Some Issues Posed by Market Concentration in Agriculture
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The publication note accompanying a 2008 International Assessment of Agricultural Science and Technology for Development report (authors: IAASTD/Ketill Berger, UNEP/GRID-Arendal) summarizes many of the core issues canvassed on this page:
"Agricultural trade is increasingly organized in global chains, dominated by a few large transnational buyers (trading companies, agrifood processors and companies involved in production of commodities). In these globalized chains primary producers often capture only a fraction of the international price of a trade commodity, so the poverty reduction and rural development effects of integration in global supply chains have been far less than optimal."
"Agricultural trade is increasingly organized in global chains, dominated by a few large transnational buyers (trading companies, agrifood processors and companies involved in production of commodities). In these globalized chains primary producers often capture only a fraction of the international price of a trade commodity, so the poverty reduction and rural development effects of integration in global supply chains have been far less than optimal."
- The complete report, Market Concentration, is available online for free download.
- The entries below cover issues of market concentration from seed to shelf.
Consolidation in the Global Seed Market
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- The graphic on the left was created by Philip Howard of Michigan State University. It illustrates how just five biotech giants have increased their control of the global seed market, promoting monoculture farming, further reducing the range of commercially available seed options to a small number of GMOs, thus making it harder for farmers to find alternative sources of seeds. Since the mid-1990s just five biotech giants - Monsanto, Syngenta, Bayer, Dow and DuPont - have bought up more than 200 other companies between them to dominate our access to seeds. Howard's analysis covers the period from 1996-2008 and the published paper is avaialble as a pdf in Sustainability 2009, 1, 1266-1287.
The Future of Seeds and Food
The Future of Seeds and Food: Under the Growing Threat of Patents and Market Concentration was prepared in 2009 by Christoph Then & Ruth Tippe. The report was written for the international coalition of “no patents on seeds. For more on the coalition see, http://www.no-patents-on-seeds.org/. The full document in pdf format can be found here. The chapter topics include:
- Introduction: history and evolution of patents at the EPO
- Concentration of the seed market
- Patents in conventional plant breeding
- Examples of seed patents
- The legal situation in Europe
Global Seed Industry Concentration – 2007
Company - 2007 seed sales (US$ millions) - % of global proprietary seed market
1.Monsanto (US) - $4,964m - 23%
2.DuPont (US) - $3,300m - 15%
3.Syngenta (Switzerland) - $2,018m - 9%
4.Groupe Limagrain (France) - $1,226m - 6%
5.Land O' Lakes (US) - $917m - 4%
6.KWS AG (Germany) - $702m - 3%
7.Bayer Crop Science (Germany) - $524m - 2%
8.Sakata (Japan) - $396m - <2%
9.DLF-Trifolium (Denmark) - $391m - <2%
10.Takii (Japan) - $347m - <2%
Top 10 Total - $14,785m - 67% [of global proprietary seed market]
Source: ETC Group
The table above is from GM Watch. It reports the following ownership trends in the global seed industry:
1.Monsanto (US) - $4,964m - 23%
2.DuPont (US) - $3,300m - 15%
3.Syngenta (Switzerland) - $2,018m - 9%
4.Groupe Limagrain (France) - $1,226m - 6%
5.Land O' Lakes (US) - $917m - 4%
6.KWS AG (Germany) - $702m - 3%
7.Bayer Crop Science (Germany) - $524m - 2%
8.Sakata (Japan) - $396m - <2%
9.DLF-Trifolium (Denmark) - $391m - <2%
10.Takii (Japan) - $347m - <2%
Top 10 Total - $14,785m - 67% [of global proprietary seed market]
Source: ETC Group
The table above is from GM Watch. It reports the following ownership trends in the global seed industry:
- "According to Context Network, the proprietary seed market (that is, brand- name seed that is subject to exclusive monopoly – i.e., intellectual property), now accounts for 82% of the commercial seed market worldwide. In 2007, the global proprietary seed market was US$22,000 million. (The total commercial seed market was valued at $26,700 million in 2007.) The commercial seed market, of course, does not include farmer-saved seed."
- "The top 10 seed companies account for $14,785 million - or two-thirds (67%) of the global proprietary seed market."
- "The world's largest seed company, Monsanto, accounts for almost one-quarter (23%) of the global proprietary seed market."
- "The top 3 companies (Monsanto, DuPont, Syngenta) together account for $10,282 million, or 47% of the worldwide proprietary seed market."
- "ETC Group conservatively estimates that the top 3 seed companies control 65% of the proprietary maize seed market worldwide, and over half of the proprietary soybean seed market"
A 2009 Survey of Global Seed Ownership
The global commercial seed market in 2009 was estimated at $27,400 million. The top 10 companies account for 73% of the global market (up from 67% in the 2007 survey cited above). Just three companies - Monsanto, DuPont (Pioneer) and Syngenta - control 53% of the global commercial market for seeds. The world’s largest seed company, Monsanto, now controls 27% of the seed market. These are some of the findings of the ETC Group that led the 2007 survey of market concentration in crop seeds. See the December, 2011 ETC Group report, Who Will Control the Green Economy?, for more details about the causes and consequences of the trends toward market consolidation in the agricultural sector.
Center for Food Safety: 2010 Update of their 2005 report on US patent infringement lawsuits on seeds
The Center for Food Safety's 2010 update of Monsanto vs The Farmers tracks litigation by agri-business against farmers and others they believe to be infringing their patents on crop seeds. The report shows the potential economic impact of litigation and threat of litigation as the fight for market dominance heats up.
The Center's report uses data from Monsanto's own updates on the battle against what it perceives as "seed piracy. These updates track trends in various states and regions of the US. The report monitors the growth of litigation, its monetary damages trends, and the out-of-court settlements that rarely disclose the terms of the agreement between the parties.
Similar tracking information can be found in a news item entitled "Applications and granting of patents in the sphere of animal and plant breeding in 2010." The report by Christoph Then & Ruth Tippe of No-Patents-on- Seeds, org picks up at January 2010 and claims that Monsanto had filed 136 lawsuits against farmers for alleged violations of its Technology Agreement or its patents on GM seeds. They noted that Monsanto won 70 lawsuits and was awarded a total sum of $23.3 million.
The Center's report uses data from Monsanto's own updates on the battle against what it perceives as "seed piracy. These updates track trends in various states and regions of the US. The report monitors the growth of litigation, its monetary damages trends, and the out-of-court settlements that rarely disclose the terms of the agreement between the parties.
Similar tracking information can be found in a news item entitled "Applications and granting of patents in the sphere of animal and plant breeding in 2010." The report by Christoph Then & Ruth Tippe of No-Patents-on- Seeds, org picks up at January 2010 and claims that Monsanto had filed 136 lawsuits against farmers for alleged violations of its Technology Agreement or its patents on GM seeds. They noted that Monsanto won 70 lawsuits and was awarded a total sum of $23.3 million.
How Pervasive are Patented GM Crops Globally?
logo for globalagriculture.org
The acceleration of market consolidation within all agricultural sectors has been fueled by patented seeds. Standardization, on which the industrial agricultural system depends, can now start at an earlier stage in the farm-to-table process, and consolidation of farming techniques into large tracts is more easier when even the seed - and with some seeds, the in-built choice of pesticides and fertilizers - makes replication of the process possible anywhere around the world. Thus, of all the patented seeds, GM seeds have been a main driver of industrial standardization. But just how far-reaching has this shift been? There are a number of ways of answering that question, but one way to gain insight is to consider what percentage of agricultural land globally is devoted to GM crops.
On the website of GlobalAgriculture.org, two bits of data were combined to make the following estimate of the proportion of agricultural land that is devoted to GM crops. They first note the following:
"According to the biotech lobbying organisation ISAAA, in 2011 GM crops reached 160 million hectares, an increase of 8% as compared to 2010. The US is the lead producer of biotech crops with 69.0 million hectares (43% of global). Brazil ranks second with 30.3 million hectares." ISAAA Brief 43-2011: Executive Summary. ISAAA, 2011.
They then note the following estimate from the FAO: "the global agricultural area amounts to 4,9 billion hectares. This means that the 160 million hectares planted with GM crops as stated by the ISAAA only make up roughly 3% of the total agricultural area. 97% of farmland still remains GM free."
On the website of GlobalAgriculture.org, two bits of data were combined to make the following estimate of the proportion of agricultural land that is devoted to GM crops. They first note the following:
"According to the biotech lobbying organisation ISAAA, in 2011 GM crops reached 160 million hectares, an increase of 8% as compared to 2010. The US is the lead producer of biotech crops with 69.0 million hectares (43% of global). Brazil ranks second with 30.3 million hectares." ISAAA Brief 43-2011: Executive Summary. ISAAA, 2011.
They then note the following estimate from the FAO: "the global agricultural area amounts to 4,9 billion hectares. This means that the 160 million hectares planted with GM crops as stated by the ISAAA only make up roughly 3% of the total agricultural area. 97% of farmland still remains GM free."
The Global Food Supply Chain: From Seed to Shelf
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Research data generated as a companion to the documentary, Seeds of Hunger, examines trends in the global food supply chain. It looks at circumstances in a number of specific countries, and it traces some key historical events that have led to greater market concentration in every sector of agriculture. Read about the 2008 documentary film, Seeds of Hunger, where some of the major issues in the concentration of the global food supply chain are discussed.
Part 1 of Exploring the Global Food Supply Chain looks at looks at the seed markets in India, South Africa, Brazil, the United States, the European Union, Tanzania and Cambodia. For each case, an attempt is made to measure market concentration and to provide information about the legal framework pertaining to the protection of plant varieties. Part 2 takes the same country-specific approach to food markets more generally for the same set of countries.
Part 1 of Exploring the Global Food Supply Chain looks at looks at the seed markets in India, South Africa, Brazil, the United States, the European Union, Tanzania and Cambodia. For each case, an attempt is made to measure market concentration and to provide information about the legal framework pertaining to the protection of plant varieties. Part 2 takes the same country-specific approach to food markets more generally for the same set of countries.
Concentration in Beef and Dairy Production
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The Government Accountability Office (GAO) concluded in a 2009 report that since 1982, the four largest beef packers and milk producers have captured an increasingly large share of the market.
In 1982, the four largest chains stores sold 16 percent of all groceries in the U.S. By 2005, the four largest — Wal-Mart, Kroger, Albertson’s and Safeway — controlled 36 percent of the market, more than doubling the concentration of food sales within a generation.
The same kind of concentration also took place in the dairy business. The four largest dairy companies controlled 16 percent of the milk market in 1982. Twenty years later, the four largest processors were taking 43 percent of the market. (See chart on the left). The GAO report contains data about many other sectors of agriculture, but concluded that thus far, “Concentration generally has increased at all levels of the food marketing chain in all agricultural sectors since the 1980s.”
A critique of the GAO's methodology explains the two most commonly used statistical approaches for assessing market concentration and the potential for market power. They are the Herfindahl-Hirschman Index (HHI) and the four-firm concentration ratio (CR4). See more CR4 analysis data in the entry below.
In 1982, the four largest chains stores sold 16 percent of all groceries in the U.S. By 2005, the four largest — Wal-Mart, Kroger, Albertson’s and Safeway — controlled 36 percent of the market, more than doubling the concentration of food sales within a generation.
The same kind of concentration also took place in the dairy business. The four largest dairy companies controlled 16 percent of the milk market in 1982. Twenty years later, the four largest processors were taking 43 percent of the market. (See chart on the left). The GAO report contains data about many other sectors of agriculture, but concluded that thus far, “Concentration generally has increased at all levels of the food marketing chain in all agricultural sectors since the 1980s.”
A critique of the GAO's methodology explains the two most commonly used statistical approaches for assessing market concentration and the potential for market power. They are the Herfindahl-Hirschman Index (HHI) and the four-firm concentration ratio (CR4). See more CR4 analysis data in the entry below.
More Market Concentration Data Using CR4 Analysis
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Mary Hendrickson and William Heffernan of the Department of Rural Sociology -- University of Missouri, have posted a 2007 analysis of is the concentration ratio of the top four firms (CR4 analysis) in a number of specific food industries. In their CONCENTRATION OF AGRICULTURAL MARKETS, they show data from GAO and elsewhere regarding the concentration levels in a number of markets, including the following:
- the top 4 beef packers control 83.5% of the market
- the top 4 pork packers control 66% of the US market
- the top 4 broilers (chicken) control 58.5% of the US market
- the top 3 flour millers control 55% of the US market
Top 10 Global Food Retail Organizations
Academic researchers having a focus on questions of justice should read more of what is written for an audience whose focus is business opportunity. For example, Research and Markets has produced a report, The Global Top 10 Food Retail Companies. The report profiles the leading companies in the global food retail market.
The report notes that the food retail market (as they define it in their survey) includes the retail sales of all food products, both packaged and unpackaged, as well as beverages (including retail sales of all alcoholic and non-alcoholic beverages). Here are the main issues examined:
The report notes that the food retail market (as they define it in their survey) includes the retail sales of all food products, both packaged and unpackaged, as well as beverages (including retail sales of all alcoholic and non-alcoholic beverages). Here are the main issues examined:
- What was the market size of the global multiline retail market by value in 2009?
- What will be the market size of the global multiline retail market in 2014?
- What are the trends in the global multiline retail market?
- Who are the top 10 players in the market?
- What are the strengths of the top 10 players in the global multiline retail market?
- What are the weaknesses of the top 10 players?
- What are the growth opportunities for the global top 10 multiline retail companies?
- What are the threats faced by the global multiline retail companies in the market?
The American Political Context of Market Concentration in Agriculture
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The central theme of Wenonah Hauter's illuminating book can be summarized by the words she uses to describe the evolution of US food policy with respect to biotech crops: "the story of public policy for sale across five presidential administrations" (p. 243). Hauter's account is a first-person narrative of the key role played by federal policies in the consolidation within and across market sectors of agriculture, especially since 1980. From a perspective as a staff member of Food and Water Watch and other public interest groups in DC, she surveys decades of legislative and regulatory decisions affecting agriculture. An important point is that both political parties are virtually identical in their policy perspectives and both recycle the same regulators who pass through the revolving door of industry-trade-association-lobby shops before landing right back in roles of governmental decision making affecting their former and future clients.
The common policy thread across administrations is their support for the combination of deregulation of the processes of production and the non-enforcement of anti-trust laws has contributed to the highly concentrated domestic system of food production and distribution that has morphed into a global system. If you imagine that Clinton or Obama, for example, might differ in their policies and personnel choices from Reagan or either Bush, this book will disabuse you of that notion. Although Hauter does not put it this way, the Reagan-Clinton legacy is a kind of one-two punch. Under Reagan the wholesale retreat from anti-trust legislation facilitated domestic consolidation and the vertical integration of markets, while Clinton's robust embrace of free trade opened up global markets to US-based agribusiness giants and WTO rules radically limited the ability of governments to protect health and environmental interests and control over the food security of other nations when doing so might have a trade-restrictive impact. (More on these points below)
Another central feature of the book is that it weaves its political narrative together with a story of economic transformation within all sectors of agriculture. It traces the dynamics of consolidation within various sectors of agricultural markets, including poultry, cattle, staple grains, fruits and vegetables, and it reveals differences in the evolution of each. It also reveals similarities in patterns of vertical integration that consolidate market power across retail, wholesale, and intermediaries within the supply chains that extend from farm to table.
While environmental impacts and human health effects are mentioned frequently throughout, the book is not a useful source for empirical documentation of these problems. The primary consequences she highlights have to do with the way in which market concentration and control of the supply chain has constrained consumer choices and driven out smaller growers, retail grocers, and traditional market intermediaries and suppliers of inputs such as seeds, fertilizers, pesticides, and implements.
The historical account of American agricultural politics is fascinating and it names names. But the larger point is that it is meant to drive home the message that the problems of modern agriculture are systemic or structural. The rules have been crafted to advance the interests of powerful agribusiness entities that pursue market domination within and across market sectors at all levels of the supply chain. Her conclusion is that "[w]e cannot shop our way to a better food future." (p. 288). Conscientious choices of consumers, through patronage of local farmers' markets and CSA's is fine (her spouse runs a CSA), but what is required is vigorous regulation of the market.
The common policy thread across administrations is their support for the combination of deregulation of the processes of production and the non-enforcement of anti-trust laws has contributed to the highly concentrated domestic system of food production and distribution that has morphed into a global system. If you imagine that Clinton or Obama, for example, might differ in their policies and personnel choices from Reagan or either Bush, this book will disabuse you of that notion. Although Hauter does not put it this way, the Reagan-Clinton legacy is a kind of one-two punch. Under Reagan the wholesale retreat from anti-trust legislation facilitated domestic consolidation and the vertical integration of markets, while Clinton's robust embrace of free trade opened up global markets to US-based agribusiness giants and WTO rules radically limited the ability of governments to protect health and environmental interests and control over the food security of other nations when doing so might have a trade-restrictive impact. (More on these points below)
Another central feature of the book is that it weaves its political narrative together with a story of economic transformation within all sectors of agriculture. It traces the dynamics of consolidation within various sectors of agricultural markets, including poultry, cattle, staple grains, fruits and vegetables, and it reveals differences in the evolution of each. It also reveals similarities in patterns of vertical integration that consolidate market power across retail, wholesale, and intermediaries within the supply chains that extend from farm to table.
While environmental impacts and human health effects are mentioned frequently throughout, the book is not a useful source for empirical documentation of these problems. The primary consequences she highlights have to do with the way in which market concentration and control of the supply chain has constrained consumer choices and driven out smaller growers, retail grocers, and traditional market intermediaries and suppliers of inputs such as seeds, fertilizers, pesticides, and implements.
The historical account of American agricultural politics is fascinating and it names names. But the larger point is that it is meant to drive home the message that the problems of modern agriculture are systemic or structural. The rules have been crafted to advance the interests of powerful agribusiness entities that pursue market domination within and across market sectors at all levels of the supply chain. Her conclusion is that "[w]e cannot shop our way to a better food future." (p. 288). Conscientious choices of consumers, through patronage of local farmers' markets and CSA's is fine (her spouse runs a CSA), but what is required is vigorous regulation of the market.
Marx Was Wrong: The Evolution of Contract Agriculture and Captive Control of the Supply Chain
Marx famously made the point that whoever owns the means of production controls both political institutions and determines the economic fates of everyone else. The point that Marx got wrong is that ownership is not necessarily the critical factor in the ability to control and shape the market and political outcomes as he imagined. A growing feature of domestic and global agriculture is that ownership is precisely what multinational corporations often have good reasons to avoid. For with ownership comes market risk and the equally unwanted potential for governmental accountability. There is another business model that can offer the benefits of vertical integration without the burdens that normally accompany ownership. Agriculture has now adopted the business model that has worked so well (for business enterprises) within the garment industry: controlling the supply chain through contract.
Consider first the garment industry. By the mid-1980s many of the world's top fashion designers shifted away from owning factories or in some cases, retail outlets. In the grip of a revolution in business school thinking about industrial supply chain management many companies were eager to adopt "just-in-time" strategies of production in order to avoid the risk of oversupply of clothing and personal accessories as fashions and tastes changed. One way to do that is to contract with others for production at remote locations around the world, also using less expensive labor than would be available in developed nations. Risk management became as important as lower wage costs. But in order to maintain standardization of products they knew that they would have to develop very precise specifications for clothing production. They needed to make sure that a garment made in Singapore would be the same as one made in Honduras. A further benefit of the flexibility the contract model offered was the ability to avoid long-term commitments to a labor pool and worries about unions, pension liabilities and so on. It also created the ability to avoid both safety and environmental regulations and capital investment in factories by getting out of the business of building permanent production facilities tied to any geographic or political jurisdiction. If consumer tastes shift or the regulatory climate of a country changes, the garment industry can just walk away. That strategy shifts risks of capital investment to those who contract to manufacture the goods to the desired specifications. it also shifts a larger portion of economic risks within society from the investor class to wage earners. And having invested capital, the contract producers that employ the wage earners have reduced bargaining power in successive rounds of contract negotiations such that both wages and the profits of local producers fall under the permanent threat of disinvestment by those higher up in the supply chain.
The same phenomenon has taken root in agriculture. In what are known as "captive supply chain contracts" large food retailers, fast food operations, and other market intermediaries sometimes have so much market power within a production area that it can dictate what is grown, how it's grown, the prices that will be paid, and the degree of economic and regulatory risk that contract growers or producers will bear. Hauter in her book, Foodopoly (see book entry above) surveys the extent of the contractual supply chain management within various sectors. She reports that more than 20% of all fruits and vegetables in the US are produced on contract with "first handlers" - packers of food processing companies) (p. 89). 40% of cattle are sold in this way (pp. 166-67), and 98% of chickens eaten in the US are produced under contract with "integrators" who control every aspect of production from supply of chicks and feed to management and delivery of broilers (p 193). Others have provided documentation of these trends and the nature of the contractual arrangements and details of how contractual relationships have altered agricultural markets and shifted risks to growers.
For a vivid account of how contract chicken production has stymied water pollution regulation and impoverished many growers who sink large sums of money into the required production facilities and have become so dependent upon the industry that they risk economic ruin, see the PBS Frontline special Poisoned Waters.
The effect on consumers of these forms of supply chain management by large buyers is that they dictate the type of potato or chicken or beef that will be produced, the additives and hormones that will be used in their production, and broader effect is that they also dictate the conditions under which workers labor and the conditions under which animals are raised.
Some have touted the positive effects of multinational agribusiness supply chain management citing, for example, the general improvement of food quality available to the affluent in developing nations when multinationals impose standardization upon foreign suppliers. Never mind that the purported benefits accrue to the economically most privileged segments of developing nations, but apart from any crude calculus of aggregate benefits and burdens, a justice-based issue of control still looms. Consumers lose control over what they will eat. Nations lose control over what is grown within their borders. Farmers and growers lose parity of bargaining power to multinational corporations that off-load legal liability and economic risk to the most dependent, disadvantaged populations (not just in poor nations but in poor parts of the US such as the South and Delmarva where poverty is endemic and economic opportunities are limited). Moreover, the reply that some of the developing nations or political sub-units of the US may fare no better in their standards of governance is not the proper point of comparison. The more pertinent point is that this business model is what enables some of the rankest forms of exploitation and is in itself an unjust form of domination for which it is the proper task of political units to prohibit.
Moreover, the captive supply chain contractual model flies in the face of basic assumptions of standard economic theories of how markets should work. Markets are efficient (and fair) only when there are many buyers and sellers (markets are not "thin"), none of whom can dictate price, and when there is transparency of price information for all parties (no asymmetry of information that leads to market failure). But captive supply arrangements not only thin out markets so that a handful of buyers can dictate every term of the transaction, the agreements often contain no predetermined price. Instead, they leave the ultimate price to determination according to standards which only the seller knows and buyers are contractually prohibited from sharing their own price information with other growers. You don't have to be Karl Marx to condemn this sort of arrangement. Adam Smith will do just fine. And it's the theoretical basis of all anti-trust jurisprudence.
Consider first the garment industry. By the mid-1980s many of the world's top fashion designers shifted away from owning factories or in some cases, retail outlets. In the grip of a revolution in business school thinking about industrial supply chain management many companies were eager to adopt "just-in-time" strategies of production in order to avoid the risk of oversupply of clothing and personal accessories as fashions and tastes changed. One way to do that is to contract with others for production at remote locations around the world, also using less expensive labor than would be available in developed nations. Risk management became as important as lower wage costs. But in order to maintain standardization of products they knew that they would have to develop very precise specifications for clothing production. They needed to make sure that a garment made in Singapore would be the same as one made in Honduras. A further benefit of the flexibility the contract model offered was the ability to avoid long-term commitments to a labor pool and worries about unions, pension liabilities and so on. It also created the ability to avoid both safety and environmental regulations and capital investment in factories by getting out of the business of building permanent production facilities tied to any geographic or political jurisdiction. If consumer tastes shift or the regulatory climate of a country changes, the garment industry can just walk away. That strategy shifts risks of capital investment to those who contract to manufacture the goods to the desired specifications. it also shifts a larger portion of economic risks within society from the investor class to wage earners. And having invested capital, the contract producers that employ the wage earners have reduced bargaining power in successive rounds of contract negotiations such that both wages and the profits of local producers fall under the permanent threat of disinvestment by those higher up in the supply chain.
The same phenomenon has taken root in agriculture. In what are known as "captive supply chain contracts" large food retailers, fast food operations, and other market intermediaries sometimes have so much market power within a production area that it can dictate what is grown, how it's grown, the prices that will be paid, and the degree of economic and regulatory risk that contract growers or producers will bear. Hauter in her book, Foodopoly (see book entry above) surveys the extent of the contractual supply chain management within various sectors. She reports that more than 20% of all fruits and vegetables in the US are produced on contract with "first handlers" - packers of food processing companies) (p. 89). 40% of cattle are sold in this way (pp. 166-67), and 98% of chickens eaten in the US are produced under contract with "integrators" who control every aspect of production from supply of chicks and feed to management and delivery of broilers (p 193). Others have provided documentation of these trends and the nature of the contractual arrangements and details of how contractual relationships have altered agricultural markets and shifted risks to growers.
For a vivid account of how contract chicken production has stymied water pollution regulation and impoverished many growers who sink large sums of money into the required production facilities and have become so dependent upon the industry that they risk economic ruin, see the PBS Frontline special Poisoned Waters.
The effect on consumers of these forms of supply chain management by large buyers is that they dictate the type of potato or chicken or beef that will be produced, the additives and hormones that will be used in their production, and broader effect is that they also dictate the conditions under which workers labor and the conditions under which animals are raised.
Some have touted the positive effects of multinational agribusiness supply chain management citing, for example, the general improvement of food quality available to the affluent in developing nations when multinationals impose standardization upon foreign suppliers. Never mind that the purported benefits accrue to the economically most privileged segments of developing nations, but apart from any crude calculus of aggregate benefits and burdens, a justice-based issue of control still looms. Consumers lose control over what they will eat. Nations lose control over what is grown within their borders. Farmers and growers lose parity of bargaining power to multinational corporations that off-load legal liability and economic risk to the most dependent, disadvantaged populations (not just in poor nations but in poor parts of the US such as the South and Delmarva where poverty is endemic and economic opportunities are limited). Moreover, the reply that some of the developing nations or political sub-units of the US may fare no better in their standards of governance is not the proper point of comparison. The more pertinent point is that this business model is what enables some of the rankest forms of exploitation and is in itself an unjust form of domination for which it is the proper task of political units to prohibit.
Moreover, the captive supply chain contractual model flies in the face of basic assumptions of standard economic theories of how markets should work. Markets are efficient (and fair) only when there are many buyers and sellers (markets are not "thin"), none of whom can dictate price, and when there is transparency of price information for all parties (no asymmetry of information that leads to market failure). But captive supply arrangements not only thin out markets so that a handful of buyers can dictate every term of the transaction, the agreements often contain no predetermined price. Instead, they leave the ultimate price to determination according to standards which only the seller knows and buyers are contractually prohibited from sharing their own price information with other growers. You don't have to be Karl Marx to condemn this sort of arrangement. Adam Smith will do just fine. And it's the theoretical basis of all anti-trust jurisprudence.
Food Processing Top 100© Report for 2012
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Each year for the last 37 years, Food Processing has produced a list ranking food and beverage processors based on their sales of "value-added, consumer-ready goods that were processed in U.S. and Canadian facilities." I discovered this great resource from reading Foodopoly, where Hauter used it, together with other corporate reports of various companies, to construct tables showing the brands owned by each of the top 20 (pp. 40-3). Take a look at Hauter's tables and see how many of the brands on these lists you know and which ones, if any, from which you buy products. If you go to Food Processing's website you can find a great deal of other information about food industry trends, including their judgment that some companies "have become so big and unfocused that they will or already have split into two companies."
The report paints a portrait of a number of sources of economic uncertainty in processed food markets, some due to the rise in costs of raw materials, some due to shifting consumer preferences, much due to "painfully low profit margins" in some sectors, and perhaps most importantly, the general range of problems that come simply from becoming too large to manage. Those who follow management-speak trends over the years will recall the shift from the slogan "a manager is a manager, whatever the product" that led to a wave of conglomerate mergers across all sectors of the economy to the mantra that companies "need to return to their core strengths." Perhaps a lesson here is that size itself is not necessarily a good thing for the firm's bottom line as much as vertical integration or control of a supply chain and other aspects of bigness that allow food processors to exert control over the marketing and buying decisions of retailers.
The report paints a portrait of a number of sources of economic uncertainty in processed food markets, some due to the rise in costs of raw materials, some due to shifting consumer preferences, much due to "painfully low profit margins" in some sectors, and perhaps most importantly, the general range of problems that come simply from becoming too large to manage. Those who follow management-speak trends over the years will recall the shift from the slogan "a manager is a manager, whatever the product" that led to a wave of conglomerate mergers across all sectors of the economy to the mantra that companies "need to return to their core strengths." Perhaps a lesson here is that size itself is not necessarily a good thing for the firm's bottom line as much as vertical integration or control of a supply chain and other aspects of bigness that allow food processors to exert control over the marketing and buying decisions of retailers.
Who Owns Nature? - a 2008 ETC Group Tacking a Broader Set of Market Concentration Trends
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Another publication from the ETC Group assesses a broader range of metrics (encompassing more than seeds and agricultural products) by which the extent of global concentration of agricultural markets can be assessed. This document surveys market concentration trends within markets for the primary factors of production such as pesticides and fertilizers. The prefatory passage from the 2008 report, Who Owns Nature? is illustrative of some of their findings and observations:
"From dozens of pesticide companies three decades ago, ten now control almost 90% of agrochemical sales worldwide. From almost a thousand biotech startups 15 years ago, ten companies now have three quarters of industry revenue. And, six of the leaders in seeds are also six of the leaders in pesticides and biotech. Over the past three decades, a handful of companies has gained control of that one quarter of the world’s annual biomass (crops, livestock, fisheries, etc.) that has been integrated into the world market economy."
"From dozens of pesticide companies three decades ago, ten now control almost 90% of agrochemical sales worldwide. From almost a thousand biotech startups 15 years ago, ten companies now have three quarters of industry revenue. And, six of the leaders in seeds are also six of the leaders in pesticides and biotech. Over the past three decades, a handful of companies has gained control of that one quarter of the world’s annual biomass (crops, livestock, fisheries, etc.) that has been integrated into the world market economy."
- The trends tracked there have been updated in part by their 2011 report (See above).
The Role of GMO's in Market Concentration
The 2005 documentary, The Future of Food, occupies a special niche among the various food documentaries produced during the last decade. Its focus is on the linkage between the market proliferation of GMOs, leading to vertical consolidation in agriculture, which in turn, leads to loss of genetic diversity, and in turn the potential for increased food insecurity and diminished consumer choices.
The film begins by reminding viewers of historical instances of food crises precipitated by farming practices that relied upon a narrow genetic base for crop production and as a result, suffered when insects or disease decimated monocultures. What then is the linkage between GMOs and loss of genetic diversity?
The patenting of GMO crops and subsequent legal decisions has allowed owners of patented seeds to enforce their patents aggressively, in many jurisdictions, holding landowners legally liable for inadvertent (e.g., cross-pollination, wind-blown seeds) contamination of existing seed stocks. But why would large corporations act pursue such aggressive legal strategies when the economic value in each instance is often quite insubstantial. Some of the interviewees in the film speculate that the underlying business model is one designed to eliminate competition in the seed markt by forcing farmers to destroy their own, now contaminated seed stocks, and thus leave farmers with few market options but to buy their GMO seeds for staple crops.
The consequence is increased market concentration in seeds. But the market concentration does not end there. Seed companies are now chemical/pharmaceutical companies that own seeds that are genetically modified to make them resistant to the herbicides and insecticides that the companies also own. In the case of Bt corn, for example, is registered for patent purposes as an insecticide. So in addition to horizontal consolidation of the seed market, the conglomerate industries control more of the inputs to farm production and this achieve vertical consolidation of more parts of the food supply chain. Market consolidation occurs as well at the other end of the food supply chain with fewer buyers controlling where farmers can sell and ultimately what they can plant, given the demands of fewer and fewer buyers for their products.
The film also provides a scientifically informed, but broadly accessible elementary discussion of the processes by which plants are genetically modified. They emphasize that these techniques are designed to modify a single gene in order to produce one trait - e.g., fungal resistance - but every gene modified affect other traits as well, which may not be known for years or may be adverse to human health or the environment. However, the film does not exploit fears but merely explains the scientific basis of theoretical risks.
The central message pertains to the role of GMOs as the economic gateway to market consolidation and the attendant risks to food security as genetic crop diversity is lost by patent-driven mechanisms for achieving market consolidation.
The film begins by reminding viewers of historical instances of food crises precipitated by farming practices that relied upon a narrow genetic base for crop production and as a result, suffered when insects or disease decimated monocultures. What then is the linkage between GMOs and loss of genetic diversity?
The patenting of GMO crops and subsequent legal decisions has allowed owners of patented seeds to enforce their patents aggressively, in many jurisdictions, holding landowners legally liable for inadvertent (e.g., cross-pollination, wind-blown seeds) contamination of existing seed stocks. But why would large corporations act pursue such aggressive legal strategies when the economic value in each instance is often quite insubstantial. Some of the interviewees in the film speculate that the underlying business model is one designed to eliminate competition in the seed markt by forcing farmers to destroy their own, now contaminated seed stocks, and thus leave farmers with few market options but to buy their GMO seeds for staple crops.
The consequence is increased market concentration in seeds. But the market concentration does not end there. Seed companies are now chemical/pharmaceutical companies that own seeds that are genetically modified to make them resistant to the herbicides and insecticides that the companies also own. In the case of Bt corn, for example, is registered for patent purposes as an insecticide. So in addition to horizontal consolidation of the seed market, the conglomerate industries control more of the inputs to farm production and this achieve vertical consolidation of more parts of the food supply chain. Market consolidation occurs as well at the other end of the food supply chain with fewer buyers controlling where farmers can sell and ultimately what they can plant, given the demands of fewer and fewer buyers for their products.
The film also provides a scientifically informed, but broadly accessible elementary discussion of the processes by which plants are genetically modified. They emphasize that these techniques are designed to modify a single gene in order to produce one trait - e.g., fungal resistance - but every gene modified affect other traits as well, which may not be known for years or may be adverse to human health or the environment. However, the film does not exploit fears but merely explains the scientific basis of theoretical risks.
The central message pertains to the role of GMOs as the economic gateway to market consolidation and the attendant risks to food security as genetic crop diversity is lost by patent-driven mechanisms for achieving market consolidation.
The International Assessment of Agricultural Knowledge, Science and Technology for Development
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The International Assessment of Agricultural Knowledge, Science and Technology for Development (IAASTD) was initiated in 2002 by the World Bank and the Food and Agriculture Organization of the United Nations (FAO). The upshot was an assessment process that examined many important issues and trends in agriculture. The focus of the 2009 international assessment, Agriculture at a Crossroads, is the "role of agricultural knowledge, science and technology (AKST) in reducing hunger and poverty, improving rural livelihoods and facilitating environmentally, socially and economically sustainable development." The product of the assessment consists of a global and five subglobal Summaries for Decision Makers, and a Synthesis Report with an Executive Summary. The decision to carry out five sub-global assessments in addition to the global one was on the fact of substantial variation in the major agricultural regions of the world.
In the words of the report's authors, "the Summaries for Decision Makers and the Synthesis Report specifically provide options for action to governments, international agencies, academia, research organizations and other decision makers around the world. The 590 page global report draws on the work of more than 400 experts working in 110 countries from all regions of the world and was subjected to an extensive peer review process.
The global report, as well as the 5 regional reports, Synthesis and Summaries focus heavily on the challenges of small subsistence farmers around the world. The Summaries, the 5 regional reports, and the overall Synthesis Report can be downloaded (in English and many other languages) from the IAASTD website. These documents provide a vast amount of data useful for anyone who wants to develop a better understanding of many of the key drivers in the transformation of agriculture on a global scale, whether or not the policy recommendations are congenial with the readers' own perspective on the role of increasing economies of scale in lesser developed nations.
The assessment is wide-ranging, but this brief passage from the Synthesis (p.8) is representative of some of its key findings regarding the global patenting and market concentration of seeds. The IAASTD acknowledges the contributions of different IPR [intellectual property rights] systems in stimulating investment in research and providing incentives for distribution of products on the market, but it warns that IPR systems may drive up costs and restrict experimentation by the individual farmers and researchers, especially in developing countries, undermine local practices that enhance food security and economic sustainability, inhibiting beneficial seed-saving arrangements, and place seeds beyond the ability of many small scale farmers to purchase proprietary crop seeds.
The final report was presented to delegates from 64 countries in April, 2008 in Johannesburg, South Africa. All but the United States, Canada, and Australia signed off on the report's 22 recommendations. Large biotech companies Monsanto, Syngenta, and BASF withdrew from IAASTD because it did not back GMOs as a solution to reduce poverty and hunger.
Another, more compact, easy to digest summary of the major findings of the massive Agriculture at a Crossroads set of reports is a 63 page brochure version available from Greenpeace.
In the words of the report's authors, "the Summaries for Decision Makers and the Synthesis Report specifically provide options for action to governments, international agencies, academia, research organizations and other decision makers around the world. The 590 page global report draws on the work of more than 400 experts working in 110 countries from all regions of the world and was subjected to an extensive peer review process.
The global report, as well as the 5 regional reports, Synthesis and Summaries focus heavily on the challenges of small subsistence farmers around the world. The Summaries, the 5 regional reports, and the overall Synthesis Report can be downloaded (in English and many other languages) from the IAASTD website. These documents provide a vast amount of data useful for anyone who wants to develop a better understanding of many of the key drivers in the transformation of agriculture on a global scale, whether or not the policy recommendations are congenial with the readers' own perspective on the role of increasing economies of scale in lesser developed nations.
The assessment is wide-ranging, but this brief passage from the Synthesis (p.8) is representative of some of its key findings regarding the global patenting and market concentration of seeds. The IAASTD acknowledges the contributions of different IPR [intellectual property rights] systems in stimulating investment in research and providing incentives for distribution of products on the market, but it warns that IPR systems may drive up costs and restrict experimentation by the individual farmers and researchers, especially in developing countries, undermine local practices that enhance food security and economic sustainability, inhibiting beneficial seed-saving arrangements, and place seeds beyond the ability of many small scale farmers to purchase proprietary crop seeds.
The final report was presented to delegates from 64 countries in April, 2008 in Johannesburg, South Africa. All but the United States, Canada, and Australia signed off on the report's 22 recommendations. Large biotech companies Monsanto, Syngenta, and BASF withdrew from IAASTD because it did not back GMOs as a solution to reduce poverty and hunger.
Another, more compact, easy to digest summary of the major findings of the massive Agriculture at a Crossroads set of reports is a 63 page brochure version available from Greenpeace.
Why Has Africa Become a Net Food Importer? Explaining Africa agricultural and food trade deficits
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A 2011 report by the trade and markets division of the Food and Agriculture Organization (FAO) of the United Nations asked why Africa had become a net food importer over the last few decades. The answer in a nutshell is: "The core finding is that population growth, low and stagnating agricultural productivity, policy distortions, weak institutions and poor infrastructure are the main reasons."
The full range of impediments to meeting local food need within many parts of Africa are surveyed. It examines supply-side impediments, such as water shortages and rainwater dependence, lack of affordable access to fertilizers and pesticides, and it looks at demand side challenges in terms of population growth and urban migration away from subsistence farming occupations. When you dig deeper into the report, you find that highly significant are economic policy factors that create price distortions. These arise from both internal economic policies (high taxes on food production) and external economic and agricultural policies (especially the protection and subsidies from developed countries).
The report is an amazing source for key data on agricultural practices and economics across the highly diverse nations in Africa, and it offers a background understanding of how the small scale forms of agriculture in much of Africa fares in the new global agricultural marketplace increasingly dominated by a few powerful actors. It is a perfect bookend to the report below immediately surveying the state of agricultural markets in the EU.
The full range of impediments to meeting local food need within many parts of Africa are surveyed. It examines supply-side impediments, such as water shortages and rainwater dependence, lack of affordable access to fertilizers and pesticides, and it looks at demand side challenges in terms of population growth and urban migration away from subsistence farming occupations. When you dig deeper into the report, you find that highly significant are economic policy factors that create price distortions. These arise from both internal economic policies (high taxes on food production) and external economic and agricultural policies (especially the protection and subsidies from developed countries).
The report is an amazing source for key data on agricultural practices and economics across the highly diverse nations in Africa, and it offers a background understanding of how the small scale forms of agriculture in much of Africa fares in the new global agricultural marketplace increasingly dominated by a few powerful actors. It is a perfect bookend to the report below immediately surveying the state of agricultural markets in the EU.
European Commission's 2012 report: Monitoring Agri-trade policy: Agricultural trade in 2011
This EU Commission's 2012 report on Agri-trade policy surveys the global market positioning of EU agriculture. Among the key findings is the fact that its economic superiority in agricultural production rests heavily upon the high percentage of the most economically lucrative exports of "final products" which make up 64% in the total EU agricultural exports. The top ten retail food companies accounted for around 10.5% of all groceries bought worldwide in 2009. The top three supermarket retailers (Walmart, Carrefour, Schwarz Group) control 48% of the revenues earned by these top ten retail food companies. The ten biggest food and beverage processing firms control an estimated 28% of the global market for packaged food products.
The picture of what makes the EU a powerful market force is in sharp contrast with the portrait of economic vulnerability vividly described in the 2011 report by the trade and markets division of the Food and Agriculture Organization (FAO) on the causes of African Net food imports. The two reports make perfect bookends for a more comprehensive assessment of what factors explain market dominance and market vulnerability in the agricultural sector of the global economy.
The picture of what makes the EU a powerful market force is in sharp contrast with the portrait of economic vulnerability vividly described in the 2011 report by the trade and markets division of the Food and Agriculture Organization (FAO) on the causes of African Net food imports. The two reports make perfect bookends for a more comprehensive assessment of what factors explain market dominance and market vulnerability in the agricultural sector of the global economy.
The Impact of Global Trade Rules
An important part of the story of the trends toward greater concentration and consolidation in global agricultural markets is the set of global trade rules that shape markets, often benefiting large, heavily subsidized multinational companies based in developed countries that also protect their agribusiness enterprises with tariffs.
The Uruguay Round of trade agreements pursuant to the Global Agreement on Trades and Services (GATS) resulted in the 1994 Agreement on Agriculture (AoA). Sophia Murphy, a public policy analyst and a senior advisor on trade and global governance issues at the Institute for Agriculture and Trade Policy, provides a well-documented account of how agricultural trade policies have worked in practice since the push for free trade in the agricultural sector of the global economy began in the 1980s.
In her 2009 article, "Free Trade in Agriculture: A Bad Idea Whose Time Is Done" she traces the gap between the benefits that the free trade proponents promised and the often harsh realities that developing nations have faced. Some of the key points about how things have gone under the AoA regime are the following:
See Sophia Murphy's 2012 update on the state of the stalled discussions on trade pertaining to the prospects for the next phase of the Doha round negotiations, "Crisis or opportunity in the multilateral trade system?." For more insight on free trade and on the impact on agriculture in particular, see the website for the Institute for Agriculture and Trade Policy. See also, the Draft Principles of Food Justice.
The Uruguay Round of trade agreements pursuant to the Global Agreement on Trades and Services (GATS) resulted in the 1994 Agreement on Agriculture (AoA). Sophia Murphy, a public policy analyst and a senior advisor on trade and global governance issues at the Institute for Agriculture and Trade Policy, provides a well-documented account of how agricultural trade policies have worked in practice since the push for free trade in the agricultural sector of the global economy began in the 1980s.
In her 2009 article, "Free Trade in Agriculture: A Bad Idea Whose Time Is Done" she traces the gap between the benefits that the free trade proponents promised and the often harsh realities that developing nations have faced. Some of the key points about how things have gone under the AoA regime are the following:
- It did little to impede both direct and indirect agricultural subsidies in the developed world
- It did little to change prevailing tariffs on agricultural products
- Many developing countries would have natural competitive advantages in these industries if foreign subsidies and tariffs were removed
- Existing preferential regional and bilateral trade agreements were grandfathered into AoA to the detriment of many developing countries
- The creation of new tariffs further protected key agricultural industries in the developed world from competitive developing world exports
- Developed world governments, and particularly that of the United States, still set floor prices below current market prices and the average farmer’s cost of production, making it impossible for developing world farmers to compete
- policies that might have taken some of the food price pressure off the developing nations were not implemented. For example, the Marrakesh Decision on Least Developed Countries (LDCs) and Net-Food Importing Developing Countries (NFIDCs) was supposed to provide funding for a list of developing countries if food import bills rose too high. However, the IMF claimed that the agreements were too new to have been the cause of the 40% rise in food import bills in LDCs and NFIDCs in 1995-1996 and consequentially did not implement the aforementioned Decision.
See Sophia Murphy's 2012 update on the state of the stalled discussions on trade pertaining to the prospects for the next phase of the Doha round negotiations, "Crisis or opportunity in the multilateral trade system?." For more insight on free trade and on the impact on agriculture in particular, see the website for the Institute for Agriculture and Trade Policy. See also, the Draft Principles of Food Justice.
Food Sovereignty or Unrestricted Global Markets?
The food sovereignty movement takes aim at global market consolidation and the trend toward multi-national agri-business entities gaining an ever growing footprint within lesser developed nations. The World Development Movement defines food sovereignty as follows:
"Food sovereignty is the right of peoples to define their own food and agriculture; to protect and regulate domestic agricultural production and trade in order to achieve sustainable development objectives; to determine the extent to which they want to be self reliant; to restrict the dumping of products in their markets, and; to provide local fisheries-based communities the priority in managing the use of and the rights to aquatic resources."
The food sovereignty movement is distinguished from food security aims by the World Development Movement as follows: "Food sovereignty goes beyond the concept of food security that the big aid donors and neoliberal international institutions prefer. Food security simply aims to ensure that people have sufficient food to eat. It is not concerned about how this food
is produced, nor the means by which people might attain this fundamental right. By contrast, food sovereignty requires not just that everyone is properly fed, but that the food system that feeds us is just and sustainable."
"Food sovereignty is the right of peoples to define their own food and agriculture; to protect and regulate domestic agricultural production and trade in order to achieve sustainable development objectives; to determine the extent to which they want to be self reliant; to restrict the dumping of products in their markets, and; to provide local fisheries-based communities the priority in managing the use of and the rights to aquatic resources."
The food sovereignty movement is distinguished from food security aims by the World Development Movement as follows: "Food sovereignty goes beyond the concept of food security that the big aid donors and neoliberal international institutions prefer. Food security simply aims to ensure that people have sufficient food to eat. It is not concerned about how this food
is produced, nor the means by which people might attain this fundamental right. By contrast, food sovereignty requires not just that everyone is properly fed, but that the food system that feeds us is just and sustainable."