(7-08)

In the midst of the worldwide financial industry meltdown, the global food crisis continues unabated. More than 925 million people—mostly women and children—are still unable to buy food, despite the fact that there is enough to go around. At play in both the financial and food crises are the rippling effects of decades of deregulation, corporate consolidation and speculation.

Unchecked profiteering in both capital and agricultural commodity markets has created inflationary “bubbles” where market prices are divorced from real-world indicators of value. But whereas the United States Treasury and Federal Reserve have enormous cash reserves to tap, international grain reserves were dismantled in the 1990s. Today, the UN Food and Agriculture Organization (FAO) estimates the world’s grain reserves would only last 53 days.

Traders in the corn options pit at the Chicago Mercantile Exchange. Frank Polich / Reuters

If the bad news is that the global food system is even less resilient than the global financial system, the good news is that ways of understanding and fixing the food system have already been identified. Over the past months, the contributing causes of the ongoing crisis have been largely identified:

• the diversion of cereal crops to agrofuel production;
• floods and drought exacerbated by climate change;
• high oil prices;
• increased meat consumption worldwide; and
• speculative trading on food commodities markets.

At the root of this series of triggers is a relatively new system for producing and distributing food in a globalized market.

Winners and losers in the world food system

Over the last four decades, international development projects and trade policy regimes have effectively dismantled agricultural self-sufficiency and smallholder farming in the Global South while positioning large agribusiness corporations to profit from controlling more and more of the world’s food system. Today, Archer Daniels Midland (ADM), Bunge, and Cargill control 90% of the world’s grain trade. Chemical giant Monsanto controls one-fifth of seed production while Bayer Crop Science, Syngenta, and BASF control half of the total agrochemical market. This kind of corporate consolidation pays handsomely. Since the beginning of the world food crisis in 2005, ADM’s profits have soared 73%, Cargill’s are up 138%, and Bunge’s increased by 105%.

Meanwhile, food prices have skyrocketed in the last few years to unprecedented and unsustainable levels. The World Bank reports an 83% jump in three years; the FAO, a 45% spike in a recent nine-month period; and The Economist’s food-price index peaked in 2008 at its highest level since it began reporting on prices in 1845.

The net result is that the world’s poor have been priced out of the food market, throwing nearly a billion people who already had insufficient access to food into acute crisis. In Haiti, Morocco, Guinea, Mexico, Egypt, Burkina Faso, Indonesia, Mauritania, Senegal and Uzbekistan, people have taken to the streets in mass protests. Governments are resorting to rationing, price freezes, and halting exports of key food staples such as rice in increasingly desperate attempts to stem the tide of growing domestic unrest. The world’s collective social fabric is on the line, and for good reason.

Corporate Control of the Food System: Big profits and unsustainable prices

From January 2005 to June 2008, the three companies controlling 90% of the world’s grain trade have posted historic profit increases, while food prices soared.

^{Sources: corporate statements and international commodities market index. Grain prices reflect averaged percentage increases translated to dollar amounts, sourced from annual international commodity market prices of corn, wheat and rice. Graphs by PAN.}

Solutions do exist

More than 400 experts spent the past four years gathering the best ideas on how to ensure that agriculture addresses world hunger. In April 2008, they laid out their analyses and findings in the International Assessment of Agricultural Science, Knowledge and Technology for Development (IAASTD). Endorsed by 58 countries, this rigorous report calls for investment in small-scale, ecological farming; emphasizes the need for fair trade; and urges approaches that protect peoples’ rights to democratically determine food and agricultural policies.

Sources: UN World Food Program; Food and Agriculture Office of the UN; Corporate earnings statements; World Bank; The Economist

Heather Pilatic, Ph.D., is a communications associate at PAN.

www.panna.org/mag/fall2008/hunger/world-food-system