Issue 254: March/April 2008

in

 Follow the Money

The price of the world’s three main grains – rice, wheat and corn – has doubled in the past year. Rice exported from Thailand, for example, has risen from $360 a tonne to $760 in the past year and India has increased its export price for rice to $1000 a tonne. The rise in prices is popularly attributed to the demand for food crops to produce agrofuels (ethanol and bio-diesel), population growth, prosperity leading to a rise in demand for meat, particularly in India and China, climate change, and the price of oil (for the manufacture of fertilizer and for transporting food commodities).

It’s not just food prices. The CEO of fertilizer company Agrium told a global fertilizer investor conference in Toronto that the current high grain prices are good for his business. “Our customer – the farmer – is making a lot of money,” he said. Agrium’s stock has risen 48% over the past 12 months, while Potash Corp of Saskatchewan is up 165%. Canpotex, which exports the products of both Agrium and Potash Crop, has raised its price for sales to Brazil and Southeast Asia to $750 a tonne, a 40% increase for Southeast Asia and an 85% increase for Brazil. In Brazil, it is soy (livestock feed for Europe) and sugar cane (for ethanol for Brazil and the USA) that require vast amounts of fertilizer. Fertilizer for India went up 130% to $625 per tonne. Potash Corp’s president said these price increases should produce a gross maragin of $2 billion this year, more than double 2007. Agrium’s profits are expected to similarly increase.       – G&M, 3/4/08

Analysts such as Michael Pollan and Anna Lappé see some positive in the higher grain prices, pointing to the massive subsidies to the commodity crops in the US, and noting that “higher food prices level the playing field for sustainable food that doesn’t rely on fossil fuels.”                                  – NYT 2/4/08

However, nowhere have I seen any mention of the pockets in which those subsidies actually wind up. The fact that in every sector of the global industrial food system there are three, and possibly five, corporations in control is not discussed. But the oligopolistic structure of the food industry makes it quite possible that these companies are colluding in fixing prices, propagating a variety of other plausible explanations for the rise in commodity prices as a smokescreen. As Noam Chomsky famously remarked, it does not take a conspiracy for elites to work together in their own self-interest. Cargill, ADM (Archer Daniels Midland) and Bunge are quite able, and willing, to work together for mutual advantage. Competition is a slogan for public consumption, not a behavioral description of Capital. (An article in the business pages of the Globe & Mail did comment that there is no sign that the US government plans to revisit its biofuel legislation “because there are powerful interests in Congress that benefit from it.” However, it did not mention that ADM is not only the biggest ethanol producer but a perpetually major Washington lobbyist.)

Of course, this is not to deny that there really is drought resulting from climate change  in Australia and Africa, or that the substantial subsidies for agrofuel production in the USA have driven up the price of corn, or that the rising price of oil has increased the cost of fertilizer and transportation, or that the emerging middle class in India and China (which is huge even though a small percentage of total population) is demanding more meat.

The point is that we are habituated to looking at discrete factors, not systems, to explain phenomena such as dramatic price increases. For example, the current financial meltdown in the USA should clearly be attributed to the inner dynamic of the capitalist system, not to some unusual events or isolated corrupt practices – though these are part of the reality, along with an attitude that social unrest and violation of trade rules are more significant than malnutrition and starvation.

A front page article in the Toronto Globe & Mail (29/3/08) prominently noted that the rise in commodity prices is “affecting just about everything people eat, and fanning social unrest in some of the most unstable corners of the world .” It also noted that “numerous countries, including Argentina and Vietnam, have capped or taxed exports . . . running the risk of violating international trade rules.”
– B.K.

 

#254: March/April 2008 TOC
Follow the Money: - we look at what is behind the rise in grain prices
Supermarket Wages: breaking the unions for corporate competitiveness
World Beef: update on mergers and expansion
About Feedback: the CFIA learns that people are deeply concerned about health and environment, and decide to adjust their messaging
Clean Milk (relatively speaking): WalMart and others refuse milk produced with rBST
Nutritionism: reductionism in the food system
Food Safety in China: Cargill steps in to help
Appendix A: scientists discover the likely role of the appendix
Neither Food Nor Nutrition: Cargill's new ingredient for frozen desserts; egg replacers for baked and other foods
Cell phones may disorient bees: stay away from the microwave
Sugar Beet Resistance: food companies join the opposition to GM sugar beets
Attack on the Eldest Brother: farmers and activists in Hawaii opposed GM taro, which is viewed as an ancestor of the people.

 

 

ram