For farm advocates, agribusiness consolidation has brought with it a host of evils, none more precious than the loss of family farm independence, knocked back on its heels by a one-two punch of an eroding cash market and an increase in forward contracting. As firms and plants have consolidated, left behind are fewer commodity buyers in the cash market, on which small producers still depend heavily.
Fewer buyers mean less competition in the cash market and, by extension, lower prices.
Farmers who continue to sell in cash markets argue that these captive markets relegate them to stopgap suppliers who bear the brunt of swings in supply and demand. More U.S. farmers are signing forward contracts to shield themselves from price risk in a herky-jerky market. But many remain skeptical. While contracts can help with short-term cash flow, they do little to help farmers get ahead in the long run, according to Paul Strandberg of the Minnesota Department of Agriculture. As a result, contracted farmers are not afforded the opportunity to catch up financially when commodity prices turn around.