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Farmers, consumers squeezed by middlemen

The current global food crisis is bringing into sharp focus the issue of which farming methods are best poised to meet global food needs. While large-scale industrial farming has generated increases in output, there has been increasing concentration whereby a few agribusiness corporations are exerting a large amount of influence over the food supply chain, from inputs to sale. Item 1 examines these issues and points to alternatives.

Meanwhile, a new report from GRAIN “Making a Killing from Hunger”, points out how global agribusiness firms, traders and speculators are raking in huge profits at a time when poor people are suffering from the rise in food prices (Item 2). The full report is available at http://www.grain.org/articles/?id=39

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Third World Network
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Item 1
Development: Farmers, consumers squeezed by middlemen

New York, 24 Apr (IPS/Matt Homer) -- With global grain stocks at record lows and soaring prices for agricultural products, new attention is being paid to which farming methods are best poised to meet global food needs.

The United States and Europe have long utilised large-scale industrial farming - which has generated enormous increases in output - but this method is coming under increasing scrutiny over concerns about monopolistic behaviour and sustainability.

In order to increase output in a sustainable way, agricultural experts are increasingly looking to alternative models, or at least significant alterations to the existing industrial one.

A conglomeration of over 110 countries - including the United States - and key global institutions recently concluded a three-year study of world agriculture and found that North America is increasingly dominated by a vertical agricultural structure.

According to the report, "The International Assessment of Agricultural Knowledge, Science and Technology for Development" (IAASTD), this has created a situation where "the largest actors... have predominant influence over the production, processing and marketing of food."

It further argues that this has disconnected farmers from consumers and ensured that most profits are "captured by industries after the farmgate, not by farmers".

In fact, according to agriculture expert Raj Patel, although the average basket of food has increased by 2.0% in real terms over the past 20 years, farmers are receiving 40% less.

And the National Farmers Union estimates that for every dollar that US consumers spend on food, only 20 cents actually goes to farmers or ranchers. The rest is found in "marketing, processing, wholesaling, distribution and retailing".

This increasing concentration means a fewer number of agribusinesses are exerting a larger amount of influence over the food supply chain, from inputs to sale. Critics of this situation compare it to the shape of an hourglass. A vast amount of producers must funnel their goods through a handful of large corporations before they can make their way to consumers.

Research by Mary Hendrickson, a rural sociologist at the University of Missouri, shows that the level of influence by agribusiness in the United States has increased significantly.

In soybean crushing, for example, the largest four firms now make up 80% of the market, whereas in 1977 they comprised 54%. In flour milling, the top four have increased their concentration from 42% of the market in 1982 to over 60% today.

Farming is also concentrated at the extreme beginning and endpoints of US agriculture. The top two seed providers comprise 58% of the marketplace and nearly half of purchased food comes from just five retailers: Wal-Mart, Kroger, Albertson's, Safeway, and Ahold.

Critics point out that this monopolistic influence has a perverse impact on competition, and consequently on prices for consumers.

Denis Keeney and Loni Kemp of the Institute for Agriculture and Trade Policy wrote in a review of US agriculture that "any commodity where four or fewer industries exert over 60% control has the makings of a price cartel. Farmers have no market price control, and consumers, over time, will pay higher prices."

Small-scale farmers and ranchers have been particularly pinched by the hourglass configuration of US agriculture. Because farmers must rely on just a handful of major buyers, they have little ability to influence the price of their products.

They must also depend on seeds and fertiliser from a few large corporations at the beginning of the food chain. And because of intellectual property rights restrictions on seeds, they are often required to purchase new seeds each year instead of saving them from previous ones.

In short, although farmers vastly outnumber buyers and input suppliers, they have significantly less leveraging power. And although a significant amount of government subsidies are directed at agriculture, few of them make their way to small-scale farmers or ranchers.

In addition to distorting effects related to monopolistic behaviour, large-scale industrial agriculture is also under attack for reasons of sustainability.

"We have seen adverse ecological impacts on water and soil quality and biodiversity," Hendrickson told IPS. "The use of synthetic inputs (fertilisers, pesticides, etc) from off the farm enhanced productivity fabulously, but has had some serious impacts."

Keeney and Kemp agree, arguing in their report that "one cannot see how this structure can hold over the next century because it is so heavily dependant on fossil fuels, taxpayer subsidies, and environmental externalities."

Already, they point out, this form of agriculture has resulted in "water pollution, groundwater pollution, hypoxia zones, increased flooding, depletion of ground water, air pollution, excessive odours, climate change, loss of wildlife habitat, degradation of natural ecosystems, loss of pollinators, loss of soil quality, and soil erosion."

Proponents of large-scale agriculture argue that despite these considerations, it is still the most efficient way to produce large quantities of food. They say that industrial farming is best suited to bring new areas of land into production, increase productivity and boost output.

The reasoning is because of economies of scale. Larger firms are able to consolidate functions and thus reduce costs. For example, whereas each small-scale farm may require its own tractor, industrial farming could purchase multiple farms and use one tractor among all of them.

These claims of greater efficiency, however, have come under question - especially when considering the external costs associated with this method - pollution, soil depletion, etc.

Critics such as Gary Howe of the International Fund for Agricultural Development point out that industrial farming cannot really be considered more efficient than small-scale farming when it relies so heavily on subsidies. He also points to the vast productivity generated from small-scale farming in the green revolutions of Asia.

An important key for the future of agriculture, Hendrickson argues, is to change the measurement of success. It should be shifted away from measurements such as the number of bushels produced per acre to something more like the number of nutrients produced per acre.

She remarks that "what the Latin American [IAASTD] assessment showed is that agro-ecological strategies can be as productive - or more productive - than current large-scale intensive agriculture that is dependent upon outside inputs."

In fact, she concludes, "they are probably a better model for boosting food production exactly in the areas that need it." These are methods that "employ both local/traditional knowledge and findings from formalised science, [and] are adapted to their particular social and ecological niche."

With the world facing dire agricultural straits, experts are hoping this will be a crucial moment in which the direction of agricultural production can be changed. They point out that output can be boosted, prices eventually reduced, and sustainability improved all at the same time.

Although a variety of options are available, many agree that they must start by giving farmers greater influence within the food chain and breaking the monopolistic and unsustainable influence of big agribusiness. +

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Item 2

New from GRAIN
28 April 2008
http://www.grain.org/nfg/?id=565

MAKING A KILLING FROM THE FOOD CRISIS

A new report by GRAIN - http://www.grain.org/2/?id=39 and in PDF http://www.grain.org/2/?id=39&pdf

The world food crisis is hurting a lot of people, but global agribusiness firms, traders and speculators are raking in huge profits.

Much of the news coverage of the world food crisis has focussed on riots in low-income countries, where workers and others cannot cope with skyrocketing costs of staple foods. But there is another side to the story: the big profits that are being made by huge food corporations and investors.

Cargill, the world's biggest grain trader, achieved an 86% increase in profits from commodity trading in the first quarter of this year. Bunge, another huge food trader, had a 77% increase in profits during the last quarter of last year. ADM, the second largest grain trader in the world, registered a 67% per cent increase in profits in 2007.

Nor are retail giants taking the strain: profits at Tesco, the UK supermarket giant, rose by a record 11.8% last year. Other major retailers, such as France's Carrefour and Wal-Mart of the US, say that food sales are the main sector sustaining their profit increases. Investment funds, running away from sliding stock markets and the credit crunch, are having a heyday on the commodity markets, driving prices out of reach for food importers like Bangladesh and the Philippines.

These profits are no freak windfalls. Over the last 30 years, the IMF and the World Bank have pushed so-called developing countries to dismantle all forms of protection for their local farmers and to open up their markets to global agribusiness, speculators and subsidised food from rich countries. This has transformed most developing countries from being exporters of food into importers. Today about 70 per cent of developing countries are net importers of food. On top of this, finance liberalisation has made it easier for investors to take control of markets for their own private benefit.

Agricultural policy has lost touch with its most basic goal: that of feeding people. Rather than rethink their own disastrous policies, governments and think tanks are blaming production problems, the growing demand for food in China and India, and biofuels. While these have played a role, the fundamental cause of today's food crisis is neoliberal globalisation itself, which has transformed food from a source of livelihood security into a mere commodity to be gambled away, even at the cost of widespread hunger among the world's poorest people.

 


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