As Agribusiness Grows, Farmers Get Less and Consumers Pay More

The Globe and Mail had a story last week that caught my attention titled, "The Fat Cats of Agribusiness." The article references growing concerns about large corporations muscling their way into the food chain, but observes that not much is being said among effected nations because they have become so dependent on these mega-corps. There is one report from Siva Makki at the World Bank in 2008 that sounds the alarm.

The market share of the biggies is on the rise, leading to questions about the potential abuse of economic power. In 2004, the top four suppliers of agrochemicals had a 60% share of their market, up from 47% in 1997. In the seed market, the four biggest players had a 33% share in 2004, up from 23%. In some specialized sectors, concentration is much higher. Monsanto’s worldwide share of the market for transgenic soybean seeds, which are easy to protect against weeds, was 91% in 2004...

Is the concentration harming or helping farmers? Makki’s research suggests that farmers are getting ripped off. As sales and prices rise, agribusiness giants are capturing a disproportionate share of the profits. Take coffee. The proportion of the retail price received by the main coffee-producing countries (Brazil, Colombia, Indonesia and Vietnam) declined from one-third in the early 1990s to a mere 10% a decade later. Could this be because the top four coffee traders and roasters had 40% or more of the market? Producers of cocoa, tea and bananas are also getting relatively smaller financial hauls as agribusiness clout increases.

Makki’s conclusion is obvious: “The market power of international trading companies” is widening the spreads between what consumers pay for food and what farmers receive for their product.

So the trend is that farmers get a much smaller share of the consumer's dollars and even if consumers start paying more at grocery store, the corporations pocket the increase. In other words everyone loses except for the corporation. There are a whole series of other problems with this system including animal welfare, food quality, and food safety to name a few.

Over the Christmas break I read Michael Lewis' book, The Big Short, and was aghast at the inefficiencies and ineptitude in the financial markets. The recent trend has been for large corporations to treat food commodities like any other financial asset that is traded in the markets, only with food it's more than someone's 401k or home mortgage that's on the line. With food it's people's health and in some cases, ability to survive, that is at stake.

The best way I have found to respond to these troubling trends with food and agriculture is to buy local, and buy direct from farmers. They deserve a lot a much larger share of the consumers' food dollars than they are getting in the current system. Go to LocalHarvest.org to find a local farmer near you.