Timothy A. Wise
Today, the U.S. Departments of Justice and Agriculture convene their fourth public hearing on corporate concentration in U.S. agricultural markets, a process I described previously on this blog. Farmers and ranchers are expected to crowd Fort Collins, Colorado to air their long-standing grievances about the disproportionate power of multinational meat packers. To contribute to this unprecedented public policy process, research assistant Sarah E. Trist and I surveyed the evidence of buyer power in U.S. hog markets, which have undergone rapid structural transformation in the last 25 years.
We found that among the limited studies of the issue, several that had been widely interpreted to suggest that buyer power was not a problem in fact presented evidence of just the opposite. Two related points were particularly striking. First is the pattern of approving mergers on the basis of “efficiency gains” that offset market power losses to consumers, when some of those apparent gains can actually come from packers using their buyer power to force down producer prices. The second is the way that buyer power in food retail can intensify the exercise of buyer power by packers, with farmers at the bottom of the food chain losing out from this “compounded” market power.
You can read the executive summary and download our paper, “Buyer Power in U.S. Hog Markets,” or read our public comments to DOJ/USDA, which include the paper.
Steve Suppan, Guest Blogger
Wheat prices had been climbing prior to the August 5 announcement of a Russian wheat export ban. Kansas Board of Trade wheat futures contracts had gone from $4.92 a bushel on June 10 to spike at $7.95 a bushel on August 5, prompting a reporter to ask, “How could a Russian drought in the age of instant information escape the world’s notice until the country’s wheat crop was devastated?” This excellent question does not yet have a clear answer.
The wheat price crisis has led the press and even policymakers to focus almost exclusively on the traditional supply-demand fundamentals that ostensibly set prices. It’s as if the press were relieved to point to that old standby, weather, as the culprit for a 50 percent increase in wheat futures prices in a few weeks. For a change from the last three years, excessive speculation in commodities by financial institutions would not be accused of driving price volatility. Furthermore, according to the U.S. Department of Agriculture, unlike 2007-2008, global grain stocks were high enough to supply countries that could afford them. Maybe the specter of speculators increasing hunger might be eluded.
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Guest bloggers, Chris Baker and Pasuk Phongpaichit
The recent turmoil in Bangkok has hogged the headlines across Asia. But Bangkok is not the only city in turmoil. A few weeks ago, demonstrators in Athens fought an hours-long battle with police ending with three dead and scores injured. In neighbouring Turkey, police with batons had clashed with protesters hurling bricks and fire bombs. Just across the Mediterranean, the dispossessed of Cairo decided to occupy the city centre, sleeping on the streets. Further afield, the Maoists staged a massive protest in Kathmandu, and in the capital of Kyrgyzstan, an urban mob attacked the residence of the president, tore up the plants in his garden, and drove him from power.
Bangkok’s red-shirt protesters are demanding a general election, return of their hero, former premier Thaksin Shinawatra, and an end to the “double standards” resulting from the concentration of wealth and power. It is easy to see all these struggles as unique. The Greek riots are an offshoot of the country’s financial collapse. The Kathmandu demo is just one more stage in the country’s transition from monarchy. The Kyrgystani president had been elected to power on a surge of popularity, and had then turned out to be spectacularly corrupt. And so on. But what is really striking about all these incidents are the similarities. Big urban mobs. Fierce defiance. Security forces overstretched. States rattled. Middle class urbanites wringing their hands.
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Ilene Grabel
Triple Crisis Blog has invited readers’ questions in advance of the April 24-25 IMF/World Bank meetings in Washingon. See all of the questions and answers here. A reader asked:
Q: Will we finally see an IMF/WB policy that truly acknowledges the rights of the poor and the least developed countries? Will the reforms of the IMF/WB push for localization and food sovereignty as ways to face poverty?
Grabel: Certainly the IMF/WB have been discussing the poor and the poorest developing countries a good deal of late, especially in relation to the effects of the financial crisis on the most vulnerable. And some of the assistance packages that they’ve negotiated have paid somewhat more attention to the most vulnerable groups, such as pensioners (though concrete financial support for the most vulnerable groups has been pretty scant).
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Mehdi Shafaeddin
What are consequences of the implementation of Neo-liberal economic philosophy for industrialization and development of poor countries? The answer: de-industrialization of many low-income countries; destruction of their food production (influenced also by protectionist agricultural policies of developed countries), thus their heavy dependence on food imports. The boom in commodity prices had improved the balance of payments of some developing countries temporarily before the “busts” emerged. But even then, it had detrimental impact on some other developing countries, through the hike in food and fuel prices, which were influenced by speculative activities of the trans-national corporations.
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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.
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