Categorized | English, WSF 2010

ANALYSIS: ‘Food Empires Creating Agricultural Crisis’

Posted on 18 October 2010 by admin

A farmer works crop fields. Dutch professor Jan-Douwe van der Ploeg says that multinational food empires manipulate markets, causing price volatility that affects both consumers and farmers. Credit:Mary Chind/IPS

Analysis by Frank Mulder

UTRECHT, The Netherlands, Oct 18, 2010 (IPS/TerraViva) – Forget speculators, forget biofuel farmers. The real cause behind the permanent food and agricultural crisis is the imperial food regime, squeezing money out of agriculture, a Dutch professor says.

Last month, the Food and Agriculture Organisation invited experts to talk about the increasing price of wheat. “Global cereal demand and production still appears in balance,” they concluded, “and there is no indication of an impending world food crisis.”

“Lazy thinking,” says Jan-Douwe van der Ploeg, professor of rural sociology at Wageningen University in the Netherlands. “Almost one billion people are hungry and another one billion are chronically malnourished, while one billion others are obese. Isn’t this a food crisis? Hunger has always existed, but for 50 years the phenomenon has been global and permanent.”

Behind the food crisis we face a severe agrarian crisis, he says. “Farmers have to struggle harder and harder in order to survive, because of low prices and turbulent markets. This is a paradox: for consumers prices keep rising, but for farmers, prices are too low to earn back their investments.”

Where does the difference go to? “To food empires,” Van der Ploeg says. “The market is more and more dominated by industrial trade conglomerates, like Ahold, Nestle, Cargill, and many more, governing production, processing, distribution and consumption of food. Those empires are able to manipulate markets and squeeze wealth out of agriculture. In this regime, small disequilibria in the markets translate into huge price fluctuations.”

Empires don’t usually own resources, but control the networks. “Both farmers and consumers are dependent on their entry points and exit points. They can set standards and prices.” Governments are called upon not to distort markets and to liberalize trade, but these empires are the ones that distort the market, says Van der Ploeg. “If it’s in their financial interest to grow asparagus, chicken, green beans or flowers in poor countries and sell it to rich countries, they do it, even if the population is starving.

That is not necessarily bad for poor countries, says Anoesjka Aspeslagh, spokesperson for the Dutch supermarket division of the multinational Ahold. “Our demand creates thousands of jobs, and income for people in the exporting countries. Especially because we cooperate very closely with producers to improve labour conditions and living standards.”

Van der Ploeg points to the side effects. “Peru, for example, was turned into the world’s biggest asparagus exporter. The country, however, is very desertous, so the local farmers are deprived of their much-needed water. Besides, the situation is not stable. Now already the asparagus production is shifting to China.”

Aspeslagh does not accept such views. “We are not as powerful as people often think. We don’t set prices and standards, we are as subject to the market and to government regulations as anyone. That’s why it’s in the interest of both us and the producers to build stable relationships and to both agree on prices. If China becomes cheaper, we don’t move all of a sudden. That’s not the way we work.”

“Yet supermarkets have become the most powerful players among the food empires,” says Myriam Vander Stichele, senior researcher at the Centre for Research on Multinational Corporations in Amsterdam. “They have acquired a very strong role as gatekeeper between consumers and the processing industry. For example, even the big banana multinationals have to accept low prices and short-term contracts nowadays. Moreover, many supermarkets are now becoming producers as well, making them even more powerful.”

Their power is not just economic, but also political. “They lobby like hell against stricter regulator,” says Stichele. There’s really a lack of good regulation on the contracts between supermarkets and other companies.”

The power of food empires is worrying, says Van der Ploeg, because their only interest is cash flow. “They have to pay off their debts, created to acquire other companies and to monopolise large segments of the global food supply chain. Expansion is the keyword. This debt made some companies almost stumble over their own legs, as Parmalat did.” This Italian food empire left a total debt of 14 billion euros.

The imperial, or ‘corporate’, food regime also affects farmers. Food empires prefer large-scale industrial farming, for its predictable and standardised output. However, not only are these industrial farms often less productive and less efficient than the small farms they replace, they appear to be extremely vulnerable to economic shocks. “The companies are highly dependent on stability, easy credit and ongoing growth,” says Van der Ploeg. “When this disappears, as now is the case, they go broke.”

Governments and researchers are quick to call on technological innovation to boost production, especially in developing countries. “They are almost autistic in their simplistic solutions. They don’t see that hi-tech systems are the very reason that farmers are competed away.”

The division between entrepreneurial farming and peasant-like farming is growing, says Van der Ploeg. “Fortunately, more and more farmers acknowledge that farming is more than producing commodities. They look for an integrated, multifunctional approach and become less dependent on articificial resources.”

This is a trend in developing and developed countries alike. “In western Europe, multifunctional farming already creates billions of euros of added value, in a sector that stagnates as a whole. In Brazil it’s the same: while some farms keep growing bigger, the number of small farms has increased from 3.6 to 4.2 million in the last eight years.”

This is a very important undercurrent, according to Van der Ploeg, who warns that the food empires have no future. “With their short-term policies they undermine the very agriculture they need. It’s very dangerous, but eventually they will collapse.” (END)

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