Agribusinesses Consolidate Power
by admin
At all stages of the food system—from seeds and other inputs to food processing and retail food sales—market power is concentrating in an ever smaller number of corporate firms. This trend is transforming how the world produces food, squeezing millions of farmers between a small group of input suppliers and an equally concentrated group of commodity purchasers, and in turn influencing the food choices available to consumers.
Concentration begins at the input stage in agriculture. Three companies control about half of the global agrochemical market: Bayer, Syngenta, and BASF.1 Use of genetically modified (GM) seeds has risen dramatically since these were first commercialized in the mid-1990s— now 45 percent of the corn and 85 percent of the soybeans grown in the United States are GM.2 By branching out into plant biotechnology, huge chemical and pharmaceutical companies such as Monsanto have gained control over critical agricultural inputs that reach into food systems around the world. In 2004, land planted with Monsanto seeds accounted for 88 percent of the total area in GM crops worldwide. 3 Once a global commons, genetic resources are now subject to Intellectual Property Rights protections. Developing countries are forced to deal with large transnational companies to get access to improved seed varieties and plant breeding technologies.4
Other input markets are similarly concentrated. In the United States, Mosaic—a company created out of a merger between Cargill and IMC Global—controls 50–60 percent of the synthetic fertilizer market, while four firms control over 80 percent of the market for farm equipment.5 Four companies control 60 percent of terminal grain facilities, and Cargill, Archer Daniels Midland, and Zen Noh control 81 percent of U.S. corn exports and 65 percent of soybean exports.6 Cargill has the largest global terminal capacity, handling significant grain exports in Canada, the United States, Brazil, and Argentina.7 It owns and operates a worldwide transportation network of ships, trucks, barges, railcars, and grain elevators for storage. Cargill is also among the top three beef producers in the United States and plays an important role in poultry production.8
Genetic stock, a crucial input into animal production, is another area where concentration has rapidly taken hold.9 Control over the development and dissemination of livestock genetics is shifting from farmers and ranchers to specialized genetics companies. They hold exclusive contracts with the largest livestock producers and play a key role in determining which livestock breeds will dominate the market. 10 Today, virtually all white eggs sold on the U.S. market come from a single breed of layer, the white leghorn.11 A depleted genetic pool will weaken the global food system’s ability to respond to disease, to changes in climate or available inputs, and to shifts in consumer preference.12
A growing share of farmers and ranchers in the United States, Europe, and some developing countries work under contract for companies that also control food processing and distribution. These firms may mandate the use of a certain technology to maximize yield or animal weight gain. If producers stray from the prescribed methods, they may find their contracts terminated.13 Virtually all U.S. poultry is produced under contract, as are close to 60 percent of hogs, cotton, rice, fruit, and dairy.14 Contracts tend to shift risk from the company to the producer, and producers are often forced by necessity into contracts that pay little or are excluded altogether from markets if they do not contract.15
Whether producing independently or under contract, farmers have few choices when it comes to selling their product to a packer or processor. In Brazil, 68.5 percent of the soybean oil refineries are controlled by just three companies.16 In the United States, 81 percent of beef packing plants are run by four firms.17 (See Table 1.) Concentration in livestock and dairy markets is likely to continue in developing countries as well, as rising incomes and shifting dietary preferences boost meat consumption.18
Globally, transnational supermarkets dominate the retail sector for food. In 2003, the top 30 retailers held 19 percent of the market in Asia and Oceania, 29 percent of the market in Latin America, and 69 percent of the market in Europe.19 Globalized supply chains give supermarkets the ability to get products from wherever they are cheapest, and the large firms exert pressure on suppliers to accept lower prices. Suppliers in turn demand that farmers accept lower prices. Squeezed between low returns and high-priced farm inputs, farmers around the world have experienced declines in net farm income. In the United States, farmers’ share of the retail food dollar fell from a high of 40 percent in 1973 to below 20 percent in 2000.20 In Canada, the National Farmers Union reported that farmers’ net income, adjusted for inflation, was lower over the last decade than at any time since the 1930s.21
Some analysts argue that large supermarkets like Wal-Mart’s Supercenters have helped consumers by using market power to drive down prices.22 But a growing body of economic research suggests that, over time, concentration tends to lead to higher prices.23 Because of the power they exert over the market, giant retailers have no incentive to pass on savings to consumers, even as they squeeze producers and suppliers by offering lower and lower prices for their products.24
In a striking example of the power of large processors and retailers, U.S. hog prices fell to Depression-era lows in real terms in 1998, sending many family hog producers into bankruptcy. 25 Meanwhile, the average price of pork in the grocery store dipped by less than 2 percent.26 This wide farm-retail price spread helped the giant meatpacking company IBP bring in record profits and facilitated market dominance by industrialized hog operations.27
Around the world, individuals, communities, and civil society organizations are working to counteract the negative impacts of concentration in the food system. In the United States, they are trying to strengthen existing laws, such as the Packers and Stockyards Act, that have been weakened by lax enforcement, underfunding, or legal loopholes.28
Campaigns against abusers of market power are taking shape. In Europe, a major campaign has been launched against the largest supermarket, Tesco. It demands fair treatment of U.K. farmers and those abroad; protection of workers’ rights; an independent watchdog agency to protect consumers, farmers, and workers against exploitation; a moratorium on mergers with other supermarkets; and stronger planning policies to protect local shops.29 Organizations are using class action lawsuits and penalties against retail giant Wal-Mart for discrimination against women, forced overtime without pay, abuse of Family Leave laws, and other labor problems.30 International networks such as the Agribusiness Accountability Initiative are helping campaigners to connect across national boundaries.
For farmers, the most effective strategy is strength in numbers: forming cooperatives so that they can supply enough reliable quantity and quality of crops or livestock products to negotiate with supermarkets. At the same time, public education campaigns worldwide are raising awareness about direct marketing options for farmers and consumers, including farm stands, farmers’ markets, and Internet sales. But farmers need government support to keep agribusinesses in check and to meet the quality standards that these large companies impose.
