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Oligopoly power distorts the flow of resources throughout the economy

Every introductory economics textbook spells out the danger to society of allowing a few firms to dominate any sector of productive activity. Oligopolists underpay for their inputs and overcharge for their outputs. This is certainly the case in the food system, where corporate market power squeezes farmers when they buy expensive seeds and fertilizers and again when they sell their products for less than it cost to grow them.

But there is a pervasive myth in developed countries that this price pressure on farmers actually benefits consumers by providing "cheap food." In fact, the hidden costs of "cheap food" offer a useful illustration of how agribusiness oligopoly power distorts overall economic flows:
Agribusiness firms benefit greatly from historically low commodity prices, which reduce their costs for the farm produce they turn into processed food for the consumer. But commodity prices are only low because of global overproduction. In the absence of an international commodity supply management mechanism, farmers continue to produce too much, while paradoxically depending on support payments from their governments. In other words, taxpayers effectively subsidize the operations of the food companies by keeping production levels high and commodity prices low.  
The globalization of the food system has been made possible by the apparent low cost of transportation, which encourages food companies to market products thousands of miles from where they were grown. But like "cheap food," the "cheap oil" that makes such transportation possible is priced artificially low because of government subsidies to the petroleum industry, again funded by taxpayers. American agribusiness firms also receive export credits when they sell -- or dump -- surplus production on foreign markets.

The industrial agriculture model promoted by transnational agro-food companies generates huge costs that are not borne by the companies that profit from it. Soil erosion, water depletion, toxic contamination, and the loss of bio-diversity all substantially diminish the overall stock of resources available to society for the long-term. While agro-food companies benefit now from their short-term approach to resource management, future generations will assume the true costs, both in cleaning up a legacy of environmental damage and through lost opportunities for sustainable land use. 

As in most other industries that benefit from taxpayer subsidies, food, beverage and tobacco companies also use their lobbying skill and complex international financial transfers to substantially reduce their own tax bills.

Far too few consumers realize that they actually pay for their "cheap food" three times: at the checkout counter, again through their tax bill, and finally by assuming the long-term social and environmental costs of unsustainable production methods. Thanks to market distortions, public subsidies and tax avoidance, corporate oligopoly power in the food system actually results in a massive transfer of resources from farmers, workers and consumers into the coffers of an ever-smaller number of transnational companies.