There is one thing that my new book is about: corporate control of every aspect of our food system, from how it is labeled to the pesticides we are exposed to. The main thesis of Foodopoly is simple — We, the people, must reclaim our democracy. We must reestablish strong anti-trust laws as part of the progressive agenda if we have any hope of fixing our broken, corporate-controlled food system. And to do that, we need to organize and force our elected officials to create laws that result in a food system that works for consumers and farmers—not big agricultural, food processing, retail and chemical conglomerates.
How has consolidation enabled Monsanto, Tyson, Nestle, Kraft, Cargill, McDonalds and other food/ag/chemical companies to write our food policy, and why is about to get worse? The disastrous decision in the landmark Citizens United case now allows corporations to spend unlimited sums of money to buy the political system. This decision comes at the expense of citizens and democracy itself.
Just when you thought the unhealthy ties between food, fuel, and financial markets couldn’t get more perverse, we get the announcement that Vitol, the world’s largest independent oil trader, is entering the grain-trading business, hiring a team from Viterra, based in Toronto, to run the show. And lest we toss this off as just another corporate deal, Javier Blas in the Financial Times reminds us that Viterra has itself recently been bought by Glencore, perhaps the world’s greatest global commodity speculator.
What could go wrong?
For the world’s poor, plenty. They’ve already endured three food price spikes in the last six years, fueled in part by financial speculators gambling on agricultural, energy, and metals commodities as they fled the wreckage of the housing and stock market crashes. This corporate deal may not change a thing, but it is a powerful symbol of what’s wrong with our broken food system.
NGOs have stepped up their critique of large investment banks’ involvement in agricultural commodity derivatives markets in recent months. Now, it appears that the banks are starting to fight back.
Last September, the World Development Movement estimated that Barclays earned some $785-million from financial speculation on food commodities in 2010 and 2011. And last month a new WDM report estimated that Goldman Sachs’ earnings from food price speculation in 2012 were over $400 million.
These figures were the latest to come out of a prominent NGO campaign against ‘gambling on hunger’ that has captured widespread attention and concern, particularly in Europe, over the past few years. Investment banks have been a primary target of this campaign, given their important role in facilitating large-scale financial investments in agricultural commodity derivatives, which NGOs say is responsible for food price spikes and rising hunger in the world’s poorest countries.
Last year international food markets suffered their third price spike in five years. The trigger was a terrible drought in the United States—a major agricultural producer and exporter. An unstable climate met low levels of international grain reserves, while U.S. ethanol gobbled up maize supplies. The resulting high and volatile prices struck yet another blow at the world’s already fragile food systems.
This is exactly the scenario we warned of a year ago when we published “Resolving the Food Crisis,” a comprehensive assessment of the international community’s response to the global food price crisis. High and volatile food prices in international markets will continue until structural reforms to trade, finance and agriculture are put in place to address the real drivers of the food crisis.
It’s bad enough when bad policy causes unneeded suffering for those governed by that policy. It’s worse when the victims include those far from the policymaking. Such is the history of U.S. farm policy. Today, that history is being written in places like Guatemala, where the U.S. ethanol boom is contributing to hunger and landlessness among that country’s indigenous majority.
Thanks to the New York Times’ Elisabeth Rosenthal, we can see that history unfold in all its ugliness. She traveled to Guatemala for her feature, As Biofuel Demand Grows, So Do Guatemala’s Hunger Pangs. Her expose makes my own, which showed how U.S. corn ethanol has driven up corn import costs for poor countries, seem like just the proverbial outer layer of the onion.
Foreign aid has been getting a bad press this year – and not without reason. For a long time bilateral aid in particular has been seen as too small and scattered, too politically motivated, too supportive of the interests of donors (especially of the business interests of donor countries) rather than oriented to real benefits for intended recipients. Now, governments of poor developing countries that were earlier grateful for any crumbs from the rich countries’ table are less welcoming, especially of aid that comes tied to various economic and political strings. The improvement in their terms of trade over the past six years, as well as the emergence of new markets and new sources of aid and investment from other emerging nations and oil-exporting countries, have all played a role in this changed perception.
The relationship of the UK government with foreign aid has become particularly complicated in recent times – but it may well be symptomatic of a wider problem in many developing countries. The Cameron government announced that it was going to “ringfence” foreign aid from the sweeping budget cuts that it has already announced or plans to implement over the next few years. But this has come under attack from both Left and Right for various reasons. Revelations in the British media that a significant part of the funds has been directed to highly paid consultants based in the UK whose output is often of dubious relevance or usefulness to the so-called “beneficiary” country or its people may have come as a surprise to many within Britain, but such patterns have been apparent in the developing world for some time now.
Is climate change good or bad for agriculture? As recently as the 1990s, it was widely believed that the first few degrees of global warming would boost world average crop yields and food production. Higher temperatures were expected to lengthen growing seasons in temperate regions, while more carbon dioxide (CO2) in the atmosphere would act as a fertilizer, promoting plant growth.
The research of the last decade has led to a more ominous outlook for agriculture, as Elizabeth Stanton and I explain in a new paper. Three areas of recent research challenge the older, optimistic picture of climate change on the farm: field research has reduced estimates of the carbon fertilization effect; new analyses identify a strong effect of extreme temperatures on crop yields; and in many regions, changes in precipitation and the availability of irrigation will be the limiting factor for food production.
Carbon fertilization benefits are real but limited. Some plants, including maize, sugar cane, sorghum, and millet, use a distinct style of photosynthesis and experience almost no yield gains from increased atmospheric CO2. For one major crop, cassava, increased CO2 causes sharply reduced yields. Most other crops do have higher yields at elevated CO2 levels – but research with realistic simulations of actual growing conditions has led to modest estimates of the carbon fertilization effect. William Cline has projected that 550 parts per million (ppm) of CO2 in the atmosphere (about a 40% increase over current levels) would cause a worldwide average increase of 9% in crop yields.
Olivier De Schutter, the UN Special Rapporteur on the Right to Food, speaks today (Nov. 27) at 3:00 pm EDT at Tufts University. The distinguished lecture will be webcast live. Click for webcast information and for more information on the event, which is open to the public.
The U.S. Environmental Protection Agency recently decided to keep the nation’s head buried deep in the sand when it comes to biofuels policy, refusing to waive the U.S. ethanol mandate in order to ease price pressures in corn and soybeans following the severe U.S. drought. Europe, the other major market feeding its cars at the expense of the world’s people, lifted its collective head from the depths long enough last month to reduce from 10% to 5% the mandated share of transportation fuel that can come from food sources. No such acknowledgment of reality here, where 40% of our corn crop goes to make ethanol.
The right to food, now recognized worldwide, demands action. So too does Olivier De Schutter, the UN Special Rapporteur on the Right to Food. “It is imprudent to support, let alone to mandate, extra agrofuel production when food prices are high and volatile,” he wrote last month. Indeed, De Schutter has established himself as one of the world’s most passionate and effective advocates for decisive action on biofuels and a wide and impressive range of other issues he has taken on under his UN mandate.
Over the past several years it has become increasingly clear that derivatives markets and instruments have played a large role in the global food crisis. Masters and White, Ghosh, Wise and, most recently, a paper co-authored by the World Bank, IMF, UNCTAD, and FAO (among other agencies), have all pointed to the role of speculative commodity index trading in aggravating the food price crisis in 2007-8 – perhaps by as much as 20% - as well as the run-up in global food prices in 2011.
Derivatives markets and instruments are thus implicated as levers of inequality, as food price volatility does not affect all people in the same way. Indeed, in the presence of food price risk, the poor tend to suffer disproportionately. Food purchases are generally a greater proportion of one’s income the lower that income is, meaning that food price increases have a disproportionately negative effect on low income people and households. Food price shocks often lead poorer individuals and families to coping strategies that ensure adequate food in the short-term but have longer-term costs, such as pulling kids out of school or liquidating hard assets. Those with higher incomes, more assets or access to credit do not face the same vulnerabilities. This generates inequalities on a global scale, especially as food price volatility becomes a more permanent feature of the global economic landscape.