Recent Structural Changes in the Agricultural Industry and their Effects

By the Robert F. Kennedy Memorial Center for Human Rights

Increasingly prevalent incidents of worker exploitation and forced labor in America’s fields are linked to a shift in agricultural markets in the last two decades that have significantly altered the market spread to the advantage of large buyers and tightened profit margins for producers (growers of fresh produce). This fact sheet explains this trend and proposes a mechanism for change.

• Purchasing Practices: The purchasing practices of the buyers of fresh produce have changed from the 1980s when products were purchased from wholesalers at a fluctuating market price. In today’s market, large retailers purchase produce directly through cooperative buying mechanisms. One example of this practice is Yum Brands, Inc., the largest restaurant corporation in the world. Yum Brands has an exclusive purchasing relationship with the United Foodservice Purchasing Co-op (UFPC), which is the self-described “largest purchasing cooperative of its kind in the quick-service restaurant industry.” By purchasing greater volumes, buyers such as the UFPC can negotiate lower wholesale costs, which in turn, lowers (in relation to inflation and other factors that increase the costs of production) the per-unit cost of goods. Please see the UFPC’s website for more information at www.ufpc.com.
  
  
• Market Spread: The market spread between the retail price of tomatoes and the price received by the grower has continuously increased over the past decade, to the advantage of the retailer. In 1990 growers received 41% of the retail price of tomatoes but by 2000 growers were receiving barely 25%. This growing market spread is indicative of the increased power buyers have acquired in agricultural markets and their ability to negotiate lower per-unit prices.
  
  
• Farm Gate Prices: While the inflation adjusted price for fresh tomatoes at the retail level has increased significantly, farm gate prices (i.e. the prices paid to growers) have dropped by 21% for tomatoes, in real terms, since 1980. Again, this figure indicates the shift in the industry in favor of retailers and the lowering of profit margins for the growers of fresh produce.
  
  
• Concentration of Growers: The pressure exerted by this shift and the demand for large orders that it entails, coupled with increased foreign competition, has resulted in the rise of larger growing operations and the end to many smaller producers. This is evidenced by membership in the Florida Tomato Committee, which has fallen from roughly 300 growers to less than 75 over the past decade. The top five Florida growers account of 45% of the volume of tomatoes shipped; the top ten account for 70%.
  
  
• Farmworker Wages: Tighter profit margins are central to an industry-wide slashing of labor costs. Farmworkers have lost ground absolutely. Since 1978, Farmworker wages – adjusted for inflation – have decreased by 65%. They have also lost ground to other workers in the private non-farm sector. In 1989 the average crop worker wage was 54% of the hourly wage of production workers in the private, non-farm sector, but by 1998 that wage had dropped to 48%. The vast majority of farmworkers have no benefits of any kind, no right to overtime pay, and no right to associate or collectively bargain.
  
  
• Forced Labor in the Agriculture Industry: Since 1996, the Department of Justice has successfully prosecuted five cases of modern-day slavery in the agriculture sector of Florida alone—involving over 1,000 enslaved workers. Additional investigations are currently underway. The majority of these cases are perpetrated by labor contractors subcontracted by growers in efforts to acquire an even cheaper workforce.
  
  Attorney General John Ashcroft has spoken often of this crime, stating that “America will not stand idly by as those who seek to profit from modern-day slavery ignore the humanity of their prisoners and show their distain for the rule of law.” President George W. Bush has also spoken specifically about slavery in the tomato industry, telling the story of one woman, Maria, during a speech on human trafficking on July 16th, 2004 in Tampa, Florida. “She was being kept as a slave. She was forced to work without pay in the tomato fields of central Florida and then raped at night.”
  
  Forced labor, like the drop in wages, is the product of an agriculture industry in which profit margins for growers have been slashed and mechanisms for growers or workers to respond to create a more sustainable and mutually beneficial model are limited.
  

A Mechanism for Change

There exists in the context of the Florida Tomato Committee and Exchange (the group of Florida- based tomato growers, most of whom operate up the East Coast upon the decisions made at the annual Florida Tomato Committee and The Florida Tomato Exchange Joint Tomato Conference) a mechanism to change the price levied by all producers and paid by all purchasers based upon factors that affect the entire industry, such as the legally mandated phase out of a less expensive pesticide. This mechanism could be used to afford a penny-per-pound industry-wide surcharge to be passed to farmworkers in the form of higher wages.

• Surcharge Precedent: Industry-wide surcharges have been applied in the past to cover increased production costs in the tomato industry. In 2002, the Florida Tomato Growers Exchange approved a penny per pound surcharge on tomatoes to cover the cost of phasing out the use of methyl bromide pesticide. This was accepted with no real resistance among buyers, who tolerate it as “an accepted cost of doing business,” according to a Florida Tomato Committee officer.
  
  
• Piece Rate Payment: Farm laborers are not paid an hourly wage, but rather are paid by the piece. Tomato pickers currently earn approximately 40 cents per 32-pound bucket of tomatoes picked, a figure that has not changed since 1978. A worker must pick and haul two tons of tomatoes, or 125 buckets, in a single day to earn $50. An increase of one penny per pound in the price paid for tomatoes, if passed directly along to workers, would nearly double farmworkers’ wages, lifting the average wage from $7,500 a year to roughly $13,500 per year—from well below the federal poverty threshold to above it.
  
  
• Industry-wide Ramifications: The proposed penny-per-pound price increase would create a more sustainable agricultural supply chain without significantly adversely affecting any one stakeholder.
  
  Workers would earn a better wage with less of a threat of modern-day slavery or exploitation and less of a need for state or federally funded programs (welfare, etc).
  
  Growers would be able to pay their workers more fairly, feeling less pressure to deal with labor contractors that exploit or enslave their workers. There are growers who support the surcharge, as it would remove a cloud from the industry.
  
  The cost increase would be negligible to corporate buyers like Yum Brands, Inc. Alone, its subsidiary, Taco Bell, reported sales of over $5.4 billion in 2003. Moreover, as this would be an industry wide measure, all retailers would absorb or pass on this cost to consumers, eliminating any competitive disadvantage to any one retailer. At the same time, these retailers could capitalize on the positive branding that such a corporate socially responsible endeavor would allow—effectively ameliorating a grave domestic human rights problem.
  
  If passed directly onto consumers, this penny-per-pound increase in the price of tomatoes would result in less than a fourth of one-cent increase per fast food fast food item (e.g. per Taco Bell Chalupa or McDonald’s Big Mac) and a one-cent increase in per-pound retail price. As such, it would be virtually undetectable to consumers—except those that presently boycott these retailers, who would then return as loyal consumers.