Higher prices at the supermarket, lower prices for farmers
Perhaps the side effect of consolidation which will have consumers most vocal is higher prices. Less competition, after all, means greater efficiency, but it also often means that companies are able to charge higher prices in the absence of former competitors. And while higher prices may be one of the most noticeable side effects of consolidation for consumers, producers are those who are likely to be most affected. As consolidation intensifies, farmers are increasingly at the mercy of just a few processors who are marketing the finished product.
And while analysts are optimistic regarding the food industry’s trend toward consolidation, agricultural analysts are increasingly worried that farmers and consumers are the ones who will be hit the hardest by the M&A frenzy, with producers getting less and less for their crops and livestock, and consumers paying more and more for its end result.
It’s hard to say how big the impact of the Big Food’s consolidation will have on consumers, but according to the Agriculture Department, consumers can expect beef and veal prices to rise by 6 percent in the next few months, and around 3.5 percent this year, per USA Today.
Consolidation, a NOFA (Northeast Organic Farming Association) report from 2006 notes, also allows companies to engage in price gouging, which has no benefit for the farmer. “Although farm milk prices are the lowest they have been since the 1970s, prices paid by consumers have not declined,” the report reads.
ICCF Wealth Management’s Doug Sheehan is one of a few analysts who question the benefits of the industry’s further consolidation. “It’s bad anytime you have competitors going away,” he told CNBC. “There will be less incentive to lower prices in stores, and that can be harmful all around. Those companies can control the market.”