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Profits in hungry times

Agribusiness $471,000 profit/hour

The current hunger crisis is forcing millions of the  world’s most vulnerable people to the edge. The most recent headlines come from Ethiopia but it was Haiti earlier this year that provided a quick snapshot of the dynamics of starvation. Runaway prices for basic staples like rice have driven its people to desperate measures. Some have even tried to stave off hunger by eating mud patties mixed with oil and sugar. Others have turned to protest. When commodity prices peaked earlier this year, food riots broke out across the country. They drew the world’s attention and even forced the Prime Minister to resign, but this has made little difference to government policy. Several months later, the riots are starting again.

Like so many other countries, Haiti was force-fed a diet of structural adjustment programmes that opened it up to cheap, subsidized imports from richer countries. In the early 1980s Haiti was self-sufficient in rice, its main staple crop. But conditions on foreign loans, particularly a 1994 package from the International Monetary Fund (IMF), forced it to open its markets to cheap, subsidized rice from the US and local production was practically wiped out. Since 2007, rice prices have risen by 50 per cent, and the average Haitian can no longer afford their basic foodstuff.

Honduras, another country that was nearly self-sufficient in rice before World Bank intervention, now imports over 80 per cent of its rice needs. Senegal and other West African rice-consuming countries have also seen drastic decreases in domestic rice production following their adoption of structural adjustment programmes. Côte d’Ivoire was a net exporter of rice in the 1970s, but following trade liberalization now imports more than half the rice it consumes. The World Bank’s heavy-handed advice to the Philippines was to back off from its targets for rice self-sufficiency because the world market would take care of its needs. But with the onset of this year’s food crisis, cheaper imports dried up, leaving the Government in a desperate situation – its domestic supply of subsidized rice was nearly exhausted, but it was unable to afford to import because prices demanded by foreign traders were out of reach.

The costs of high-tech agriculture

The ongoing food crisis has been compounded by the way most rice is now farmed. In the 1960s, a ‘green revolution’ model of rice production, based on large-scale use of a few high-yielding varieties, pesticides and chemical fertilizers, was pushed around the world by international donors and research institutes. The push continues today, especially in Africa, through the Consultative Group on International Agricultural Research (CGIAR) and Bill Gates’ Alliance for a Green Revolution in Africa (AGRA). As a result, most of the world’s rice production is now dependent on petroleum-based inputs – and their costs have spiked alongside the rising costs of energy.

The high cost of pesticides and fertilizers has robbed farmers of any benefits they might have seen from higher rice prices. It has also held back increases in production. So, as urban consumers in Haiti protest against high prices, rice farmers in the department of Artibonite, one of Haiti’s few remaining areas of rice production, have taken to the streets to protest against the cost of fertilizer, which, they say, makes it impossible for them to continue farming.

In July, GRAIN met farmers from the Red River Delta of northern Vietnam. They say that the rising cost of fertilizers and pesticides has swallowed up the meagre price increases they are getting for their harvests. According to one leader of a co-operative in Thai Binh province, rice farmers in this part of Vietnam now only make about $6 per season.

IMF-enforced trade policies combined with ‘green revolution’ agricultural practices have set the stage for agribusiness to reap immense profits, especially in times of crisis. Both the traders – with their near-monopoly of the global trade in agricultural commodities – and the handful of companies that control the global fertilizer, seed and pesticide markets are now effectively in a position to hold the world to ransom. While the UN’s Food and Agriculture Organization (FAO) estimates that 50 million more people are now going hungry because of the rise in food prices this year, big agribusiness is making spectacular profits.

Fertilizer - Double the profits! Double the price!

A bloody killing

At the height of the food crisis, Cargill, the world’s largest grain trader, was making $471,000 in profit every hour from its grain trading operations. Its fertilizer subsidiary, Mosaic, more than doubled its profits last year. Canada’s Potash Corp, the world’s largest potash producer, made more than $1 billion profit in 2007, an increase of 70 per cent on the previous year. And Bunge, another top global grain trader and fertilizer company, announced profits in excess of $1 billion for the first and second financial quarters of 2008, a growth rate of 471 per cent.

With governments panicking about food supplies and desperate to boost their harvests, corporations such as these can essentially charge whatever they want. In April 2008, the joint offshore trading arm for Mosaic and Potash hiked the price of potash fertilizer by 40 per cent for Southeast Asian buyers and by 85 per cent for those from Latin America. India was forced to pay 130 per cent more than last year;  China 227 per cent more.

Speculators are also cashing in on the food crisis and they are often blamed for the sharp increases in the global price of rice and other commodities. At Thailand’s Agricultural Futures Exchange, the average number of contracts being traded each day has trebled in one year, thanks to speculation on rice, and hedge funds and other speculators now represent up to half of the daily contracts being traded. Such speculation has helped send the price of rice soaring, yet few rice farmers are seeing any benefits. Thai farmers say that whereas last year they were getting $308 per tonne of rice delivered to the mills, this year they were receiving just $296, despite the fact that the price of rice to consumers had trebled.

In the name of the corporations

Despite much high-level talk about the food crisis, including a ministerial summit organized by the Food and Agriculture Organization (FAO) of the UN to deal specifically with the matter, nothing concrete has been done. Instead, the current situation is being seized upon as an opportunity to advance corporate control.

What is needed is a real shift in power. The policymakers, scientists and investors who have led us into the current mess cannot be relied upon to get us out of it

Most national programmes in developing countries that have sprung up to deal with the food crisis amount to little more than subsidy schemes for seed and fertilizer companies. The Philippine Government’s central response to the food crisis has been a $1 billion rice self-sufficiency programme that will dedicate a substantial part of the funds to the production and distribution to farmers of subsidized hybrid seeds. But the farmers cannot save seeds from rice hybrids and will therefore be forced to purchase seeds from the company every year. One of the companies supplying seeds for the programme is SL Agritech, a Filipino firm with connections to a Chinese company that has already cornered much of the hybrid rice seed market. Monsanto from the US and Bayer from Germany are also involved. Farmers’ groups and NGOs are alarmed that the programme will merely amount to subsidizing big seed companies – and that it will entrench the Philippines among the world’s biggest rice importers.

Senegal’s response to the crisis, dubbed the Big Agricultural Offensive for Food and Abundance (GOANA), will dedicate over two-thirds of the programme’s $792 million budget to subsidizing the purchase of fertilizers, seeds and pesticides. Given the radical investment and fiscal deregulation that accompany GOANA, many of the foreign-owned companies supplying these products will profit from the scheme. Farmers’ groups in Mali are attacking their Government’s response to the food crisis, called the Rice Initiative, because it focuses on input subsidies. They say that the initiative will put all the benefits into the pockets of the fertilizer and seed dealers.

Corporate land grab

But the corporate rush into rice goes well beyond seeds and fertilizers. Lured by the rise in global prices, companies are quickly moving in to set up ‘vertically integrated’ systems of rice production and trade, often with the backing of governments.

In West Africa, for example, the Dubai-based Stallion Group has started a regional rice farming project valued at about $1.2 billion, in conjunction with Nigeria’s Ministry of Agriculture and Water Resources. The company plans to reach annual rice production of 2.25 million tonnes in Nigeria and 500,000 tonnes in Ghana, and will also be investing in farm machinery, milling capacity and a 700,000-tonnes-per-year fertilizer plant.

Special price: Price trebled today

Two of Asia’s biggest food corporations, Sime Darby of Malaysia and Charoen Pokphand of Thailand, are moving into rice production under the banner of their home country’s response to the global food crisis. They are starting their programmes with the production and commercialization of their own hybrid seeds and the implementation of large-scale contract production schemes. Similarly, the San Miguel Corporation, the largest food corporation in the Philippines, and the Singapore-based Kuok Group, the world’s largest palm oil conglomerate, have announced joint plans for a $1 billion food production project. It has the support of the Government and the military and will involve a million hectares of public land in the Philippines.

Several cash-rich governments, like China and Saudi Arabia, concerned about their long-term food security, are working with their business sectors and newly created investment vehicles to outsource rice production to other countries. The Government of Laos is considering a proposal from a Chinese company for a land concession which would cover 600,000 hectares of prime irrigated rice land. Chinese companies also have a number of rice ventures in Africa, from Mozambique to Cameroon. Kuwait has leased rice fields in Cambodia for export production and is negotiating similar deals with Laos and Burma, while the United Arab Emirates is leading negotiations between its companies and Pakistan for 600,000 hectares of rice and wheat land. Bahrain too says it has signed long-term rice production and supply deals with Thailand and the Philippines.

Shut down the system

How then to solve the global food crisis? With governments and agribusiness working together in profit-making schemes which ignore the plight of the hungry, short-term fixes will not be enough. Now is the time to break with the past and to mobilize around a new, creative vision. We need a profound change to pull us out of this and the unending series of other crises (climate change, environmental destruction, poverty, conflicts over land and water, migration) that neoliberal globalization has generated.

What is needed is a real shift in power. The policymakers, scientists and investors who have led us into the current mess cannot be relied upon to get us out of it. They have created a profound double vacuum: a policy void and a market sham. The policy void is palpable. Instead of generating bright ideas to build a more sustainable and equitable food system, they only provide knee-jerk responses that amount to more of the same. More trade liberalization. More fertilizers. More genetically modified organisms and hybrid seeds. And more debt to make it all possible. Rewriting the rules of the finance system or clamping down on speculators remain taboo topics. Even the food self-sufficiency policies being adopted in some developing countries (in themselves a very good idea) are often just repeats of failed ‘green revolution’ strategies.

The only credible way forward is to rebuild from the bottom up. The power structure must be inverted. Small farmers, still responsible for most of the food produced, should be the ones setting agricultural policy, not the World Trade Organization, the IMF, the World Bank or government bureaucracies. Peasant organizations and their allies have clear, viable ideas about how to organize production and services and how to run markets and even regional and international trade. Labour unions and the urban poor also have a key role to play in defining food policy.

Those of us outside governments and the corporate sector need to come together as never before. We must build new solidarities and fronts of action both to address the immediate problems of the food crisis and to define long-term solutions. If we don’t work together to facilitate a power shift that puts the needs of the rural and urban poor first, all we can expect is more ‘business as usual’. 

GRAIN is a small international NGO which promotes the sustainable management and use of agricultural biodiversity based on people’s control over genetic resources and local knowledge.  www.grain.org

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