By Glenn Ashton · 6 May 2008
Global food prices are rising at unprecedented levels and speed, sparking food riots and unrest. Some commentators suggest that this crisis could trigger social rebellion or even war. This is a direct result of the increasing industrialisation of our food production and processing.
Food production has, for the first time in human history, fallen almost entirely into the hands of private interests whose priorities are aligned solely with profitability and which have nothing to do with pragmatism, altruism or human welfare.
Some companies or cartels have even gone so far as to collude to fix prices in the retail market. The bread price collusion between Tiger Brands, Pioneer and others in South Africa is just one such case.
Most of the trade in agricultural commodities, as food has come to be termed, is controlled by a few major houses that transport as well as process food stocks. Archer Daniels Midland, ConAgra, Louis Dreyfuss, Bunge and Born, Andre, Tuppfer and Cargill are not names familiar to a brand focussed world but the truth is that these, together with a handful of other companies, control the lions share of trade in international food commodities and products such as maize, soy and wheat.
In a time of international financial uncertainty - triggered by the so-called sub-prime crisis in the US, driven by irresponsible trading in the mortgage market - speculative money has shifted focus into real commodities such as minerals, oil, gold and most relevant to this analysis, food in order to escape dollar devaluation and protect value.
The amounts of money traded on exotic and speculative financial instruments such as hedge funds, leveraged options, futures and the like is astronomical. An amount equal to the full value of the annual global GDP, the full value of goods and services traded internationally, is traded every three days in these financial instruments. The real effects of these flows generate effects that are not properly understood and which produce unpredictable results.
One such result has been that we find that food has become simply another commodity amongst nameless others, subject to the rule of the global financial system jungle. But we are not trading real food but futures in pork bellies, hard winter wheat, yellow maize, soybeans, that bear little relation to the real market. Farmers are increasingly being hurt by these tools that were originally devised to assist them smooth market volatility but that instead have the opposite effect.
The profound injustice of this system is that, as we now see, central banks are doing their best to bail out reckless lenders, thus condoning their risky behaviour. The corporate political nexus looks after its own while leaving global consumers to pick up the tab.
As the US dollar has lost value, speculative money trade has shifted into alternative markets, seeking other profitable investments. One is gold. Another oil. And of course food has gone this way too. Consolidation of the food trade industry and speculative trading in these exotic financial instruments are therefore important drivers of increased food prices. But this is not the whole of the story. There is obviously a lot more to it than that.
We need to remember that the industrialised world depends on very few foods for the majority of our of food security. Maize, soy, rice and wheat are the most significant. Sorghum, rye, rice, rapeseed (also known as canola), beet, sunflower, oil palm, coffee, cocoa and sugar are other examples. However it is the big four, maize, soy, rice and wheat that constitute the bulk of ingredients for most modern industrial processed foods. They have become so ubiquitous in our food supply that they have assumed importance far beyond their traditional roles as individual foods.
For instance maize is converted into products like starch, oil, corn fructose syrup and most recently, ethanol for fuel. The latter effectively diverts food into the fuel tanks of motor vehicles. Maize is also a crucial part of the meat industry, where most animals, including chickens, pigs and beef are raised or fattened up on maize and soya derived diets.
Soy is a little understood commodity crop. It provides oil but being a bean it has a high protein content that is critical to the animal feed industry. The importance of soy has increased since fish meal became depleted through the unsustainable over-harvesting of global pelagic fish stocks. Soy is also used increasingly in human food, despite it not having a traditional role as a human food in raw form, only in altered forms such as miso, soy sauce and soy curd or tofu. But now we are sold soy milk (in reality little more than bean juice with lots of additives to make it palatable), soy flour and even soy meat replacements and fillers.
Soy and maize are crucial to any examination of the present food crisis as they epitomise everything that has gone wrong with the food industry and its supply chains. The products of these two crops form the foundation of modern highly processed industrial foods. Margarines made from plant oils have been used to replace butter. While we were told they were healthy, they instead precipitated a marked increase in cardiovascular diseases. Soft drinks made from corn fructose syrup have been implicated in increased obesity and diabetes risks globally. Snack foods, convenience food and fast foods usually contain these two critical ingredients. These two foods that can be healthy if eaten in traditional ways, such as in tortillas and miso, have instead become a primary cause of global health problems.
Another effect of these commodity crops is a marked displacement of small family farms around the world. Through consolidation of farms, driven by industrial agricultural monocrops, small farmers are affected by heavy uses of pesticides and chemicals but more importantly because they simply cannot compete against this system through market distorting subsidies and crop commodity speculation controlled by industrial producers. The fact that these farmers traditionally grew a wide variety of crops, providing a balanced diet, is overlooked. Our reliance on an industrial agricultural production model has displaced healthy food for industrial foods.
The result of this consolidation is that areas like the Amazon basin have opened up to soy production on massive farms that employ as few as 3 people per 1000 hectares. This displaces small land owners, causing serious social disruption through forcing people from rural areas into urban slums. It is worth noting that as of this year, for the first time in history there are more people living in cities than in rural areas. This too has direct bearing on just why we are experiencing food shortages.
Industrial farming, for all the hype, is not nearly as productive as it is portrayed to be. Given the ecological damage it causes, it can be argued that this model of agriculture causes more damage than benefit. The average crop yield from small farms around the world is far higher than that of large industrial plantations. While most large farms yield an average of 4 tonnes per hectare, small farms can yield four to eight times more, which can include dozens of crops.
Sustainable farming is also far more resistant to the impacts of variable weather conditions, such as recently experienced in regions like Australia, negatively affecting global wheat supplies. Those farming mixed crops on smaller farms are far more flexible in how they deal with increased extreme weather events caused by climate changes. Weather has already affected global food security, underlining the need to use more adaptable agro-ecological systems like Permaculture, an integrated farming system that copies natural patterns, to counter these real and immediate threats.
It would be useful if governments encouraged, through active interventions, extensive areas of smallholdings and allotments in areas on the periphery of cities or towns in order to support local food security. African cities such as Kampala and Kinshasa source a significant amount of their produce from within or close to the city. Encouraging this approach is important. It provides employment and income for otherwise marginalised sectors of the population and encourages food and seed trading, social networking, all which consolidate local food security.
Cities and urbanisation provide serious challenges to global food security. Cities are the polar opposite to agrarian communities. At this time of global food insecurity it is opportune that we step back to closely examine the dynamics of food production and supply within these conurbations. Surely it would be sound policy, especially in countries like South Africa, to encourage local production? Locally produced food also facilitates the local trade of an increased variety of foods, makes food more immediately available and uses often fertile vacant land.
The sharp increase in oil prices is in many ways central to how we deal with some of these challenges to food security. Most fertilisers, agricultural chemical and farm inputs such as mechanical power rely on petrochemicals for feedstock. Fertiliser prices have recently skyrocketed, as have tractor and transport fuel costs. It is clearly sensible to produce food as close to the target market as possible while also re-examining how we grow our food.
Our reliance on agricultural chemicals is known to have had extensive negative health effects, both through using and consuming them. It is nearly impossible to gauge precisely how these thousands of chemicals interact or to trace these effects on differing and unique individual metabolisms. The broad public awareness of the dangers posed by agricultural chemicals has driven a marked shift towards organically produced food.
There have long been arguments posed - mainly from those with vested interests in industrial agriculture models but also from ill-informed economists - that the green revolution model of agricultural production, reliant on massive applications of fossil fuel chemicals is the only way to produce sufficient food for a growing global population.
However things are not as clear cut as these vested interests insist. Several recent studies have shown that low input agro-ecological, organic production methods – allowing no petrochemical based formulations - can yield as much, and often more, than conventional farming. Perhaps more importantly, organic crops have demonstrably higher levels of minerals, vitamins and other crucial nutrients that are lacking in industrially farmed crops.
The International Assessment of Agricultural Science and Technology for Development, a study commissioned by the UN Food and Agricultural Organisation (FAO), has stated clearly that modern industrial agriculture is unsustainable and is bound to fail to sustain us if action is not taken. The 400 agricultural experts responsible for the report concluded that localised, sustainable and ecological food production must be actively pursued in order to attain food security. They also, interestingly, noted that genetically engineered crops had little role to play in feeding the world, despite the egregious and shrill claims of this industry to the contrary.
Another serious and increasing threat to food security which has directly driven up the cost of food is the accelerating global uptake of so called 'biofuels', more accurately called agro-fuels.
Agriculturally based fuels, such as ethanol from maize and oil from soybeans, have created an artificial internal market competition between food supplies and feedstock for fuel. Several of the large grain trading companies such as Cargill, are actively investing in ethanol and other agro-fuel plants in order to create new markets and opportunities that can increase the profitability of their vertical control of the food chain.
Given that over the past five years the percentage of the US maize crop directed to ethanol production has risen from around 4 percent and now approaches 18 percent, makes immediate the scale of the problem. This may be understandable if this ethanol did actually provide transport fuel in a cost effective manner but the fact is that maize and several other key agro-fuels expend more energy on producing and processing the fuel than is provided by the finished product. What we have is an entropic system that is bound to fail as certainly as there is a second law of thermodynamics.
Because of this rapid and massive diversion of maize for ethanol, we have seen the costs of animal products like eggs, dairy and chicken, each traditionally cheap sources of food, rising sharply over the past year. So too the prices for soy, used to produce oil as a diesel replacement. Vegetable oil prices have nearly doubled through direct competition from fuel oil.
The biofuels industry is simply another form of indirect subsidisation of industrial scale crops. Biofuels are subsidised not only through direct and indirect state subsidies but also through the wealth of consumers in developed nations, who can better afford to put fuel into the tanks of their vehicles than can poor people afford to put food into their bellies.
It is a deeply ironic and obscene reality that it takes a similar amount of maize to produce sufficient ethanol to fill the tank of an SUV as would be needed to feed a person for a year.
This is all related to the matter of agricultural subsidies. Subsidies are in and of themselves problematic enough. The OECD (developed) nations provide around 350 billion US Dollars of subsidies, direct and indirect, to their agricultural sectors every year. This is highest in nations like Japan and the EU, but is sufficiently high in high volume producing nations like USA to totally skew the agricultural trade system, further disadvantaging farmers in developing nations.
US rice and cotton subsidies ensure that that the US can produce these for less than developing nation competitors. This effectively destroys the livelihoods of millions of small farmers around the world who simply cannot compete against this subsidisation. The same goes for maize, soy, sugar, meat, dairy, fibre and oilseed industries.
These trade distortions, while directly attributable to the subsidies, are further obscured within arcane and secretly negotiated texts of multilateral and bilateral trade agreements that specify prohibitions for poor nations to subsidise food or erect protective trade barriers. The fact that developed nations have gained their historical market advantages through such mechanisms is blithely ignored.
Multi and bi-lateral trade agreements are often more problematic than even the controversial WTO agricultural proposals that have stalled the Doha round of negotiations for years. Whilst newly emerged blocs of developing nations like the China, India, Brazil and South Africa bloc and the G21 have halted the Doha round in its tracks through a collective refusal to extend these inequalities, negotiated trade agreements are usually leveraged from within profoundly unequal power relationships between states or trade blocs. It is usually the developing nations that come off second best by being forced to open markets and allow access to scarce national resources and structures while simultaneously being forbidden to provide similar protection for their economies.
There is a strong argument that the WTO structures, multilateral agreements and other trade restrictions have exacerbated the present food crisis. Recently the United Nations Special Rapporteur on the Right to Food, Jean Ziegler said, "hunger has not been down to fate for a long time – just as Marx thought. It is rather that a murderer is behind every victim. This is silent mass murder." It is timely that powerful friends of the south have spoken out so clearly. However the record of the UN in actually solving crises of this ilk is not brilliant. It would appear more realistic to seek national solutions to solving food security, underlining the reasons for the Doha roadblock.
Thanks for a great article
This article is a wonderful read. It's nice to see someone making suggestions for local and national solutions. It can seem so overwhelming when one reads about the global food crisis, one feels that one is completely powerless to the forces of global trade agreements and multinational corporations. However, perhaps we can influence our own local, provincial and national governments to start focussing on local food security endeavours.
A great read, thanks.