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Timothy A. Wise

The food crisis has a new villain: agribusiness. A recent report by Olivier De Schutter, the UN Special Rapporteur on the Right to Food, on “Agribusiness and the Right to Food” takes a close look at the contribution of commodity buyers, food processors, and retailers to the food insecurity now plaguing over one billion people in the world.

Why agribusiness?  Aren’t they driving prices down?  Well, yes and no, and both are a problem. If they are so big they can exert monopoly control over key markets, they can raise prices for lack of competition, hurting all food consumers. And if they have excessive market power over suppliers – particularly farmers – they can exert monopsony control and force down crop prices.  That can benefit food consumers if low prices are passed through to consumers, but monopoly can rear its head again there. In any case, the price squeeze puts smallholder farmers in a precarious position. That contributes to the global food crisis because the majority of the world’s hungry are small-scale farmers.

Among De Schutter’s recommendations: strengthen anti-trust enforcement nationally and globally with a particular emphasis on “excessive buyer power in the agrifood sector,” which he considers more worrisome than seller power.

This month, the U.S. Department of Justice (DOJ) launched an unprecedented process to consider doing just that. In Ankeny, Iowa, 800 farmers jammed a community college auditorium March 12 for the first of five public hearings this year on corporate concentration and anti-competitive practices in U.S. agriculture. Convened jointly by the DOJ and the U.S. Department of Agriculture, the session took on Monsanto and the seed conglomerates, which are among the most concentrated sectors in the industry.

Obama’s DOJ has already launched an investigation into Monsanto’s practices in licensing its genetically modified seeds. Monsanto presents a classic case of monopoly selling power. Seed prices overall have risen an astounding 146% since 1999, and 64% in just the last three years, according to a report by the Farmer to Farmer campaign. Monsanto controls an estimated 93% of the U.S. soybean seed market. An Iowa grain farmer told the crowd that he had no choice but to buy Monsanto’s GM traits and that the prices eroded any gains he got from higher yield. Others told of legal threats from Monsanto for planting its seeds without a license.

The hearings may be more significant, though, for their explicit focus on monopsony buyer power. “When agribusiness purchasing power is reduced to a small number of companies, does that create such an unlevel playing field that it compels those in the middle to either get bigger or get out?” asked U.S. Secretary of Agriculture Tom Vilsack, whose presence, along with U.S. Attorney General Eric Holder and his chief anti-trust officer, Christine Varney, lent weight to the proceedings.

U.S. anti-trust law has always recognized buyer power as an anti-competitive practice, but authorities have rarely taken the issue seriously when reviewing the agribusiness mergers that in the last two decades have placed the majority of the world’s food in the hands of a small number of corporations. Ever-larger supermarket chains, from Walmart on down, force down prices from their increasingly concentrated suppliers, which in turn demand rock-bottom prices from their own suppliers. At the bottom of this food chain are farmers. It is a race to the bottom that squeezes the life out of farms, particularly the smallest farms.  And it contributes to food insecurity not just from unsustainable farm prices but by forcing down wages, for agricultural laborers, packing workers, and other workers in the industry.

The issue is particularly urgent for independent livestock farmers, who have seen the meat conglomerates gobble each other up, with the DOJ blessing the carnage. DOJ did its standard investigation of pork giant Smithfield’s 2007 takeover of Premium Standard Farms, a merger that consolidated the largest U.S. hog producer and pork packer with the country’s second largest hog producer and sixth largest packer. The concerns about uncompetitive practices and undue buyer power were particularly important in the southeastern part of the country, where the merged company left 2,500 independent hog producers with just one regional buyer for their market-ready animals. Despite USDA studies documenting Smithfield’s buyer power in the region even before the merger, Bush’s DOJ ruled that “the merged firm is not likely to harm competition, consumers or farmers.”

The August DOJ hearing will focus precisely on this kind of buyer power in livestock. Family farmers will be waiting to see if President Obama is all hope and no change when it comes to anti-trust enforcement.

9 Responses to “Agribusiness and the Food Crisis: A new thrust at anti-trust”

  1. mary says:

    You may find this article interesting…

    Panamanian Coffee Production

    Coffee is one of the world’s biggest export commodities, the top agricultural export for a dozen countries and one of the world’s ten largest legal agricultural exports by value. (Source: FAO Statistics Division.) According to John Talbot of the University of the West Indies, “Coffee is the second most valuable commodity exported by developing countries, a distant second to crude oil,” but well ahead of third place sugar and other agricultural, forestry and mining outputs.

    for full access to free article visit:
    http://www.alternativelatininvestor.com/28/agribusiness/panamanian-coffee-production.html

  2. It has been the concern over the monopoly power in the seed supply chain which acted as one of the reasons for resistance to genetically modified crops in India. At one point of time, the court had to intervene, to instruct the seed supplier to reduce the cost of Bt Cotton seed by half.

  3. Trevor Wells says:

    First of all the link that states majority of the world’s hungry are small-scale leads to the United Nations FAO (Food and Agriculture Orginisation) site and a thorough search of that site finds no such statement. Small farmers throughout the world consistently produce more food than the big sky boys who produce Monsanto’s two trick pony, corn and soya.
    58 countries have ratified the the International Assessment of Agricultural Knowledge, Science and Technological for Development.(IAASTD),which was hosted and sponsored by the UN-FAO, is the most comprehensive assessment of agriculture and food security ever undertaken with a the engagement of 400 scientists and agri-experts over 4 years with two peer reviews. The IAASTD outcomes calls for land reform, agro-ecological techniques (proven to enhance farmers’ adaptive capacity and resilience to environmental stresses such as climate change and water scarcity), the building of local economies equitable distribution systems and farmer-led participatory breeding programs.  The IAASDT was sponsored by the FAO. It was adopted in Johannesburg in 2009. The only significant dissenting parties to the report were Monsanto and the United States who walked out when priority was not given to their handful of industry experts who believed that large scale industrial planting of GM crops was the answer to climate change. Small farmers produce more food than the total of Monsanto’s two trick pony riders.

  4. Trevor Wells says:

    I need to add that am horrified at the sugar beet fiasco in the United States of America. Here you have a Judge who says the USDA did not follow the law. He orders the USDA to follow the law. Monsanto instructs all its clients to ignore the judgment. In a new case where the alarmed American public are concerned about Monsanto’s clients contempt of Court, Monsanto screams like a pig and claims that sugar beet farmers have not got any other beet to plant than the sugar beet which Monsanto produces. The Judge then finds that this is true. So he says”Even though the USDA acted illegally and the USA system and Monsanto have created this ridiculous situation where farmers are unable to plant any other kind of sugar beet except Monsanto’s sugar beet, we will allow you to plant this monopoly crop”
    Then at the same time Vilsack and company are doing the rounds, going through the motions, “investigating whether monopolies exist”.

    It is blatantly clear that Monsanto is it own enemy. Monsanto creates Bt resistant cornborer. Monsanto creates herbicide resistant superweeds.
    In response to cornborer resistance and herbicide resistant superweeds Monsanto creates SmartStax GM corn which now contains 6 genes that constantly exude six different insectcide toxins and 2 genes which constantly exude herbicide resistance from every single living cellof the plant from seed to mouth.
    Monsanto creates “Stewardship of its Technology” programs and the US consumers have to pay the price for Monsanto police to enforce Monsanto Law. US farmers who get caught twice for not complying with Monsanto’s refuge system will be blacklisted and never allowed to plant Monsanto seeds again. Can you think of anything worse, because according to what they told Judge White,there are no others seeds available.
    Quite frankly I think Monsanto has become a forked tongue, sorry sight.

  5. As a young econ grad, my adviser, Dr. Karcz, told me to incorporate understanding of agriculture into my life study. After an interesting corporate stint in the late sixties and early seventies, I started at the bottom and worked my up to become foreman of a mid-sized hay, grain and cattle operation. Reforestation seedlings and vegetable production was also fairly intense, we packed 25 tons/day of carrots, for example. The general subject of this article was well known by just about every farmer in the country, additionally, today’s situation was accurately predicted then by almost every farmer, it was obvious way back then, without benefit from or need for advanced college degrees. Now the US government continues it’s same old forked tongue concern for the family farm internally as it uses it’s military and financial might to do to small scale human land owners world-wide what perfected and already accomplished against its own people. Don’t get me wrong, this is an intelligent and well written article, it’s problem is innocent faith that the continuing oppressive actions of corporatism gone wild can be stopped without doing something real. Economic reasoning needs to include a lesson for the people, the US Government is broken and something new that sees justice as the key must replace corporatist control over life.

  6. Triplecrisis Triplecrisis says:

    Timothy A. Wise:

    I appreciate the comments. The statistics that the world’s hungry are not, overwhelmingly, the urban poor, seems to contradict the popular wisdom. The source cited by agencies from the World Bank on down is the U.N. Hunger Task Force, from 2005. Here is the specific reference:

    “Who and where are the hungry? While accurate data are scarce, estimates indicate that the majority of hungry people live in rural areas. The task force believes that about half of the hungry live in smallholder farming households, while roughly two-tenths are landless. A smaller group, perhaps one-tenth, are pastoralists, fisherfolk, and forest users. The remainder, around two-tenths, live in urban areas.”

    From “Halving Hunger: It Can Be Done,” Summary version, pp 5-6. Lead authors: Pedro Sanchez, Coordinator; M.S. Swaminathan, Coordinator; Philip Dobie; Nalan Yuksel. UN Millennium Project Task Force on Hunger, 2005.

  7. Jim says:

    Re: The food crisis has a new villain: agribusiness.

    You’re just figuring this out? What did you think was the chief cause?

  8. T R Nagesh says:

    Re: How would the recent investments in farmland by China and some Gulf countries affect the food crisis.

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