AGRICULTURE IN A GLOBALIZED WORLD ECONOMY

OR

THE CORPORATE FOOD REGIME

Alexandra StricknerInstitute for Agriculture and Trade Policy, Vienna

www.iatp.org; www.tradeobservatory.orgastrickner@iatp.org

OVERVIEW

1. Agriculture today – structures, actors, trends

2. Agriculture and Trade

3. Consequences of these trends

4. Alternatives

1. Agriculture today: structures, actors, trends

• Changes in agricultural production during the past decades

• Establishment of a Corporte Food Regime

• Data on market concentration

Historic Trends

- Industrialization and mechanization of production

-Enormous market concentration along the whole food chain

-From subsistence and/or agriculture for domestic market to export-oriented agriculture

The Corporate Food Regime

• Establishment of an industrialized, corporate controlled agriculture

• Control of food production by few Transnational Corporations – from seeds to supermarkets

• Privatization of resources (land, water) and of knowledge (seeds, patents)

The Corporate Food Regime

• Development of vertically integrated food corporations and transnational value chains – e.g. Cargill

• Development of so called oligonomies – market is controlled by few buyers and sellers who are the same – e.g. Nestle

Data on market concentration – seeds, fertilizers

• 70% of corn and 90% cotton seeds controlled by– Pioneer (USA) - Monsanto (USA)– Syngenta (CH) and - Groupe Limagrain (France)

• Monsanto: controls 90% of commercial GMO sales

• 1995 – 1998: 68 seeds companies in US bought by transnational companies active in Pharma/Chemistry

• Development of Life Science conglomerates - Syngenta (CH) Nr. 1

Concentration trends in agricultural production• Less farmers, bigger farms

• Contracting as trend – farmer is producing for TNC (e.g. chicken production)

• TNCs – direct control of production e.g. via Joint ventures

• Farmers as producers of agricultural commodities

Concentration - production

The case of Archer Daniels Midland (ADM)

• Joint Venture with Growmark and Countrymark – Producer Cooperatives: access to 50% of US & 75% of Canadian market for corn and soybeans

• Joint Venture with EU cooperatives (A.C. Toepfer/Germany – little data available) – Control of access to Eastern European market.

• 1993 45% of processed food imports into Eastern Europe came from ADM

Vertically integrated companies and Joint Ventures: expl. Novartis/Archer Daniels

Midland (ADM)

• Novartis: Market leader – chemical products in agriculture sector (1997: 4 Mrd. USS Sales, approx. 15% of World market)

• ADM: US company active in food processing, trade of grains, meat production– Food processing units in: US, China, Eastern Europe, Mexico

• Novartis/ADM Link: Joint Ventures with same companies – Novartis obtains greater access/control of markets

Market concentration – Food Processing

• Top Companies: Nestle, Philip Morris, ConAgra, Cargill, Unilever, Coca Cola, Pepsi Cola

• Three biggest: yearly sales of approx 100Mrd. US$

• 50 Top companies get 20% of food expenditure

• EU – 15 : Food processing sector one of largest industrial sectors - 13% of total industrial production, 11% employees

• 0,7% of all EU Companies in sector produce 50% of products!

• Trend: processed food, functional food

Consumers

Retailers 30 Companies, 33% of world market  

Roasters 3 Companies 45% of world market

 Internat. Traders 4 Companies ~ 35% of w. m. Local Traders  Producers 25 million farmers & Workers

 

 

Market Concentration Trade – The Case of Coffee

Source: Vorley B (2003). IIED/UK Food Group

Market concentration – Retailing Sector

• 6 TNCs will soon control retailing world wide

• Important TNCs: Wal Mart, Carrefour, Metro, Safeway etc.

• Wal Mart: 4300 shops in 9 countries, Price reduction: 13% in 10 years

• Carrefour: biggest Supermarket in F, Sp, B, Port., Brazil, Argentina, Tawain, Indonesia

Development of retailing sector in Europe – share of biggest 10 retailers until 2010 according to sales (from 337 Billion Euro to 670 Billion Euro)

0

50

100

150

200

250

300

350

400

2000 2005 2010

Largest2nd Largest3rd LargestNext 7 Largest

Consumers: 160,000,000Customers: 89,000,000

Outlets: 170,000

Supermarket formats: 600

Buying desks: 110

Manufacturers: 8,600Semi-manufacturers: 80,000

Suppliers: 160,000

Farmers/producers: 3,200,000

The Supply Chain ‘Bottleneck’ in Europe

Covers retail food (not foodservice) and represents about 85% of the total sales of the western European countries. Source: Grievink (2003)

2. Agriculture and Trade

• Trade in Agriculture and Development – what trends and experiences?

• Negotiations to liberalize agriculture trade

• EU Common Agriculture Policy and trade liberalization – winners and losers

Trade in Agriculture and Development?

Trade in Agriculture and Development?

What results of agriculture trade liberalization?

• More Exports, less foreign exchange incomeThailand: 1997 – 2002Agriculture Exports in volume: increase of 49%Value of exports: decrease of 42%1997: 10.552 Mio USS 2002: 9.997 Mio USS Only 24% to farmers

• Agriculture trade balance of developing countries between 1970 and 2001(accord. to FAO)

– From + 1 Billion USD to – 11 Billion USD– 2030: Minus of more than 30 Billion USD expected!– Most developing countries: Net Food Importers, NOT EXPORTERS

Trade in Agriculture and Development?

Decline of commodity prices as a result of agriculture and trade liberalization

0

100

200

300

400

500

600

1960 1965 1970 1975 1980 1985 1990 1995 2000

blé

soja graine

soja tourteau

Trade in Agriculture and Development?

Who makes the money from fruit? % of final price, by sector, S African apples 2003

42%

7%7%12%

6%

17%

5% 4%Supermarket

Importer's commission & duty

UK handling

Shipping

Transport & customs

Farm inputs & packaging

farm labour

farm income

Negotiations to liberalize agriculture trade

• Despite negative results of agriculture liberalization – most governments support further agriculture liberalization

• Argument: Increased trade leads to development

• Problem analysis: trade distortions caused by government policies avoid development– Main trade distortions: tariffs, export subsidies, domestic support,

state trading enterprises etc.– Main distorters: US and EU

Negotiations to liberalize agriculture trade

Arenas of negotiation

• WTO – Agreement on Agriculture (tariffs, export subsidies, domestic support)– But also TRIPS (patents) and GATS (water,

retailing…)

• Bilateral & regional trade negotiations – tariffs, non tariff barriers – US: NAFTA, CAFTA, US-Korea FTA etc.– EU: EPAs (Africa), FTAs with Chile, Mexico, EU-

Mercosur, EU – Central America, EU - ASEAN

Negotiations to liberalize agriculture trade

Key Proponents

• Country level:– Agro-exporters: US, EU, Canada, Australia, New

Zealand, Brazil, Argentina, Thailand etc. – Aim: Ensuring market access

• Stakeholders: – Transnational Corporations: Cargill, ADM, Nestle, Danone,

Carrefour, Wal Mart etc... – Aim: Producing food, trading food with as little

barriers/costs as necessary at global scale

Negotiations to liberalize agriculture trade

• OBJECTIVE OF TRADE LIBERALIZATION- Development of a global market in agriculture- NOT solution of existing problems in agriculture trade (low

commodity prices, dumping, food security etc.)- NOT creation of conditions for development

• WINNERS– Transnational Corporations along the food value chain – Few big farmers – economies of scale– Consumers in Developed countries (see also Carnegie Study)

• LOSERS– Most farmers in South and North– Consumers in South, but also North– Environment (Loss of Biodiversity, Degradation of soils,

increased water problems)

European Common Agriculture Policy

• Key elements of reform 2003– From Price Support to Direct Income

– Elimination of Export Subsidies until 2013

– Lowering of Intervention Price to come closer to World market price – allows for tariff reductions

The direct payments game(MacSharry reform Agenda 2000 Mid-term review)

World market World marketInternal EU market

World price World price

EU price

Intervention price

Import tariff Export subsidy

The direct payments game(MacSharry reform Agenda 2000 Mid-term review)

Direct payments

World market World marketInternal EU market

World price World price

EU price

Intervention priceImport tariff Export subsidy

European Common Agriculture Policy

• Who benefits?– Food processing TNCs – lower commodity prices internally– Few big farmers – economies of scale

• Who loses?– Small/Family Farmers – Intervention prices & direct support

to low to survive – Further concentration and industrialization of production – People in EU: paying 3 times (Food, Direct payments via

their taxes, environmental costs of production system)– Farmers/People in the South: Continuation of dumping with

this model

3. CONSEQUENCES OF THESE TRENDS

• A handful of TNCs decides on food production - main interest: maximizing profit!

• Less healthy food, increase of processed food, functional food – Health Impacts (e.g. Obesity)

• Monoculture in food consumption: Food comes from “No where” – Coke und Pizza everywhere

• Social catastrophy in Developing countries – loss of livelihoods, increased waged labor in agriculture sector, decrease of food security, no job alternatives (see other liberalization processes)

• Ecological catastrophy – loss of biodiversity, monocultures, degradation of soils, water scarcity

• New issue: Agrofuels – competition food, feed, fuel

4. Alternatives The Concept of Food Sovereignty

Definition:• Right to food and right to produce food

• Right of peoples, communities and countries to decide on their agriculture, fishery and food policies

• Policies should recognize and maintain unique ecological, social, economic and cultural conditions of a country/region

4. Alternatives The Concept of Food Sovereignty

Principles of the concept:• Support production of healthy, high quality, locally

produced food • Food production for local markets versus “Export at all

costs” • Protection of workers in food sector (trade union rights,

Support of standards etc.)• Laws to limit market concentration• Trade rules complementary and supportive to realize food

sovereignty (tariffs, import controls, commodity agreements)

4. Alternatives – Challenges for CSOs

• Agriculture and trade policies affect us all – it is about food – expose developments and trends

• Build spaces/networks/new alliances among different groups to discuss current developments – local, national, European and international level – Farmers, Food Workers, Environmental Groups,

Consumer Groups, Health Groups, Fair Trade, Developmental Groups, Climate Change Groups etc.

• CAP Review Process as political dynamic to build European dynamic

• Local Food Economies and Policy Alternatives

THANK YOU

Institute for Agriculture and Trade Policy

www.tradeobservatory.orgwww.iatp.org

astrickner@iatp.org