Making a killing from hunger - Meat, Biofuels, oil, chemicals, economy and politics are the problem.

[Guest guest]

:: Making a killing from hunger ::

 

The production of Meat, Biofuels, chemicals, the lack of oil, use of the car,

the economy and selfish politics are the problem to world hunger

 

 

How to help stop world hunger:

Go vegetarian, travel only by bicycle / foot / public transports, boycott GMOs

stop using chemical products, save energy, make donations and do volunteer work

 

 

 

 

 

 

We need to overturn food policy, now!

 

BY GRAIN

 

For some time now the rising cost of food all over the world has taken

households, governments and the media by storm. The price of wheat has gone up

by 130% over the last year.[1] Rice has doubled in price in Asia in the first

three months of 2008 alone,[2] and just last week it hit record highs on the

Chicago futures market.[3] For most of 2007 the spiralling cost of cooking oil,

fruit and vegetables, as well as of dairy and meat, led to a fall in the

consumption of these items. From Haiti to Cameroon to Bangladesh, people have

been taking to the streets in anger at being unable to afford the food they

need. In fear of political turmoil, world leaders have been calling for more

food aid, as well as for more funds and technology to boost agricultural

production. Cereal exporting countries, meanwhile, are closing their borders to

protect their domestic markets, while other countries have been forced into

panic buying. Is this a price blip? No. A food shortage? Not that either. We are

in a structural meltdown, the direct result of three decades of neoliberal

globalisation.

 

Farmers across the world produced a record 2.3 billion tons of grain in 2007, up

4% on the previous year. Since 1961 the world's cereal output has tripled, while

the population has doubled. Stocks are at their lowest level in 30 years, it's

true,[4] but the bottom line is that there is enough food produced in the world

to feed the population. The problem is that it doesn't get to all of those who

need it. Less than half of the world's grain production is directly eaten by

people. Most goes into animal feed and, increasingly, biofuels - massive

inflexible industrial chains. In fact, once you look behind the cold curtain of

statistics, you realise that something is fundamentally wrong with our food

system. We have allowed food to be transformed from something that nourishes

people and provides them with secure livelihoods into a commodity for

speculation and bargaining. The perverse logic of this system has come to a

head. Today it is staring us in the face that this system puts the profits of

investors before the food needs of people.

 

Market realities

 

The policy makers who have shaped today's world food system - and who are

supposed to be responsible for averting such catastrophes - have come out with a

number of explanations for the current crisis that everyone has heard over and

over again: drought and other problems affecting harvests; rising demand in

China and India where people are supposedly eating more and better than in the

past; crops and lands being massively diverted into biofuel production; and so

on. All of these issues, of course, are contributing to the current food crisis.

But they do not account for the full depth of what is happening. There is

something more fundamental at work, something that brings all these issues

together, and which the world's finance and development chiefs are keeping out

of public discussion.

 

Nothing that the policy makers say should obscure the fact that today's food

crisis is the outcome of both an incessant push towards a " Green Revolution "

agricultural model since the 1950s and the trade liberalisation and structural

adjustment policies imposed on poor countries by the World Bank and the

International Monetary Fund since the 1970s. These policy prescriptions were

reinforced with the establishment of the World Trade Organisation in the

mid-1990s and, more recently, through a barrage of bilateral free trade and

investment agreements. Together with a series of other measures, they have led

to the ruthless dismantling of tariffs and other tools that developing countries

had created to protect local agricultural production. These countries have been

forced to open their markets and lands to global agribusiness, speculators and

subsidised food exports from rich countries. In that process, fertile lands have

been diverted away from serving local food markets to the production of global

commodities or off-season and high-value crops for Western supermarkets. Today,

roughly 70% of all so-called developing countries are net importers of food.[5]

And of the estimated 845 million hungry people in the world, 80% are small

farmers.[6] Add to this the re-engineering of credit and financial markets to

create a massive debt industry, with no control on investors, and the depth of

the problem becomes clear.

 

Agricultural policy has completely lost touch with its most basic goal of

feeding people. Hunger hurts and people are desperate. The UN World Food

Programme estimates that recent price hikes have meant that an additional 100

million people can no longer afford to eat adequately.[7] Governments are

frantically seeking shelter from the system. The fortunate ones, with export

stocks, are pulling out of the global market to cut their domestic prices off

from the skyrocketing world prices. With wheat, export bans or restrictions in

Kazakhstan, Russia, Ukraine and Argentina mean that a third of the global market

has now been closed off. The situation with rice is even worse: China,

Indonesia, Vietnam, Egypt, India and Cambodia have banned or severely restricted

exports, leaving just a few sources of export supply, mainly Thailand and the

US. Countries like Bangladesh can't buy the rice they need now because the

prices are so high. For years the World Bank and the IMF have told countries

that a liberalised market would provide the most efficient system for producing

and distributing food, yet today the world's poorest countries are forced into

an intense bidding war against speculators and traders, who are having a field

day. Hedge funds and other sources of hot money are pouring billions of dollars

into commodities to escape sliding stock markets and the credit crunch, putting

food stocks further out of poor people's reach.[8] According to some estimates,

investment funds now control 50-60% of the wheat traded on the world's biggest

commodity markets.[9] One firm calculates that the amount of speculative money

in commodities futures - markets where investors do not buy or sell a physical

commodity, like rice or wheat, but merely bet on price movements - has ballooned

from US$5 billion in 2000 to US$175 billion to 2007.[10]

 

The situation today is untenable. Look at Haiti. A few decades ago it was

self-sufficient in rice. But conditions on foreign loans, particularly a 1994

package from the IMF, forced it to liberalise its market. Cheap rice flooded in

from the US, backed by subsidies and corruption, and local production was wiped

out.[11] Now prices for rice have risen 50% since last year and the average

Haitian can't afford to eat. So people are taking to the streets or risking

their lives to journey by boat to the US. Food protests have also erupted in

West Africa, from Mauritania to Burkina Faso. There, too, structural adjustment

programmes and food-aid dumping have destroyed the region's own rice production,

leaving people at the mercy of the international market. In Asia, the World Bank

constantly assured the Philippines, even as recently as last year, that

self-sufficiency in rice was unnecessary and that the world market would take

care of its needs.[12] Now the government is in a desperate plight: its domestic

supply of subsidised rice is nearly exhausted and it cannot import all it needs

because traders' asking prices are too high.

 

Making a killing from hunger

 

The truth about who profits and who loses from our global food system has never

been more obvious. Take the most basic element of food production: soil. The

industrial food system is a chemical-fertiliser junkie. It needs more and more

of the stuff just to keep alive, eroding soils and their potential to support

crop yields in the process. In the current context of tight food supplies, the

small clique of corporations that control the world's fertiliser market can

charge what they want - and that's exactly what they are doing. Profits at

Cargill's Mosaic Corporation, which controls much of the world's potash and

phosphate supply, more than doubled last year.[13] The world's largest potash

producer, Canada's Potash Corp, made more than US$1 billion in profit, up more

than 70% from 2006.[14] Panicking now about future supplies, governments are

becoming desperate to boost their harvests, giving these corporations additional

leverage. In April 2008, the joint offshore trading arm for Mosaic and Potash

hiked the price of its potash by 40% for buyers from Southeast Asia and by 85%

for those from Latin American. India had to pay 130% more than last year, and

China 227% more.[15]

 

 

 

 

 

 

 

Table 1. Profit increase for some of the world's largest fertiliser corporations

 

 

Company Profits 2007 (US$ million)

Increase from 2006

(%)

 

Potash Corp (Canada)

1,100

72%

 

Yara (Norway)

1,116

44%

 

Sinochem (China)

1,100

95%

 

Mosaic (US)

708

141%

 

ICL (Israel)

535

43%

 

K + S (Germany)

420

2.8%

 

 

Source: Compiled from corporate reports

 

While big money is being made from fertilisers, it is just a sideline for

Cargill. Its biggest profits come from global trading in agricultural

commodities, which, together with a few other big traders, it pretty much

monopolises. On 14 April 2008, Cargill announced that its profits from commodity

trading for the first quarter of 2008 were 86% higher than the same period in

2007. " Demand for food in developing economies and for energy worldwide is

boosting demand for agricultural goods, at the same time that investment monies

have streamed into commodity markets, " said Greg Page, Cargill's chairman and

chief executive officer. " Prices are setting new highs and markets are

extraordinarily volatile. In this environment, Cargill's team has done an

exceptional job measuring and assessing price risk, and managing the large

volume of grains, oilseeds and other commodities moving through our supply

chains for customers globally. " [16]

 

Table 2. Profit increase for some of the world's largest grain traders

 

 

Company Profits 2007 (US$ million)

Increase from 2006 (%)

 

Cargill (US)

2,340

36%

 

ADM (US)

2,200

67%

 

ConAgra (US)

764

30%

 

Bunge (US)

738

49%

 

Noble Group (Singapore)

258

92%

 

Marubeni (Japan)

90*

43%*

 

 

Source: Compiled from corporate reports

*Data is for Marubeni's Agri-Marine division only.

Absent from this list is Louis Dreyfus (France), a private agricultural

commodities trader with annual sales in excess of US$22 billion, which does not

report its profits.

 

Managing and assessing are not so difficult for a company like Cargill, with its

near monopoly position and a global team of analysts the size of a UN agency.

Indeed, all of the big grain traders are making record profits. Bunge, another

big food trader, saw its profits of the last fiscal quarter of 2007 increase by

US$245 million, or 77%, compared with the same period of the previous year. The

2007 profits registered by ADM, the second largest grain trader in the world,

rose by 65% to a record US$2.2 billion. Thailand's Charoen Pokphand Foods, a

major player in Asia, is forecasting revenue growth of 237% this year.

 

The world's big food processors, some of which are commodity traders themselves,

are also cashing in. Nestlé's global sales grew 7% last year. " We saw this

coming, so we hedged by forward-buying raw materials " , says François-Xavier

Perroud, Nestlé's spokesman.[17] Margins are up at Unilever, too. " Commodity

pressures have increased sharply, but we have successfully offset these through

timely pricing action and continued delivery from our savings programmes " , says

Patrick Cescau, Group CEO of Unilever. " We will not sacrifice our margins and

market share. " [18] The food corporations don't seem to be making these profits

off the back of the retailers. UK supermarket Tesco reports profits up 12.3%

from last year, a record rise. Other major retailers, such as France's Carrefour

and the US's Wal-Mart, say that food sales are the main factor sustaining their

profit increases.[19] Wal-Mart's Mexican division, Wal-Mex, which handles a

third of overall food sales in Mexico, reported an 11% increase in profits for

the first quarter of 2008. (At the same time Mexicans are demonstrating in the

streets because they can no longer afford to make tortillas.[20])

 

It seems that nearly every corporate player in the global food chain is making a

killing from the food crisis. The seed and agrochemical companies are doing well

too. Monsanto, the world's largest seed company, reported a 44% increase in

overall profits in 2007.[21] DuPont, the second-largest, said that its 2007

profits from seeds increased by 19%, while Syngenta, the top pesticide

manufacturer and third-largest company for seeds, saw profits rise 28% in the

first quarter of 2008.[22]

 

Such record profits have nothing to do with any new value that these

corporations are producing and they are not one-off windfalls from a sudden

shift in supply and demand. Instead, they are a reflection of the extreme power

that these middlemen have accrued through the globalisation of the food system.

Intimately involved with the shaping of the trade rules that govern today's food

system and tightly in control of markets and the ever more complex financial

systems through which global trade operates, these companies are in perfect

position to turn food scarcity into immense profits. People have to eat,

whatever the cost.

 

The urgent need for a policy rethink

 

The larger backdrop to this perverse food market situation is the global

financial system, which is now teetering on its flimsy axis. What began as a

localised housing loan collapse in the US in 2007 has unravelled into something

far more serious, as people realise that the emperors of the global financial

system have no clothes. The world economy is living on debt that no one can pay.

While central bankers and Lear jet executives try to patch the holes and restore

confidence, the underlying truth is that the system is close to bankruptcy and

no one in power wants to take the necessary tough measures: not the IMF, nor the

World Bank, nor the leaders of the world's most powerful nations. Not much more

than public relations glitter can be expected from the G8 meeting in June.

 

Similar problems lie at the heart of the food crisis: an ideologically driven

elite has forced countries to wrench open markets and let the free market run,

so that a few megacorporations, investors and speculators can take huge payoffs.

Many countries have lost that most basic power: the ability to feed themselves.

This loss, coupled with the corruption that plagues our countries and trading

systems, shows that neoliberalism has lost any legitimacy that it might once

have had. It is a measure of how out of touch these ideologues are that many now

openly call for more trade liberalisation as a solution to the food crisis, with

some even proposing that the rules of the WTO be changed to prevent countries

from imposing export restrictions on food.[23]

 

The World Bank president, Robert Zoellick, has tried to win the world over with

his call for a " New Deal " to solve the hunger crisis, but there is nothing new

about it: he calls for more trade liberalisation, more technology and more aid.

Today's food crisis is the direct result of decades of these policies, which

must now be rejected. While immediate action is necessary to lower food prices

and to get food to those who need it, we also need radical changes in

agricultural policy so that small farmers around the world gain access to land

and can make a living from it. We need policies that support and protect

farmers, fishers and others to produce food for their families, for the local

markets and for people in cities, rather than money for an abstract

international commodity market and a tiny clan of corporate boardroom

executives. And we need to strengthen and promote the use of technologies based

on the knowledge and in the control of those who know how to grow food. To put

it another way, we need food sovereignty, now - the kind that is defined and

driven by small farmers and fisherfolk themselves.

 

Social movements around the globe have been struggling to promote such a

reversal of strategy, only to be dismissed as unrealistic and backward by those

in power, and often violently repressed. The glimmer of hope in this crisis is

that the situation can be reversed. Peasant organisations have concrete

proposals about what needs to be done to resolve the crisis in their countries,

and governments should listen to what they are saying. Already some governments

are talking of a policy change towards food self-reliance.[24] Others are

starting to question the fundamental rationale of pushing for more free trade.

Neoliberal hawks at the top of the global food policy pyramid have lost whatever

credibility they may think they once had. It is time for them to move out of the

way so that the visions of food sovereignty and agrarian reform that come from

the grassroots can take their place and get us out of this hellish mess.

 

Source: http://www.grain.org/articles/?id=39

 

 

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Going further:

 

a.. Overview: FAO, World Food Situation: http://www.fao.org/worldfoodsituation

b.. Overview: Financial Times, " The global food crisis " , interactive map, last

updated 21 April 2008: http://tinyurl.com/6knmy8

c.. Overview: Stefan Steinberg, " Financial speculators reap profits from

global hunger " , Global Research, Centre for Research on Globalisation, Montreal,

24 April 2008.

http://globalresearch.ca/index.php?context=va & aid=8794

d.. Overview: Confédération Paysanne, " Les révoltes de la faim dans les pays

du Sud : l'aboutissement logique de choix économiques et politiques désastreux " ,

Press release, 18 April 2008: http://tinyurl.com/5glx8u (French only)

e.. Structural Adjustment Programmes: " UNCTAD official blames food crisis on

structural adjustment programme, " This Day, Lagos, 23 April 2008:

http://allafrica.com/stories/200804230375.html

f.. Food sovereignty: http://www.viacampesina.org and

http://www.nyeleni2007.org

g.. Agrofuels: GRAIN, Agrofuels special issues, Seedling, July 2007,

http://www.grain.org/seedling/?type=68

h.. Rice in the Philippines: GRAIN, Philippines and beyond: rice crisis -

reaping the 'fruit' of market capitalism, Hybrid rice blog, 22 April 2008,

http://www.grain.org/hybridrice/?lid=201

 

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References

 

1 Bloomberg, quoted by the BBC, London, 14 April 2008,

http://news.bbc.co.uk/2/hi/business/7344892.stm

 

2 BBC, " Action to meet Asian rice crisis " , London, 17 April 2008,

http://news.bbc.co.uk/2/hi/business/7352038.stm

 

3 See http://www.riceonline.com for daily reports. With many Asian rice

exporters out of the game, needy countries from Asia and Africa are turning to

the US market where prices are going through the roof.

 

4 Brian Halweil, " Grain harvest sets record, but supplies still tight " ,

Worldwatch Institute, Washington DC, http://www.worldwatch.org/node/5539

 

5 Katarina Wahlberg, " Are we approaching a global food crisis? " , World

Economy & Development in Brief, Global Policy Forum, 3 March 2008,

 

6 Food policy expert interviewed on Radio France International, Paris, 20

April 2008.

 

7 " UN food chief urges crisis action, " BBC, London, 22 April 2008,

http://news.bbc.co.uk/2/hi/americas/7360485.stm

 

8 Sinclair Stewart and Paul Waldie, " U.S. food producers, speculators

square off " , Globe and Mail, Toronto, 23 April 2008,

 

9 Ibid. and Paul Waldie, " Why grocery prices are set to soar " , Globe and

Mail, Toronto, 24 April 2008,

 

10 Paul Waldie, " Why grocery prices are set to soar " , op cit.

 

11 Bill Quigley, " USA role in Haiti hunger riots " , ZNet, US, 23 April 2008,

 

12 World Bank, " Can the world market for rice be trusted " , Box 1 on p. 52 of

" Philippines: Agriculture Public Expenditure Review, " Technical Paper, World

Bank, Washington DC, 2007, http://go.worldbank.org/TGRSK19300

 

13 Potash and phosphates are two of the main ingredients in chemical

fertiliser.

 

14 David Ebner, " Saskatchewan: A lot more than wheat " Globe and Mail,

Toronto, 11 April 2008,

 

15 John Partridge and Andy Hoffman, " China deal sends Potash soaring " Globe

and Mail, Toronto, 17 April 2008,

 

16 " Cargill income up sharply in third quarter " , World Grain, Kansas City, 14

April 2008,

 

 

17 " Tightening belts, " The Economist, London, 10 April 2008,

 

18 Jonathan Sibun, " Unilever profits surge despite price pressures, " Daily

Telegraph, London, 3 November 2007, http://tinyurl.com/6p8tcx; and, " Get set for

more price hikes: Unilever chief, " Business Standard, India, 16 March 2008,

http://tinyurl.com/694cqn

 

19 Foo Yun Chee, " Major European retailers post higher profits for 2007, "

Reuters, 6 March 2008, www.iht.com/articles/2008/03/06/business/RETAIL.php

 

20 Associated Press, " Wal-Mart de Mexico's 1Q profits rise 11 percent on

higher sales, cost controls, " 8 April 2008,

 

21 Monsanto, Annual Report, 2007.

 

22 DuPont, Annual Report 2007, and " Syngenta anuncia cifra negocio en

progresión 28 por ciento primer trimestre " , EFE, 22 de abril 2008,

 

23 Isabel Reynolds, " WTO should pressure food exporters - Mandelson " ,

Reuters, 23 April 2008,

 

24 See, for example, recent comments from West African farmers and officials:

Noel Tadégnon, " Le ROPPA préconise une pression sur les autorités politiques

pour soutenir l'agriculture africaine, " APA, 23 April 2008,

http://www.apanews.net/apa.php?article61599; and, " Réunion extraordinaire du

Conseil des ministres de l`UEMOA, hier : 200 milliards pour freiner la flambée

des prix, " Le Nouveau Réveil, Abidjan, 24 April 2008,

http://www.lenouveaureveil.com/a.asp?n=290011 & p=1903

 

 

 

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