsewhere, you know, either down to Florida by my hog Baron or, you know, across the ocean to China. I mean, that is. I just have this very aggressive mentality because it's industry wins by running out the clock. Like you said, Cargill, they think long term, they have way more capital than you, and so they'll just weigh you out. Yeah.

Thank you, Austin. This has been a fascinating conversation. Where can people learn more about your book? Where should they go?

Yeah, well, my book will be for sale on March 26th. They can go to my website, austinfer.com f r e R I C K. You can buy any bookstore near you. And like, as I mentioned earlier, I'd love to hear what people think is their favorite Baron, or honestly, or even little tidbits I miss. The best stuff comes from people reaching out, telling me, hey, you should look over here. You should look at this Baron and all that kind of good stuff.

Thank you, Austin. This has been a great conversation.

Thanks again, John.

The team at AEA and I are dedicated to bringing this show to you because we believe that knowledge and information is the foundation of successful regenerative systems. At aea, we believe that growing better quality food and making more money from your crops is possible. And since 2006, we've worked with leading professional growers to help them do just that. At aea, we don't guess. We test. We analyze, and we provide recommendations based on scientific data, knowledge, and experience. We've developed products that are uniquely positioned to help growers make more money with regenerative agriculture. If you are a professional grower who believes in testing instead of guessing, someone who believes in a better, more regenerative way to grow, visit advancingecoag.com and contact us to see if AEA is right for you. Thank you for listening, and we look forward to working with you.