The Global Food System Nodes of Power - PHP

TheGlobalFood SystemandNodes ofPower
AnanalysispreparedforOxfam Americaby
MaryHendrickson,Ph.D.,UniversityofMissouri JohnWilkinson,Ph.D.,RuralFederalUniversityof RiodeJaneiro WilliamHeffernan,Ph.D.,,UniversityofMissouri RobertGronski,Ph.D.,NationalCatholicRural LifeConference/AgribusinessAccountability Initiative
August,2008
Wegratefullyacknowledgethefundingprovidedforthisresearchby OxfamAmerica.Whilethisreportwascommissionedandpreparedfor OxfamAmerica,theviewspresentedheredonotnecessarilyreflect theviewsorpositionsofOxfamAmericaandaresolelytheresultof theresearchersstudyandanalysis.
Electronic copy available at: http://ssrn.com/abstract=1337273
NodesofPowerintheFoodSystem
Hendrickson,Wilkinson,HeffernanandGronski August2008
1. UnderstandingtheCurrentGlobalAgriFoodSystem
The globally integrated food system that has emerged in recent decades has many of the same characteristics as the industrialized food system of North America and Western Europe. As one can see from the attached matrix (see Appendix 1), a few firms dominate in certain agriculture and food sectors, from inputs for food production (e.g. seeds, fertilizers, pesticides) to where farmers sell their raw agricultural products, to where consumers shop for groceries. If competitive markets are defined as those where no one buyer or seller can influence the marketplace, we are rapidly moving to a global food system that is no longer predicated on competitive markets (indeed if it ever was). This is a food system where a Brazilian meatpacker is now the largest beef processor in the world, with an estimated third of the marketplace in the U.S. alone. It is a system where three large U.S-based traders/processors handle the majority of grain that moves between nations. It is a system of rapidly evolving global supermarkets that are penetrating many regions of the world. In this report, we describe this emerging food system both through narratives and spreadsheets compiled from trade journal information. We situate this food system in a review of food systems literature from economic, sociological and political science perspectives. We then document and define eight critical issues area where power is accumulating in different nodes of the food system. Throughout it all, we focus on the implications for farmers, consumers and communities of the food system in which we are embedded, and suggest potential leveraging points for changing agriculture and food to a more sustainable, equitable system.
1.1FoodSystemChangesandImplicationsforFarmersandConsumers
North America, Europe and to a certain extent Latin America have seen the consolidation and centralization of the agriculture and food system, particularly with consolidated markets for inputs, raw agricultural products, and food retailing. The food system that has emerged is highly integrated (c.f. Heffernan, Hendrickson and Gronski, 1999; Wilkinson, 2002), featuring a number of oligopolies and oligopsonies, even though fierce competition can sometimes exist between certain food system clusters. Though we do not analyze market distortions caused by lack of competition, or the exercise of market power, we try to document when and where limited competition or exercise of market power exists. It is particularly important to understand the food system as a system, with its own sets of relationships that have harden into structures structures that are humanly created. We are often reminded in basic economic texts that agriculture is regarded as a place of perfect competition, with many buyers and sellers. However, the reality is very different, and it has very important implications for farmers, for consumers and for communities. When there is little competition in food retailing, agricultural processing, or input markets, agribusiness firms can act in concert without outright collusion. From research on small groups, we know that individuals often behave in noncompetitive ways in competitive game settings when the number of players is reduced to just a few. It happens even when players are not allowed to directly communicate with other players. Since markets are also social institutions, they are subject to the dynamics of social interaction (see Fligstein, 2001). If individuals operating in small groups can behave nonPage1
Electronic copy available at: http://ssrn.com/abstract=1337273
competitively, then it is likely that similar social dynamics exist in oligopolistic (or oligopsonistic) markets where firms know exactly who their competitors are. They can begin to act in concert, which may not be a deliberate attempt to create collective behavior on the part of the firms. It may simply be a rational reaction to the information the individual firms have available and the social interactions at play. An example of this kind of behavior occurred in the US beef industry in the 1980s (and continues to occur). The market for beef moved from sale barns (open bidding and selling among a number of buyers and sellers), to direct visits of cattle buyers to feedlot operations. Feedlot operators began to complain that the number of buyers calling on them had declined to only one or two serious buyers, and that the firms these buyers represented were not acting as tough competitors for their cattle. In fact, feedlot operators claimed to know who the price setter was but there was probably no communication between the competing firms, they just observed their competitor and acted accordingly. In the case Pickett vs. Tyson Fresh Meats1, a jury found evidence that Tyson (previously IBP) had used marketing agreements to lower cattle prices in the cash market, and awarded a large settlement to a class of cattle producers, which was overturned on the idea that Tyson had several pro-competitive justifications for using these marketing agreements. In another commodity chain example, a Missouri soybean processing facility, owned by one of the three big crushers, exited the market when the cash market price of soybeans went above seven dollars per bushel for the first time in the season. Farmers arriving with loaded trucks were not allowed to unload unless they were delivering beans that had been contracted at an earlier date. Moreover, all facilities of that firm, as well as the facilities of the two other large soybean processing firms in area did not buy soybeans that day. Contracted beans were receiving greater than $7/bushel, and one firm had bid above $7 that day in a private transaction and then reneged, but after the firms exited the market, the next day prices fell back below $7/bushel. Other examples exist in the U.S. and Europe. Between May and August 2004, the big three UK supermarket companies all announced rationalization of their milk supply, to two suppliers in the cases of Tesco and Sainsburys and one in the case of Asda (Vorley, 2005). In 2006, the top U.S. poultry firms all announced production reductions of around 3-5% in the wake of negative impacts on chicken exports. The question is why didnt some firms slash their production more and why didnt others take advantage of their competitors reductions to seek a larger market share? We use these examples to show what can happen when markets move toward oligopolies or oligopsonies. As sociologists, we know that acting in concert is a natural outcome of social behavior. Thus, the best way to mitigate this is most likely to return to the basic principle of competition where no firm buys or sells enough of the product to influence price. In some cases, two firms who have been in stiff competition in one commodity or region of the world form a strategic alliance in another commodity or region. The question becomes: When do firms
Pickett v. Tyson Fresh Meats Inc., No. 04-12137, 2005 WL 1950272 (11th Cir. Aug. 16, 2005).
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compete and when do they cooperate? What the examples above show is that farmers are likely to lose when there are few enough firms in the marketplace to act in concert. EconomicPowerandCapital Lack of competition can lead to a consolidation of power. The global agrifood system that has emerged in the last few decades is definitely a capitalistic system, despite state-owned reserves in some places, or price controls in another. In a capitalistic social/economic system, capital is a key to economic power. With adequate capital, the best people can be hired, and managers can choose to invest in those opportunities that will return the greatest profit. A firm with limited capital has limited choices or business opportunities. Because access to capital is so essential for firm growth and survival, those firms with capital are often in a stronger power position. Those needing capital are eager to develop relationships with firms with capital. Capital can help to improve economic efficiency by upgrading equipment, improving management, or building infrastructure. However, in recent years, even large, efficient firms have failed to survive (e.g. Albertsons in the U.S.). Economic power, not efficiency, could thus be the key to ensuring the survival of a firm. In one year in the U.S., #10 grocer Supervalu acquired #3 Albertsons, #2 Pilgrims Pride bought #3 Gold Kist in poultry and #1 pork producer Smithfield took over #2 Premium Standard Farms. These transactions likely did not increase efficiency in the sector they might have even led to considerable short-term social/ economic disorganization as organizational capital rebuilt. 2 As these firms acquire other firms, they lose organization capital (e.g. experience disorganization and disruption), and those with whom they interact in the supply chain experience the same. The question is, why does it happen? Firms have been able to exercise the power they have gained from a dominant market share, capital accumulation or access to markets. Consolidation of this sort is continuing to happen in the U.S. and Brazil, and it is highly unlikely that any industry leader or observer can predict where this process will lead because it a social process that is largely out of their control. We liken it to a treadmill on which the largest firms are running at full-speed. One may gain a little and then fall back. There are others in the rear, but they are no threat. While firms in the Figure 1: Treadmill of Competition rear occasionally fall off, sometimes one of the leaders stumbles a bit. The others just run over that firm, or knock it off the treadmill entirely. No one seems to enjoy the process as the machine (the capitalistic market system) just keeps speeding up, but they all have to stay on it
Organizational capital refers to the smooth functioning of the organization, i.e. the fact that they can move things through their supply chain and onto their final customers. Disrupting this smooth flow of the organization has major costs.
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and keep everyone else off it or they no longer can participate in the system. Those who arent on the treadmill struggle to get on because they perceive no other options in the food system. That last point may indeed be the most important point for those looking to the agriculture and food system for rural development opportunities. In the case of North American farmers, many have felt compelled to join in food system clusters and their integrated supply chains because they see no other option for sourcing seed, or fertilizer or for finding markets. For instance, there is no poultry market in the U.S. unless a grower agrees to sign a production contract and become part of a system where s/he has no control over genetics, feed, healthcare, time to market and the like. There are very few mid-size poultry integrators, and very few other places to process any poultry at all. Indeed, independent growers, feed dealers, processors and distributors have all been squeezed out of the chain. Research shows that those farmers who feel they have limited choices or financial opportunities are more tolerant of unethical situations (James and Hendrickson, 2007). A similar situation exists for consumers in both the Global North and South. Consumer welfare has been primarily judged on price, and not on access to the full range of foods, or knowledge and information about production practices. Thus, consumers have given up a great deal of their co-producing role in the food system and have become more passive participants, reliant on expert knowledge that is embodied in food manufacturing, packaging, and labeling (Jaffe and Gertler, 2006). We see now the level of supermarket penetration that took years to achieve in the Global North, occurring rapidly across the Global South, with attendant levels of consolidation.
1.2 TheorizingtheGlobalFoodSystem
We have given you a short description of what is happening in the food system, but we now want to contextualize it analytically. Production centered notions of power, dominant in earlier analyses of the industrialization of the agri-food system, have been challenged in recent years by the emergence of new actors actors focused on the demand side of the system, led by the transnationalization of retail. Strategies based on food quality and considerations on their conditions of production unleashed a dynamic in which social movements, NGOs, and the politicized consumer began to overshadow the historic actors of agribusiness (examples of which we have discussed above). More recently, however, food inflation is firmly placing an upper limit on quality considerations and supply conditions are restored to center stage as market dynamics swing to the emerging economies. Public policies and market regulation are once more the order of the day. Traditional controllers of supply both upstream and downstream see their power and their profits enhanced. At the same time, strategic importance of control over natural resources - land and the necessary minerals for productive land use has stimulated a wave of new entrants: emerging economy governments, investment funds and new private actors to challenge the historic incumbents of agribusiness. The reality of power in the form of control over physical and technological assets has been forcefully reasserted. In other words, the traditional themes of political economy have been revalidated.
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The temporary shift to demand considerations and the emergence of new actors had an important benefit: it led to a critique of narrowly conceived versions of economic power as control over production resources and a theorization of the ways in which apparently marginal and subordinate actors have been able to stop the heavyweights of agribusiness in their tracks. All the insights of this enriched analytical framework should be drawn on if we are to correctly situate the current configuration of power in the agri-food system and the possibilities it provides both for strategies of contestation and negotiation. The following section provides a succinct overview of the contributions which have led to what is a workable synthesis between political economy and more network oriented frames of analysis.
1.3FromProductionChainstoNetchainsandNetworksofProductionand Consumption
Commodity chain analysis has a long history in agri-food studies prior to its reintroduction via the global commodity chain (and later, global value chain) approach by Gereffi and colleagues (1994). Originally it was understood as an inter-dependent but hierarchically organized production space created by the successive transformation of agricultural into final products (food and non-food). Actors situated at key points in the chain could exert power both (1) within their own segment via concentration and (2) backwards or forwards along the chain through technological control or buyer/purchaser power. In its most extreme form, this might lead to a concentration of inputs, processing and food elaboration activities within the same firm. More often, however, firms would specialize around these key links in the chain (although the pursuit of value-added within the food system as a whole led to a tendency for processing firms to encroach on the food manufacturing). Within this analytical framework, the economic space was a closed supply-driven system in which power was exerted upstream (machinery and inputs) and downstream (primary processing, trading and final foods), varying in accordance with the dynamic of different commodity characteristics. The two losers in the chain were agriculture and retail, both pulverized sectors at the mercy of monopolistic tendencies (and in the case of agriculture, also monopsony power). These commodity-chain power relations were alternately ratified or arbitrated at different instances and different moments through public regulation and legislation. A key rupture in this system emerged with the consolidation of retail, made possible by (1) macro transformations in urbanization and transport and (2) a shift in market strategies towards product differentiation and segmentation as a response to the stagnation in consumption of basic staples. In this new dynamic, the consumer was transformed into a key actor, promoted as such by (1) food industry branding strategies, (2) marketing strategies of retail, giving rise also to consumer defense groups and (3) an increasing reflexivity on the part of the individual consumer. In the context of deregulation, issues of safety and quality in the food system became the concern of civil society mobilization which, in shifting the focus from final product to conditions of production, also created conditions for the political strengthening of the vulnerable links in the chain: primary agriculture, small farmers, traditional communities and the environment.
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At the same time, the industrialization of the food system multiplied the range of involved actors, such as suppliers or service firms, especially small and medium, at different stages in the production process. Broader interests, therefore, developed stakes in the economic activities throughout the agri-food chain, often involving local and/or national governments with development and territorial concerns. The horizontal spaces within the vertical organization of the food chain became privileged objects of analysis focusing on the economic potential of agglomeration, cooperation and networks. These developments stimulated an exploration of the various strands of network analysis as a complement and/or alternative to the commodity chain framework. In the case of the horizontal dimensions, the network literature (whether in the form of social networks a la Granovetter (1985) or the contributions of economic geography (Storper, 1997)) was combined with the vertical chain framework leading to the adoption of the netchain concept (Lazzarini, Chaddad & Cook, 2001). Analyses focusing on demand, food quality and safety (whose criteria were increasingly in opposition to the industrial model) proposed the network framework as an alternative to the production chain model (Whatmore, 2002). This analytical approach was a useful tool in interpreting such developments as the unexpected vigor of the movement against transgenics, and more generally the role of NGOs as key actors within the dynamic of the agri-food system. Social network analysis has also been drawn on to explain the conditions under which alternative production and consumption networks have been constructed outside of the dominant commodity chains, as in the organic or fair trade movements (Murray and Raynolds, 2000). Here, informal mechanisms of trust both united local groups and consolidated global cooperation within the networks of social movements. The importance of commonly identified values in the consolidation of collective action and its broader legitimation has also been highlighted in the analysis of the consolidation of the artisan sector in the European agrofood system. In response to these challenges provided by different varieties of network analyses, the notion of global production networks has been proposed (Henderson et al, 2002). This approach reappropriates the original program of the global commodity chain literature at a time when this latter has come to focus more on the micro issues of economic coordination. In addition to the concern with coordination, this initial program included (1) a broader input-output analysis, (2) a central focus on the territorial dimension and (3) the need to situate the analysis within the institutional/regulatory context. Henderson and colleagues (particularly influenced by the parallel work of Dicken et al (2001)) have taken on board the network notion of power as an outcome of the network configuration not reducible to its possession by different actors. They have also argued for the need to anchor the production networks in the specific socio-economic and institutional dynamic of the different geographical spaces comprising the global network. In recent discussion there, authors have recognized the limitations of an exclusively production oriented analysis and have discussed the appropriateness of a broader global production and consumption network unit of analysis. Very recently, the profile of the current agri-food crisis has swung the pendulum back to the role of key economic actors. The nature of the crisis has highlighted the control of strategic resources
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(e.g. land, water, infrastructure, inputs) as a key source of power, which can give disproportionate weight to individual actors. At the same time, the incorporation of analyses critical of traditional commodity chain analysis is key for an understanding of the potential of non-traditional and subaltern actors for challenging and negotiating with these traditional sources of economic power in the agri-food system. Our work here will be centrally concerned with identifying the sources of power concentrated at strategic nodes of the vertically organized agrifood system, but it will be developed as an input (1) for strengthening the horizontal potential for agri-food development, (2) for promoting alternative production and consumption networks and (3) for creating the immaterial resources needed to power alternative networks in their negotiations with agribusiness, with governments and within the relevant global forums.
2. NodesofPowerintheFoodSystem
As described above, different economic, social and institutional arrangements in specific sectors or places can influence how farmers, firms and consumers are coordinated in the global food system. We want here to examine where power is currently accumulated or expressed in the global food system to strategically inform change in the system. We examine eight nodes of power where different actors will have different sources of power in each node. Some nodes have more potential for leveraging agency on the part of small-scale producers, consumers and others marginalized by the current arrangement in the global agrifood system. In each of the eight nodes, we try to examine where power is accumulated, the critical issues that surround that node, how that power may be leveraged, and potential methodological strategies for documenting it (this is more or less successful depending on the node). EightNodesofPower: 2.1GovernanceintheAgriFoodSystem:In this section, we discuss the shift from public regulations of food quality and safety to the private sector setting food standards, although there remains a great deal of governance in the public arena through multilateral agreements on trade, standards, and safety. 2.2AccesstoMarkets: Here we discuss how much farmers and producers have access to input markets (seeds, chemicals, fertilizers) and commodity markets (buyers of grain, fiber, livestock), although this also remains an issue for smaller entities in any part of the global food production value chain. 2.3IntellectualProperty:We emphasize here the legal regimes (including trademarks, processing methods, geographic indications and the like) governing control over genetic traits in plants and animals. 2.4AccesstoCapital: While the agrofood system has always depended on the ultimate input money, we examine the dependency of agribusiness on investment capital and the rise of private equity.
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2.5Logistics: Modern systems, including storage and handling make it possible to move huge quantities of food and agricultural commodities around the world. 2.6LaborintheAgrifoodSystem: One of the most contested parts of the food system, we examine tensions between waged labor, non-waged labor, farm operators and farmworkers. 2.7MarketingandBranding: The way the companies communicate with consumers, and how successful brands offer negotiating power for consumers and workers. 2.8ShiftinDecisionMaking: The shift from public policies set by governments to the boardroom decisions of agribusiness firms. Before we examine these critical nodes, it is important to understand what we mean by power. Power in its simplest definition is the ability to enforce ones will despite the will of others. In the food system, power affects the ability to control ones life chances. As illustration, consider the comparisons in a 30-year study of the poultry industry in Union Parish, Louisiana: when the farmer had at least two or more options of where to sell product, the farmer and the integrator negotiated a contract from relatively equal positions of power with satisfactory outcomes for the farmer. In this case, the contract can reduce uncertainty and perhaps transaction costs for both parties. However, when integrators consolidated and farmers had only one option of where to sell their broilers, then the power relationship became asymmetrical and farmers no longer entered the contract from a position of equal power (Hendrickson et al., 2008). Once that power relationship becomes asymmetrical, then farmers or workers or others are at risk of suffering major indignities. As we can see with the proliferation of contract poultry and pork production across the U.S., the opportunity to engage in a contract relationship with an agribusiness integrator can initially be appealing, particularly when the integrator provides access (directly or indirectly) to inputs, technology, and capital. Early adopters fare much better than later ones because over time, a few powerful integrators emerge as many vulnerable growers fall into debt in their efforts to stay on the treadmill of intensified production. Similarly in developing economies in the global South, when agribusiness integrators offer opportunities to resource-poor growers, the early results are greatly improved incomes for local growers. National governments also welcome these integrated operations and management by agribusiness firms; not only does it provide an answer to the need for economic development, it strengthens foreign exchange earnings (assuming the foods or agricultural products are exported, which is typical).3 But again over time, these promises of foreign exchange earnings for national treasuries and income-generation for local workers turn into a capital accumulation strategy for transnational corporations. This is exactly the situation that sours many farmers on so-called free trade, and prompts calls for food sovereignty and demands for a degree of control to remain in the hands of national governments. However, the weakening of the nation-state in the face of powerful
Philip McMichael (2004) describes this situation in Development and Social Change which draws on a number of contributions from economists and sociologists who have studied the emergence of the global food system.
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corporations has caused shifts in who actually makes public good decisions public versus private interests and in the governance of the agrifood system.
2.1
GovernanceintheAgrifoodSystem
2.1.1CriticalIssuesinGovernance
Governance in the agrifood system comes from both the private and public spheres, which intertwine and overlap. Governance makes markets work, since a clear understanding of rules can help provide the stability in the marketplace that entities are seeking (Fligstein, 2001)4 We will discuss this issue in more detail in both 2.3 (intellectual property) and 2.8 (shift from public to private decision-making). Governance in the agrofood system is provided by a complex set of treaties, institutions and agreements between nation-states at both the regional and global level (see Tansey and Rajotte, 2008). One of the most important, of course, is the World Trade Organization and associated rules of trade. An entire treatise could be written about these very important agreements based on the nation-state (public sphere). However, for the purposes of this report, we will focus our attention on another shift that has been very important, the rise of private governance systems through standard-setting (Konefal et al, 2005). Differentiation and standardization have been taking place simultaneously in the global food system, although because differentiation has been part of the turn to quality the standardization aspect has not been widely understood. (Hatanaka et al (2006:40) describe this as differentiated standardization and standardized differentiation.) Standards have long been a tool of both domestic and international trade as they reduce transaction costs, and simply reduce confusion and complications. However, they are now used as tools for accessing markets, coordinating systems, enhancing quality and safety assurance, product branding and creating niche markets. (IAASTD NAE:79). Older forms of standards focused on product features and/or health features which can be measured in the final product. By contrast, quality standards are processed based which means they are socially constructed and contested, and they are often voluntary which means those who demand them (e.g. retailers ostensibly to react to consumer demand) may have more power (see Murdoch and Miele, 2004; Miele et al., 2005, Renard, 2005). This is particularly important as there has also been a shift in governance, especially among retailers, from public (or state) regulation of safety and quality, towards private (voluntary) regulation of these aspects. Much of this has been accompanied by a shift from price to non-price characteristics as fundamental for retailers (i.e. a shift from an economy of quantities to an economy of qualities (Hatanaka et al 2006). Once there are fewer supermarkets globally, and those supermarkets can collaborate to set standards, then there is less access for those suppliers who do not have the capacity to meet those standards (see Hatanaka, Bain and Busch, 2005). Hatanaka et al 2006 argue that private standards reduce risks for retailers because every supplier, no matter where in the world they are producing, follows particular food safety and quality
A key difficulty in the transnationalization of the food system was the absence of a transnational state that could provide the rules and regulations for global firms to operate under. This has been solved to some extent with the proliferation of multilateral agreements on safety, intellectual property, standards, etc, and international codes developed through global institutions (e.g. Codex Alimentarus).
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requirements. As long as suppliers are third-party certified, the retailer has some guarantee they will not face a quality or safety problem that could hurt brand loyalty. Moreover, suppliers have to compete with each other under retailer-defined standards for that retailers market which increases competition among suppliers and puts retailers in control. These standards, which ensure basic quality and safety, also allow retailers to differentiate their products based on locale, post-harvest value-adding or the like, and leads to non-price competition. To do these three things, retailers need third party certification that can protect their brands, ensure suppliers conform to standards, reduce costs and increase efficiency in the supply chain, and enhance the notion that retailers are protecting consumers (Hatanaka et al 2006:46). The key power concept here is that those who have more of it are often able to establish and implement standards that may further advance their social, political or economic interests. Furthermore, [d]epending on how [third party certification] is used, and by whom, it may reflect and reproduce power relations that already exist in the global agrifood system, or may transform such power imbalances. (Hatanaka et al 2006:46) Third party certifiers are supposed to be independent auditors of an established system; in reality, they are competing for business from both suppliers and retailers so their neutrality is constantly negotiated. How standards are used and by whom, and who provides third party certification affects different actors in the global food system in different ways that are not easily predicted. As apparent from Table 1, NGOs can see standards are a way to educate farmers on the best production and post-harvesting practices and allow them to access new markets. However, standard-setting is not often inclusive of suppliers (producers) who may not see the reason for certain standards, who may not want to change farming practices significantly to comply, or who simply lack the capital or expertise to comply with standards set outside of their domain. (For instance, the imposition of good agricultural practices (EUREPGAP and now Global GAP) actually can decrease farm level diversity or exclude diversified small-holders from market participation. In Costa Rica, these standards precluded farmers with livestock in small operations from participating in banana markets because of food safety standards.) NGOs may have certain powerful roles in setting standards, and may become complicit with either retailers or third party certifiers in their quest to help farmers access new markets.
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Table 1: Standards: Stakeholders Strategies and their Effects Strategies Effects Power Relationship Retailers Standardization Retailers prefer to buy low and sell Lowering supply costs with some form of high (undifferentiated commodities) Global surveillance differentiation thus industry wide standards and Risk reduction supplier audits enforce direct Differentiation with competition among suppliers of Market differentiation commodities, but not so much with some forms of Due diligence specialty products. Retailers also standardization Avoidance of public need some form of contractual controversy relationship when the distance between buyer and seller is so great that trust cannot be established in a personal relationship NGOs and Standardization Use of standards and Activists with some forms Third party certification of differentiation as an educational and training tool Promotion of alternative Differentiation with Some retailers have become more some forms of vulnerable to campaigns for agrifood products and standardization corporate social responsibility practices Suppliers Standardization Suppliers most directly impacted by Making the evaluation with some forms product and process standards, but of product safety and of differentiation most minimal participation in their quality more development. Private standards are transparent Differentiation with becoming de facto requirements to Finding niche markets participate in global agrifood system some forms of squeeze out those without standardization capacity. However, suppliers can use standards to their benefit if they use required standards and add niche attributes that are certified. Third Party Standardization These bodies have to remain Accreditation Certification with some forms competitive and gain business so Use of local auditors Bodies of differentiation sometimes will go to benefit of Use of their external retailers or suppliers are not really location Differentiation with interested in seeing a harmonization Use of their external of standards because takes away some forms of location some of their competitive standardization Use of standards and advantages. suit procedures as competitive advantages Adapted from Table 1 in Hatanaka et al 2006: 47.
2.1.2LeveragePointsforChange: One leverage point for change is more significant involvement of actual suppliers in setting standards and more involvement of them in the actual development of niche markets i.e. what is special about their product, story or location that could work to their advantage in differentiating their products for new niche markets. As long as these suppliers are then the only ones to supply that product, they hold more of the power. Another leverage point is the ability of NGOs to publicly embarrass certain retailer brands, particularly if it is branded on more of a niche market where consumers are very interested in what is at stake. Finally, a shift to more
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publicly negotiated standards could allow more transparency in the process, and allow both consumer and supplier participation in standard setting. This will be resisted, however, by major retailers anxious to keep suppliers competing with each other and to retain power in the relationship; and even third party certifiers anxious to maintain their business with retailers. 2.1.3MethodologyforDiscovery Documentation of power accumulation in this node is very difficult. There is a great deal of research interest from academics (including larger research projects at Michigan State University -- http://www.msu.edu/user/ifas , Colorado State University and Cardiff University in Wales) who have done extensive field work with suppliers and also interviews and work with retailers and other buyers. Moreover, there is a lot of work that is being done by the Regoverning Markets initiative (http://www.regoverningmarkets.org/en/global/agrifood_sector_studies.html) in trying to determine actual impacts of changing markets and relationships between small scale producers and global markets in the agrifood sector.
2.2AccesstoMarketsforbothInputsandCommodities
2.2.1CriticalIssuesinAccessingMarkets As markets for inputs (fertilizers, seeds, chemicals, animal feed) and for commodities (grain, livestock) become increasingly concentrated, the decisions that farmers can make about what to produce and where to sell become constrained. Globally emerging food chains, dominated by transnational food retailers, determine many farm-level decisions, in that they shape the markets for inputs, including seeds and breeds, as well as outputs, including livestock and grains. As one can see from the matrix that is attached in Appendix 1, extreme amounts of concentration exist in many markets for both commodities and inputs in the U.S., Brazil and other places in the world. Markets are particularly concentrated in grain processing, meat slaughter, and food retail. In fact, one can see that many of the same firms are operating in different locations around the world and in different commodity sectors (e.g. Cargill processes beef in the U.S., is a major grain trader and meat producer in Brazil, sells fertilizers in Brazil, and operates in China). Many of these firms have developed into food chain clusters (see Heffernan et al consolidation charts available at www.foodcircles.missouri.edu/consol.htm) that operate around the world. In all manufacturing processes (and agriculture and food are not that different), the key is to source wherever inputs are the cheapest and sell where your products can command the higher price. AgriculturalInputs: Farmers have to have access to the basic supplies they need in order to produce food. The most basic resources are access to land and water. Land rights remain a major issue in countries like Brazil, Mexico, China and other areas of the globe. Even in North America, land is unaffordable for many would-be farmers, particularly those who farm on the urban fringe (e.g. Washington, D.C, to Boston, MA along the I-95 corridor; McHenry County, IL) or in areas with high demand for second homes (e.g. western NC, Colorado). As we noted before, control over land and water (natural resources) is becoming attractive to some investment funds, transnational agribusinesses,
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and emerging market governments. A recent New York Times (6/5/08) article noted that big funds are betting on farmland across the world.
And three institutional investors, including the giant BlackRock fund group in New York, are separately planning to invest hundreds of millions of dollars in agriculture, chiefly farmland, from sub-Saharan Africa to the English countryside. Its going on big time, said Brad Cole, president of Cole Partners Asset Management in Chicago, which runs a fund of hedge funds focused on natural resources. There is considerable interest in what we call owning structure like United States farmland, Argentine farmland, English farmland wherever the profit picture is improving.
Farmers also need inputs to manage soil fertility, plant diseases and pests, and to raise livestock. In many small holdings, these inputs are obtained from within (or locally) and are a product of diversification. However, farmers raising any product for external markets (beyond local) almost always rely on some forms of purchased inputs. Most markets for seeds, chemicals, and fertilizers are increasingly consolidated globally. For instance, two firms (Mosaic, Yara) provide most of the fertilizer used today in North America, one firm has a 25% market share for fertilizers in Europe and Bunge recently made moves in Brazil to strengthen its fertilizer business that will put it in fourth place globally. North American and European based transnationals provide almost 30% of the worlds commercially available seeds (UNCTAD, 2006). Ownership of global seed and agrochemical firms has also converged in the last 15 years. Such a strategy helps to better control and market proprietary lines of chemicals, genetic technologies and seeds, often sold in a single-bundled package (UNCTAD, 2006). While these bundles can be attractive to farmers and farmer managers as a purchased management tool, they can also reduce flexibility of on-farm management strategies for pests and weeds, as well as implementation of novel consumer-driven production systems and increase reliance on purchased inputs (c.f. Hendrickson and James, 2005). This becomes even more apparent with the stacking of more and more traits into the seeds that are available (herbicide tolerance or insect resistance). AccesstoMarkets When farmers sell their products, they also face highly concentrated markets. In the US less than 10 firms slaughter and process most of the broilers, turkeys, cattle (heifers and steers) and pork. Moreover, the concentration ratio of the top firms (based on capacity or sales) has been increasing for all livestock processing particularly steers and heifers and hogs since 1980 (USDA, 2000). In the dairy arena, intensive mergers during the 1990s among farmer dairy cooperatives left only two major US cooperatives, one of which currently produces 33% of the US milk supply. Cooperatives, state-mandated marketing boards, collective bargaining efforts have all been attempts by North America farmers to gain better and more profitable access to markets. However, many of these efforts have failed (reasons vary but include the problem of financing such ventures, rewarding members, and maintaining market share and power). Retail consolidation globally is one of the most important factors, in talking about access to markets as it is the point of interaction between the final consumer and food. Lest we think this is a phenomenon of the Global North, it is important to remember that supermarkets are rapidly spreading in Latin America, Asia and Africa. It becomes difficult for the major agribusiness
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transnationals to maintain their power vis--vis retailers as evidenced by the following quote from ConAgras annual SEC filing (2006)
[C]ustomers, such as supermarkets, warehouse clubs and food distributors, have consolidated in recent years and consolidation is expected to continue. These consolidations have produced large, sophisticated customers with increased buying power and negotiating strength who are more capable of resisting price increases and operating with reduced inventories.
Because of this power imbalance, retail consolidation can spur integration further upstream. In 2001, Tyson purchased IBPs beef and pork processing operations for the stated reason of being able to supply the entire meat case to its customers (like WalMart). It should be a cautionary note that these large firms feel pressure from consolidated retailers as new farmers are encouraged to join in global value chains in fresh fruits, vegetables and other products. The consequences of increased consolidation in farmers markets for their commodities, and where consumers can buy food can have negative consequences for both. For instance Cotterill and Franklin (2001) found that consolidation in dairy increased prices for consumers yet decreased farm gate prices in the northeastern U.S. It is true that undifferentiated commodities markets may function differently than specialty or niche markets, including those for organic, fair-trade, humane, geographical indications and the like. By its very nature, differentiation is supposed to appeal to particular sets of consumers and to be a way to command premium prices and farmers may get rewarded for their innovation, quality or integrity. However, it is very difficult to maintain these premiums when others enter the supply chain, or standard setting reduces the product to a commodity (see governance section), or when consumer loyalty is breached. 2.2.1LeveragePoints In the last few years, civil society groups have almost abandoned a focus on the state in the pursuit of mobilizing consumer market power to force changes in the conditions of farmers, labor, animals and the environment. Significant changes have been accomplished as we see the rise of fair trade networks, the meteoric increase in demand for organic food, and consumer demands for more information on labels. (See discussion of the turn to quality in Section 1.3 of this report.) However, these movements have almost all focused on niche markets that consumers demand, and do not bother much with farmer access to inputs. Moreover, the state remains an important place of contesting demands and establishing controls, even for marketbased change, and its importance may increase as we see both an emerging food price crisis, and a reassertion of control over natural resources by capital, particularly state-centered capital funds from India, China and Russia. While we recognize the significance and worth of market-based change strategies, we focus on leverage points within the state in this analysis. CompetitionPolicyatNationalandInternationalLevels As Breimyer (1965) points out, early capitalism is effective because of the nature of competition in the market place. Competition can stimulate innovation and allow markets to fully function. By the very nature of capital, however, it will tend to concentrate. One buyer, or one seller, may gain enough market share (or information) to influence other buyers or sellers in the marketplace
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and truly competitive markets which can function to regulate supply and demand are lost. The nature of competition policy is to reestablish a symmetrical relationship in the marketplace where no one party has the ability to accumulate enough power to influence other parties in the marketplace. As the UN Conference on Trade and Development states, the objective of the model law on competition is to control or eliminate restrictive agreements or arrangements among enterprises, or acquisition and/or abuse of dominant positions of market power, which limit access to markets or otherwise unduly restrain competition, adversely affecting domestic or international trade or economic development. (See model law on competition at http://vi.unctad.org/temp/ml_frames_en.html.) In the U.S., agricultural competition is regulated by several pieces of legislation, including the Packers and Stockyards Act of 1921, the Sherman Antitrust Act, Clayton Act and others. This means that jurisdiction over competitive markets can reside with USDA (in Grain, Inspection, Packers and Stockyards Administration) or with the Justice Department and the Federal Trade Commission. US laws do not deal well with vertical integration, choosing instead to focus on horizontal integration, and privilege consumer harm, rather than producer harm. Since the 1980s, competition has been much more narrowly interpreted in agriculture with de facto acceptance of concentrated markets where one buyer (e.g. JBS/Swift in beef, Dean Foods in dairy, Smithfield in pork) has roughly 30% of the market share, or where just a few companies have virtual control of grains moving through ports. (It should be noted that all of the recent acquisitions by JBS/Swift in the beef industry have not yet been approved.) However, Carstensen (2004) and others have tried to shift the debate to abuses of buyer power. Thus, a focus on abuses of buyer power, consideration of producer harm as well as consumer harm, new ways of dealing with vertical integration, and the possibility of global competition policy are all important strategies to consider. LabelingGeographicalIndicators Geographic indicators have been used to link the production of certain goods with a particular place, and protect that link as intellectual property (Barham 2003). The key point here is that these indicators, accompanied with enough institutional might, can protect farmers with particular products and allow them to gain fair prices for their products. An old example is Port Wine from Portugal. Because this wine was in high demand in England, the winemakers banded together to control access to this special wine (through the river system initially) which led to higher premiums for the winemakers. Geographical indicators can only work for unique products tied to place, and must have institutional support such as states (e.g. EU, but currently contested in WTO, included in TRIPs where the strengthening of GI is under discussion) or cultural/economic support in order for the schemes to work well for farmers. Because of its relation to protection of knowledge and cultural properties, geographical indicators are also a potential leverage point under intellectual property regimes. 2.2.3DocumentationandDiscovery There is an effort to document consolidation across the agrifood sector in a transparent and accessible way at the Market Share Matrix (http://www.marketsharematrix.org/). Those
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interested in discovery should consult the mapping matrix developed for the current research and track the dominant firms in the sectors they are interested in through agribusiness firms websites, financial filings (SEC filings available at http://www.sec.gov/edgar.shtml), leading business newspapers and journals, including The Financial Times, Wall Street Journal and others; as well as paying close attention to leading trade journals.
2.3IntellectualProperty
2.3.1CriticalIssues Intellectual property refers to forms of appropriation of innovations and creativity in ways of knowing and doing. In agriculture, intellectual property refers to inventions, trademarks, processing methods, genetic traits, geographic indications, traditional knowledge and the like, and is a constantly contested and negotiated arena, particularly over genetic traits in plants and animals. Intellectual property regimes are the domestic and international institutional arrangements that govern intellectual property and specify who can use it for what purpose. Thus, creation, use and protection of intellectual property can be significant sources of power in the agrifood system. Intellectual property is closely related to the standardization and specialization process of the industrialized of agriculture. For instance, developing unique genetic material that fits well within a larger system of rationalized agricultural production and processing allowed the mass production of agricultural products (e.g. hybrid seeds, livestock genetic lines). The question is how freely available is intellectual property in agriculture and how does that relate to accumulation of power. Moreover, intellectual property regimes (IPR) are of intense interest in agriculture because they can regulate innovations that result in living things, which by their very nature as reproducible life forms are tremendously difficult to main control of, or to capture the rents provided from the use of intellectual property. (In other words, a company like Monsanto needs the legal might provided by intellectual property regimes in the U.S. to enforce its collection of profits on Round-up Ready soybeans or there would be no reason for farmers to pay them instead of just planting the self-fertilizing soybean seeds again and again after one initial purchase.) Lets take the U.S. seed industry as an example. It is the most heavily commercialized seed sector in the world, and it started with hybrid maize, a significant innovation as it made farmers return to the seed company year after year. Between 1970 and 2000, small private seed firms essentially vanished, with more than 50 acquisitions of seed firms by pharmaceutical and chemical firms (Fernandez-Cornejo, 2004). By the 1980s, the maize seed market was dominated by two firms and by the late 1990s, over 90% of cotton seed, 69% of maize seed and nearly half of soybean seeds were sold by the four largest firms in each crop. This transformation could not have taken place without important developments in intellectual property regimes. These developments, including the 1961 International Convention for the Protection of New Varieties of Plants, the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs), and the International Union for the Protection of New Varieties of Plants provided ways to protect the innovations of plant breeders (i.e. plant breeders could control the seed of a new variety and collect royalties on it). The idea of these forms of IPR is to stimulate investment in the research and development of new varieties of plants. However, there is a question on how
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these agreements affect the encouragement of the Convention on Biological Diversity that advocates fair and equitable sharing of the benefits arising out of the utilization of genetic resources and defines genetic resources as subject to national sovereignty (IAASTD NAE, 2008; see also IAASTD Global (Chapter 2), 2008). As you can see from the mapping project (Appendix 1), there are four firms that dominate a third of the seed industry globally. These firms captured their dominant position after the refinement of IPR and as products of biotechnology were becoming commercially available. From the outset it was obvious that only the most highly capitalized firms, which included pharmaceutical firms, could afford such expensive research. Since research leading to the introduction of biotechnology was perceived as the future of crop breeding and production, experts predicted a grim future for seed firms without access to biotechnology. This prompted smaller firms without such access to capital or even large firms like Cargill to literally run to one of the five firms emerging as dominant and ask to be bought. The seed firms are not large compared to some of the other firms in the clusters, especially the retail firms, but they do control the genes of life. Most of the smaller firms that survived did so by paying royalties to those few firms that had access to biotechnology. This raises a serious question about how independent those small firms have become. Certainly the power relationships are not equal between firms when a small firm becomes dependent on a large firm that holds intellectual property rights. Where new technologies and products that are developed that can be protected through IPR, consolidation does tend to occur. The application and exercise of IPR has real life implications for what choices farmers can make in their farming practices. Hybrid corn and herbicide tolerant soybeans (Round-up Ready) are very good examples. Because of the consolidation of the seed industry, farmers are reliant on the few firms that exist for their choices of what to plant. In the U.S., there is virtually no openpollinated corn seed available except in very limited farmer to farmer sharing networks. Given that over 90% of Midwestern soybeans are Round-up Ready, sourcing non-RR soybeans is virtually impossible it has all the stresses and inconveniences of sourcing specialty crop seed without any of the benefits of specialty crop premiums. Virtually all new soybean genetics (even those achieved through conventional breeding) contain RR technology. We must remember that many improvements in the genetics of crops and livestock were achieved through public research institutions at both the national and international level, including the development of the Consultative Group on International Agricultural Research (CGIAR) system (Kloppenburg, 1988). Since the 1970s, there has been a weakening of investments in the public arena for applied research on genetics (e.g. release of new plant varieties) and for agricultural science in general. This has increased the importance of private science, which we should remember must capture returns on their investments. The products of this research are now privately held, which has had and could have significant impacts on how farmers, consumers and communities benefit from advances in science. We now turn to Brazil for a very important example of the power relationships that can be exercised through IPR. 2.3.2AcasestudyfromBrazil
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The complex story of transgenic soy in Brazil provides a good illustration both of the key role of control over strategic resources for considerations of economic power and also of the increasing importance of actors and spheres not directly involved in the production chain, such as NGOs and the judiciary. It also underlines the centrality of a legitimating discourse, the winning of hearts and minds, without which power becomes reduced to its naked and unstable variant, brute force.
In the late 90s it seemed that transgenics would be introduced into Brazil in a way similar to their non-contested adoption in Argentina. The Cultivars Law of 1995, a consequence of Brazils adaptation to the TRIPs agreement, had already accelerated the privatization and transnationalization of Brazils seed industry and in 1998 the National Technical Commission for Biosecurity (CTNBio) approved the commercialization of Monsantos Roundup Ready soy variety. Unexpectedly, however, Greenpeace, and the Brazilian Consumer Association, IDEC, supported later by the Brazilian Environment and Renewable Natural Resources Institute, IBAMA, won an appeal to prevent marketing until an environmental impact study had been undertaken. In Brazil, the judiciary has become an important arena in social conflicts, with its lower echelons increasingly sympathetic to popular appeals. Although transgenics were then banned, farmers in the southern State of Rio Grande do Sul, in spite of energetic efforts at control by the State government and escalating popular opposition to transgenics, rapidly planted and circulated clandestine seeds brought in across the border from Argentina. Whether true or not, these farmers had become convinced that the transgenic variety would lower costs, a crucial consideration for this Southern State whose production costs were higher than Brazils new Center West, frontier region. Given this fait accompli the Brazilian Government found itself in the uncomfortable position of having to sanction the planting and marketing of illegal seeds, which now dominated soy production in Rio Grande do Sul. Monsanto, arguing that it had not stimulated this diffusion and claiming that it was not responsible for the illegal planting, nevertheless decided to charge royalties on the marketed product. The Federal government decision to legalize planting and trading of transgenic soy had included a clause that royalties could only be charged against receipts for the purchase of the seed. Given that it could not charge for the seeds, which were being traded clandestinely, Monsanto levied a fine for the unauthorized use of its technology amounting to 1% of the value per sack of marketed grain. To make this fine effective it demanded that the stipulated amount be collected by the traders (e.g. Cargill, ADM and others) exporting the product on the threat that non-compliance would mean that the product was not unloaded in ports where Monsantos patent on the variety was recognized (Europe and Japan). Here we see how the new intellectual property rights on seeds decisively reinforce the global power of the genetic inputs industry, not only in relation to farmers but also to traders, although, in this case, there was no indication of conflict between these two largely transnational groups of actors. It should be recognized, however, that most farmers and their representatives, first in the Southern States and then more generally throughout the country, accepted the right of Monsanto to levy a charge, although they defended the right to negotiate its value. Farmers had already been convinced of the advantages of transgenic seeds and attributed these advantages to the new
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technology, which had been introduced. When transgenics were finally legalized, therefore, Monsanto quickly moved on to the institutionalization of royalties. The negotiation of these royalties provoked considerable tensions and the bargaining process revealed the extent of Monsantos control both up and downstream of farming activities. Given the wide diffusion of clandestine seeds Monsanto was determined to gain a return not only on the seeds it sold but also on any production from clandestine transgenic seeds. It proposed therefore a charge on the sale of the seeds and also on any production in excess of an average yield calculated by Monsanto for the seed in that particular region, since it was argued that this must be due to the planting of illegal seeds. In addition, by this mechanism, Monsanto also wanted to eliminate the practice of saving seed for replanting, given that Brazilian legislation does not permit the direct patenting of seeds but only the gene inserted into the seed. The seed, once bought, therefore, is the property of the owner, although the law also gives the owner of the technology the right to prevent the reproduction of this technology which as many analysts conclude permits a virtual patenting of the seed itself. Monsanto proposed a royalty to be divided with those who transferred the technology into the seed and those who multiplied the new variety. In addition, the multipliers who sold the seed to the farmers would have the task of collecting the royalty and paying the higher tax on the more expensive transgenic varieties, which were almost double the price of conventional seeds. Monsanto argued that the multipliers had the right to forgo their part of the royalty if they wished to sell the seeds more cheaply but that its own share was fixed. In addition it benefited freely from the infrastructure provided by the multipliers in the same way as it benefited from the infrastructure of the traders at the point of marketing. Monsantos proposals created considerable opposition and boycotts, but the conflict was not one of principle focusing rather on the level of the royalties and the method of their implementation. The final agreement was clearly in Monsantos favor with the multipliers paying for any price discounts with their share of the royalty. The continued planting of conventional seeds was made particularly difficult because farmers bore the cost of analysis to prove that their grains were conventional. Thus, there was no premium for planting non-transgenic soy, no infrastructure for ensuring its post-harvest segregation, and to boot, the farmers had to pay for the tests to confirm that the soy was conventional. In addition to conflicts over the size of the royalty and the form in which was to be implemented, two court actions were also taken to challenge the validity of Monsantos patent given that twenty years had already passed since its first registration. The way in which Monsanto was able to establish its control over the transgenic soy market in Brazil is very illustrative of the way a leading actor at a strategic node of power is able to combine its control over strategic resources- material and immaterial to make the system as a whole work to its advantage. Upstream the multipliers apply and collect Monsantos royalties, while downstream the global traders collect its fines, both bearing the logistical and administrative costs this entails. The farmers, largely accepting the legitimacy of technology rights, for the most part defensively negotiate levels of payments while those who resist must pay to prove that they have not benefited from the technology on offer.
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2.3.3LeveragePoints Challenge the legitimacy of IPR for food
The key point is to challenge the legitimacy of IPR when dealing with food, since food is unlike all other commodities (except water) in that it is a necessity needed on a regular basis. The question becomes if society wants to give up control over the very foundation of life (seeds and livestock genetics) to protect intellectual property. The exercise of IPR has also benefitted the Global North at the expense of the Global South in many cases, especially where technologies or genetics developed and freely available in the South were patented for the North. Farmers and others in the Global South lost their ability to profit, which has led to the reassertion of indigenous rights over some forms of intellectual property. Challenge intellectual property regimes by supporting public breeding programs
Reducing reliance on capital-intensive inputs while increasing the ability of farmers to develop and maintain productive agroecological systems will require a shift from private research to public research that is freely shared. One of the most successful examples of such an ambitious research and outreach program was the development of the land-grant university system in the U.S., and its contributions during its heyday, from the 1880s to the 1950s. Much of Brazil`s current strength in agrofood production is related to its national public research system, which is also the case for France. Involvement of stakeholders in the research process and public control of the benefits of research are important to maintain low-input technologies for all farmers. (Supporting public research institutions can also be a leverage point in terms of access to capital.)
2.4AccesstoCapital
2.4.1CriticalIssues
Hypermobilityofcapital
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Recent research by David Burch provides the basis of this analysis on the access to capital in the agri-food sector. Drawing on his unpublished work in progress, Private Equity and the Retail Section (2007), he begins with the undisputed fact that industrial agriculture is capital intensive; indeed all aspects of agri-food production depend on what may be the ultimate input: money (mainly in the form of credit or investment capital). The advantage goes to those who can raise capital easily, cheaply and efficaciously. In certain respects (science, research and digital technology), only corporations and governments can afford to support such activities; the one for profit and the other, presumably, for the common good. The share of capital that is under the control of farmers or responds to their needs is relatively small.
Much of this section was contributed by David Burch, School of Science, Griffith University, Nathan, Queensland Australia. Dr. Burch is a member of the Agribusiness Accountability Initiative research network and is collaborating with AAI-Asia Knowledge Network.
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The development of capital markets around the world reflects the need for access to capital. Transnational agribusiness has relied on three means of accessing capital: accumulation of profit as business grows (both privately and publicly held firms), investments through publicly regulated means (publicly held firms), and sourcing capital from family memberships and lineages (very important in Asia).6 More recent developments include the creation of banks and other forms of credit arrangements by the transnational traders (e.g. Cargill, ADM, Bunge and others) or other transnational agribusinesses. In the last decade, we have seen the explosion of private equity markets in the larger economy, but private equity has also come to play a significant role in the agrofood sector. Privateequityinglobalfoodsupplychains A more recent form of accessing capital is private equity. Private equity is the term commonly used to define the substitution of private capital for the share capital that underwrites the activities of public companies listed on the stock exchange. Consider the following comparison: Companies operating in developed countries are generally privately owned or publicly listed. A privately owned company (such as Cargill) does not have a formal structure of shareholdings, but may be owned by an individual or a family who finance its operations through accumulated savings and/or profits, bank borrowings, or some other form of capital investment that does not involve the formal allocation of a share of the business. A publicly listed company (such as ADM) finances its operations in part by the sale of shares in the company, which will be traded on the stock market and entitle the shareholder to a part of any profits the business may make. A private equity take-over, or leveraged buy-out, usually involves the purchase of all or most of the shares in a publicly-listed company, and their liquidation and removal of these shares from the public arena. The aim of a take-over by a private equity partnership is not to become engaged in the long-term management of a company, but to leverage the assets of a company in the short term in order to realize potential capital gains to the new shareholders, i.e. the members of the private equity consortium. Such gains can be achieved in a number of ways; the private equity firm can sell some of the assets of a take-over target; it can restructure, or turn around a company in order to improve its performance and make it a more attractive proposition when it comes to be re-floated on the stock exchange; it can leverage some of the existing assets of a company in order to borrow against the value of those assets; or it can do all of the above, which is not uncommon. The important point to note is that private equity companies are only interested in managing a take-over target in the short-term (usually 3-5 years) in order to maximize shareholder value. They do not seek long-term control, nor are they particularly interested in the long-term viability of any company they take over. In some instances, productive capital (and the jobs that go with this) may simply be eliminated, or stripped of its assets, even where a company may be making a profit, if this is in the short-term interests of the private equity owners (Rossman and Greenfield
In Asia, two of the largest agrofood firms, the CP Group of Thailand and the Salim Group of Indonesia, have been built through family membership and lineage approaches to capital. Their agri-food operations are listed in Appendix 1.
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2006:4-5; Burch and Lawrence, 2007:103). (There is no reason why a private equity company should commit itself to a profitable enterprise in the medium to long term, if the private equity partners are able to utilize their capital to make larger profits from a series of short-term operations.) The private equity company is not interested in making or selling physical commodities: it is only interested in making money. Another key feature of the private equity model is that the new owners are not subject to the kind of scrutiny and regulatory requirements to which a publicly-listed company must adhere. When a private equity partnership acquires a company listed on the stock exchange, it means that there are no longer any shareholders owning tradable equity in the company. Shareholdings are liquidated and the company de-listed. This means that, as a private company, it is no longer required to produce annual reports, audited accounts, or to make public its financial position. Willcapitalintensiveagriculturefeedallpeople,includingthehungry? The dueling visions of how to address hunger in the world has been raised by reviews of the work of the International Assessment of Agricultural Science and Technology for Development (Stokstad, 2008). On one hand, there is a belief that transferring the latest technological advances, most of which are capital intensive, to every corner of the world will improve agricultural productivity and thus solve the problem of hunger. In this view, hunger is caused by lack of sufficient production to feed all the hungry mouths in the world. Transferring technology to make farmers more efficient, e.g. greater yields per acre or animal, and to better store, handle and distribute food, will contribute to both rural livelihoods and reductions in hunger. A competing view is that hunger is primarily caused by distribution and power issues, and that low production levels are not a key factor in most cases (excluding areas of famine or natural resource degradation that happens in large parts of Africa). Moreover, from this viewpoint, much of the agricultural technology that has been developed is privately owned, capital intensive, not well-adapted for local conditions, and relies on finite resources that are rapidly being depleted. Relying on capital-intensive technologies purchased from outside the farm or system increases the prices for food for the hungry while contributing little to rural livelihoods. Thus rural farmers and laborers may have no access to wages to purchase foods, nor any ability to produce them on their own. An agroecological approach could be better suited to adapting to local conditions and generating agricultural production from locally available resources and without the same reliance on capital. Such an approach embraces the multifunctionality of agriculture its economic, social and environmental contributions and combines knowledge from various systems (e.g. indigenous as well as formal scientific). In that sense, agroecological systems are neither traditional nor industrialized but are appropriate for their conditions. (For further information see the FAO, 2007; IAASTD LAC, 2008.) 2.4.2Leveragepoints Regulation of capital markets to protect against unnecessary risks.
There is currently a move to reregulate financial markets in the U.S., and to a certain extent in Europe, following the mortgage crisis and the issues of liquidity in capital markets. Moreover, Indias government has called for controlling or eliminating the futures market in agricultural commodities. There is also a move to reestablish some control by the CFTC over commodity
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markets at the U.S. level. However, with the hypermobility of capital, and the tightly linked system of financial trades, regulation may be difficult. Collective stockholder actions that can force publicly traded firms into different production practices.
As an example, the Interfaith Committee on Corporate Responsibility convenes the Access to Capital Working Group which engages the financial sector to make lending and banking policies more transparent, equitable, and environmentally and socially responsible. Recent scandals on Wall Street have demonstrated that shareholders must hold corporations accountable, particularly as financial flows of capital both private and public accelerate in the globalized world economy. The response by ICCR is to use various strategies to address the impact financial institutions have on society, human rights, fair lending practices, and access to capital for the underserved. (They also make direct and local investments in community economic development.) Rise of social venture capital and potential for investment.
To help farmers across the globe to gain access to at least some capital, it is imperative that alternative financing arrangements are made possible. Social venture capital has been testing its foot in the U.S. alternative food system, while many fair trade organizations started from this vantage point. However, almost all social venture funds are still made up of angel investors who are looking for socially responsible investments (e.g. Investors Circle http://www.investorscircle.net/). At least in the United States, there is little place for individual investors to direct IRAs or other retirement investments toward these socially responsible ventures, inside or outside the food system. Creating vehicles for that kind of investment may be of enormous value. Required reporting of all firms over a certain size no matter whether publicly or privately held
Currently annual company reports are only required when a firm is a publicly owned company, and thus must report earnings and outlook to current and potential investors. Privately held firms and those that have been removed from public view through a takeover by private equity are not accountable in the same way, but they are still operating firms that impact the public good. Requiring annual reports of these companies (once they reach a certain scale) in the U.S., EU or by other governments can shed light on actions the firms take that can impact the public good.
2.5Logistics
2.5.1CriticalIssues Modern transportation, together with sophisticated storage and handling systems, make it possible to move huge quantities of food and agricultural commodities great distances. The trend over the last half-century is a dependence on distant food supplies as a global food system replaces national and local food security. On the one hand, local and national shortfalls in food production can be covered by a global food system technologically capable of transporting
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necessary foods. On the other, global markets respond to purchasing power rather than basic human needs. This global market requires far-flung, well-organized and extremely capital intensive transportation networks. The control and management of information is also creating new sources of power based on logistics. The question of food sovereignty arises when logistics infrastructure is developed in the hands of transnational corporations that move food to viable markets worldwide and to the detriment of impoverished and vulnerable populations. In terms of infrastructure, Cargill is exceptionally adept in the storage, handling and transportation of agricultural goods and food commodities. The corporations presence in scores of countries allows Cargill to source commodities at will, transport to virtually any destination, and to do so efficiently and reliably. Brewster Kneen (2002) notes that Cargill accomplishes this in a profitable way while gaining advantage in the market, whether moving commodities in bulk or identity preserved. Within North America, as illustrated by Cargill over the 20th century, the key to power in transportation is the consolidation of storage (e.g., grain elevators) along major waterways and continental railways. Besides inland storage along the Mississippi River and other rivers leading to the Atlantic and Pacific coasts, the major ports for grain and food exports also are in the hands of very few agribusiness corporations, namely Cargill and ADM. Besides grains and oilseeds, other major commodities include soybeans, sugar, salt, cotton, and orange juice concentrate. These firms are reproducing the same infrastructure in South America and East Asia. In Brazil four transnationals control virtually all crushing capacity, an activity which until the `90s had strong national capital participation. In many States these firms hold complete monopoly positions. The real life consequences for farmers are that they cannot market their products unless they can gain access to these transportation networks. One of the best examples is in bananas, where the major plantation owners are the same as the shippers so they essentially have a lock on moving bananas to market. Another example is a farmer in Mid-Missouri who was able to secure contracts with Asian customers for his grain because of his family connections there. However, he finally had to drop the deal because there was no way that the available shippers could or would guarantee that the quality grade he promised his Asian customers would not be contaminated through the transportation process. Controlofstorage,terminals,ports,transportationmethods Ports: In any country, those who control the port facilities and infrastructure determine what is shipped in and out of that particular port. In the U.S., most port facilities (even in ports that are publicly operated) are controlled by the transnational traders (Cargill, Bunge and ADM). These firms also control terminal elevators on the inland waterways (e.g. Mississippi River and St. Lawrence Seaway). Global traders have succeeded in owning/controlling port facilities in Europe and Latin America. Moreover, they have invested significantly in other transportation infrastructure such as barges and ships. Cargill, for instance, expanded its barge fleet and deepwater freighters; it now is among the worlds largest dry-cargo vessel operators with 20+ ocean freighters.
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Road Infrastructure: In Kneens analysis of Cargill (2002), roads and trucks led to fewer and larger county elevators; this placed the burden on farmers to travel further and bear more of the costs in getting grain to market, whether domestic or export markets. On the other hand, lack of infrastructure has hindered market development in places like Brazil. Transnationals are now investing in road development to move crops from the frontiers to ports. Rail cars: Cargill initiated the unit train specially designed hopper cars to be completely filled at one inland terminal and delivered as a unit to an inland customer or export facility. According to Kneen (2002:102) This puts increasing pressure on the system to eliminate the smaller elevators and forces farmers to travel further to deliver their grain to an elevator. This trend is causing farmers to come up with alternatives that enable them to regain some control, such as trackside loading of producer cars. Throughout the 20th century then, consolidation and rationalization have been applied to grain elevators, rail lines and farms alike. In Kneens analysis, this has resulted in higher costs incurred by the remaining farms for transportation, higher costs to governments for road maintenance (either to rail lines or, if near major rivers, barge lines), a smaller tax base, and disappearing rural communities. Biofuels:Thelogisticsoftransportingethanol Ethanol, even though a fuel product, cannot be moved through existing pipeline systems because of its corrosive nature. Thus, it moves much more like a food commodity than a pipeline fuel. According to the Renewable Fuels Association, about 75 percent of the nation's annual ethanol production of 4.3 billion gallons is moved by rail; the remaining 25 percent is transported by truck. Infrastructure is growing across the country; the Association reports that railroad and terminal companies are working to expand their ability to accommodate larger volumes of ethanol. (Spokesmen for major rail companies, including the nation's largest freight hauler, Union Pacific, said they are investing in track improvements near ethanol plants.) The trucking industry also has seen an expansion around ethanol and biodiesel plants -- which need abundant supplies of corn and soybeans to be shipped in and the finished product to be trucked out by tanker trucks. Trucks are used to transport biofuels relatively short distances; long-distance shipping is done by rail, which is considered more efficient for shipping large volumes. The vast majority of ethanol is produced in the upper Midwest and Northern Plains (IA, NE, IL, NE, MN and SD). That means supply is roughly 1,500 miles away from coastal areas where 80% of US population lives. The U.S. consumed 4 billion gallons of ethanol in 2006; current federal policy is to boost annual consumption to 35 billion gallons by 2017.7 The ethanol industry will need to quadruple operations in less than a decade. But transportation systems are already at capacity. Another complicating factor is that, unlike petroleum, ethanol is corrosive and cannot be transported through existing pipelines. The U.S. transportation infrastructure must almost double capacity by 2035 to meet anticipated growth in demand.
In 2007, the Renewable Fuels Association notes that 6.5 billion gallons of ethanol were shipped: in 2005, 60% shipped by railroad, 30% by trucks, 10% by barge.
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Moving ethanol can be done by train, barge or truck. However, it is likely a lack of drivers could inhibit truck transportation while a lack of tank cars will inhibit rail shipments. Also, moving ethanol by truck contributes to the increasing strain on the transportation system and infrastructure. Tank car availability appears to be the major constraint. According to Roger Ginder, professor of economics at Iowa State University who studies the ethanol industry, there are four major tank car manufacturers: GATX, Trinity, Union and AFT. He reports that some car manufacturers are booked for more than two years. He says until growth in production capacity slows and/or turnaround times for ethanol tank cars increases, it will be difficult to reduce the backlog in orders. Because of the different water content of ethanol produced in Brazil, pipelines can be used to transport the fuel. Pipelines are now in existence or being built that can deliver ethanol directly to ports. 2.5.2Leveragepoints Waterways and seaways are maintained at the expense of the U.S. public. Public policy could be changed to place higher toll charges and make it more costly for the shippers. Public investment in transportation routes may benefit some farmers although it may also benefit transnationals, and at exponential rates.
2.6 LaborintheAgrifoodSystem 2.6.1CriticalIssues Control over labor is one of the most contested parts of the food system. There are some very significant tensions that have emerged both in the academy and on the ground around labor. First, comes the historical understanding of farmer peasant, small holder, or family farmer. Family farming or small holding has been understood as the provision of the factors of production (capital, labor and management) from within the family. Farmers have more or less access to capital depending on their position (but almost always less easy and cheap access to capital than the agrifood transnationals), are losing control of the decision-making on the farm or management (particularly when participating in production contracts, integrated markets that specify exactly what genetics or other inputs to use, or bundled arrangements of seeds and chemicals), and may or may not still provide or have control over the labor of themselves and family members (moreover this is generally not understood as waged labor). Second, labor relationships are gendered and this has enormous impact on the power position of either laborer or farmer. Third, there continues to be very important tensions between waged labor, non-waged labor, and those who consider themselves family farmers (e.g. farmworkers and farmers). This tension is exacerbated when migrant labor in the U.S., for instance, is made up of many small holders from sending countries that have been forced out of farming in their home country because of political and economic changes. Fourth, while industrialized farming has used capital to reduce labor-intensiveness in many production systems, there are still very labor-intensive systems (such as vegetable production) that require large amounts of labor at particular times of the season. Labor is also intensive in certain parts of the system downstream
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as well. These varied arrangements within agriculture have made traditional labor organizing activities difficult, and have led to tensions between organized labor and farmers in many arenas. The informalization of labor (for an excellent discussion, see McMichael, 2004) has in many cases reduced its power position in the agrifood system, although escaping formalized labor arrangements can sometimes be seen as resistance against globalization or movement toward alternative livelihoods. Informalization is the movement of waged to non-waged relationships that are based on piece rate reimbursement; pay-to-play labor arrangements; or deskilled, nonunionized jobs, seasonal and/or uncertain jobs. Below are some examples of the key ideas in this informalization: Production Contracts (US): Poultry growers are estimated to provide one-half of the capitalization of the broiler production sector, yet receive very little of the profits, leaving them mired in debt, and powerless in negotiating the contract. Essentially, these growers are paying for the right to produce broilers for companies that determine (and own) what genetics will be provided, what feed will be fed, what veterinary treatment will be used, and when broilers will be sent to the farm and when they will be taken to market. However, farmers are rewarded on how well they produce which includes the indignity of submitting to tournaments with other farmers who also do not control any of the production decisions. This is classic piece rate reimbursement with the added humiliation of paying to get into the relationship. Contracts in and of themselves are not bad, but they must be entered into from equal positions of power or one party (the farmer) will be the loser. Those farmers who have more than one marketing option can enter a contract on relatively equal terms. Accumulation: Reducing labor costs is a key accumulation (profit) strategy in the global agrifood system. This ranges from sourcing of labor from the cheapest parts of the globe, to the nature of labor arrangements that keep laborers in less powerful positions as much as possible. In the U.S., the uncertain legal status of farm and processing workers prevents many workers from organizing for better wages or working conditions. Non-waged relationships, like production contracts, are often not governed as labor relationships by the state, and in many cases are not regulated by the state at all. Protection of labor has been given short shrift in international trade agreements. Because there is little legal protection domestically and even less internationally, laborers have few places to turn to protect their earnings or working conditions. Many agrifood jobs (e.g. meat processing) have been deskilled through the rationalization of tasks, and this deskilling has been used to reduce unionization and unions control over wages and working conditions. Keeping labor cheap has been a classic strategy on the part of transnational agrifood capitals to deal with the costprice squeeze of declining prices and rising costs globally. 2.6.2LeveragePoints Labor organizing
Labor organizing in many forms can be a key leveraging point in this arena. There are laborers who are in more powerful positions vis--vis other labor and could bear the weight of organizing for workers in all agrofood sectors. For instance, dockworkers are highly organized in the U.S.
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and control the flow of a large percentage of imported foods. Dockworkers standing in solidarity with other laborers in organizing for rights could have powerful impacts. The right to unionize in agriculture and food processing is necessary, and protection of workers legal status in unionization efforts is key. Collective Bargaining
For those laborers in non-waged relationships, collective bargaining (protected in the US under Capper-Volstead Act) could be encouraged and protected further which would lead to more powerful positions in the market place. Freedom from forced arbitration of production contracts is necessary. Good labor conditions as a differentiated market
There are some indications that protection of laborers in the farm and food system is becoming an important concern among younger consumers, particularly college students (see the work of Patricia Allen at UC Santa Cruz http://casfs.ucsc.edu/research/currentresearch.html#FTI). Reaching these consumers who are interested in labor treatment is important and can be accomplished through expansion of notions of fair trade and other labeling strategies (e.g. Food Alliance certification of social standards in the western US). Developing labor/family farmer coalition
Exploration of the stakeholder interests among laborers and family farmers who are both facing the price-cost squeeze forced by restructuring in the food system, but who may not see many common interests. This is a particularly important point in the tension between farmworkers and farmers in the U.S. for instance.
2.7MarketingandBranding
2.7.1 Critical Issues Brands are the way the companies communicate with consumers. A food company like Unilever (Wish-Bone, Bertolli) or ConAgra (Healthy Choice, Swanson) is only known in the grocery store by its brands. Successful brands offer negotiating power. Larger manufacturers like the two mentioned above, for instance, can negotiate deals across a range of products if they have a stable of strong brands. They can become category captains, meaning they are the dominant firm in a particular product category, and thus can influence other manufacturers in that category. Many retailers have tried to create private labels (own label as it is known in Europe) where they contract with food manufacturers to produce products to be labeled with the stores name or brand. These products can be higher or lower priced (presumably reflecting some sort of quality) than the manufacturers brand. Some retailers are estimated to have a third of their sales as private label in the U.S. with higher percentages in Europe. This is an area of contested terrain between retailers and food manufacturers (but is also a question for those who sell branded fresh fruit, vegetables, meat and seafood), since food manufacturers could lose pricing power vis--vis the retailer when producing products that arent branded.
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Because brands represent the relationship between the company and the consumer, are expensive to launch and maintain, and represent negotiating power, companies work very hard to protect their brands. They tend to err on the side of caution in terms of food safety and quality, and as such have much different interests than those actors in the food chain whose names (brands) are unknown. For instance, at the 2005 USDA Agriculture Outlook Conference, a consultant working for companies who had major brands in the marketplace was the only representative on a panel to advocate for stricter standards of beef processing and beef imports because of potential negative impact that would result if BSE were discovered again in the U.S. The other panel members, including a representative of one of the largest cattle feedlots in the country, felt that the standards in place were more than adequate and could be relaxed. While facing serious harm to the beef industry overall, this speaker did not have the same immediate concerns because it was unlikely that an outbreak could be traced to his particular company or farm. This means that companies with brands will go to extreme lengths to protect their brands. This also provides the rationale for establishing tougher standards along the food supply chain so that they can be assured of some measure of control of safety and quality (see Governance section). Retailers and manufacturers may be willing to pay for these assurances to a certain extent as well. 2.7.2LeveragePoints
Consumer trust
Brands can be fragile and if consumer trust is broken, there may be opportunities for change. However, not every actor in the supply chain has the same concerns and the same commitment, particularly if there is no premium for that particular actor associated with the protection of the brand. Unifying allies around brands Brands can also create some forms of competition within the food chain cluster, so there may be unlikely allies who can be identified. For instance, a grocery store in Kansas City works with a group of local farmers and has staked its branding/differentiation strategy on promoting local foods. That store provides training on food safety and quality to farmers, works with the farmers to be assured marketing claims are correct, and this may lead to some negotiating power on the part of farmers. However, the store can play off other farmers (in terms of local) against current suppliers to maintain some negotiating power.
2.8Shiftindecisionmaking
The restructuring of agriculture and food, accompanied by broader sociopolitical and economic transformations, means decision-making about food has moved from more public arenas to more private arenas (see also section on Governance). What does this mean? National governments make fewer and fewer decisions regarding government policies related to the food system, such as the flow of goods and services into and out of their country. Instead of governments making major policy related to their food system, global firms their board of directors and management make decisions about a countrys food system. Corporations have a very specific role in the
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food system. They operate, of course, to maximize their profits. For several years ConAgra even indicated in their annual report that their mission is to increase the wealth of their stockholders. This is the honest goal of all corporations and it permeates the activities and decision-making of such organizations. Decisions are based on what generates the most income for the firm. What happens to farmers and the general public is not a corporate concern, unless the bottom line is affected. The role of a government, on the other the hand, should be to enhance the well-being of its citizens. Decisions about food and agriculture are now made almost exclusively in the private sector where profit generation and capital accumulation are the goals rather than by nationstates which should strive to enhance the well-being of their citizens. (We acknowledge, however, that state and capital interests are always intertwined and certain nation-states have advocated for transnational agrofood interests at the expense of other citizen interests.) This is a significant change with major social and ecological implications. It is reflected in farm and food policy for instance, with the disappearance of government-mandated supply management programs in the 1996 Freedom to Farm Bill. Supply management essentially ended in the early 1970s, when government policy shifted to encouraging farmers to produce as much as possible, all the time. After the Nixon Administration began to dismantle supply management, corn production exploded and its price fell steadily. Big grain traders like Archer Daniels Midland and Cargill got access to an ever-growing supply of cheap corn, which they transformed into profitable products like high-fructose corn syrup and ethanol. As far as the U.S. is concerned, supply management of grain reserves has been left to private actors. Change in decision-making from public to private arenas has important implications for ecological diversity, rural development, the scale and type of farming, and public health and it has special implications for those with low incomes. Over forty percent of the worlds population has a daily income of two dollars or less, which translates into an annual income of less than eight hundred dollars per year. Food corporations determined to increase their profits will not be very interested in focusing their efforts on these people when they can cater to affluent consumers with thousands of dollars a year to spend. A question to be asked is: who is going to feed the close to one-half of the worlds population that has such low incomes? The answer is certainly not the giant international corporate clusters and supermarkets working under the rule of the free market and the capital accumulation imperative. Whatever the merits advanced in defense of the global economy for other sectors of the economy, the question to be raised as it relates to food is whether adequate food is a right or a privilege. The evolving food system suggests that those who have a good income will be able to obtain food regardless of where they live and where or how the food is produced, but those without adequate incomes will be left out. Corporations are not charitable organizations (see Hendrickson, James and Heffernan, 2008). Another question to be raised: is the food system so unique that it requires special policies? The World Trade Organization because of agitation from the group of 20 plus countries led by Brazil and India may be just now beginning to understand that food is different than other goods and services that are exchanged in the global economy. As the country representatives gathered in Cancun in September of 2003, agriculture, which we prefer to think as food, was the focus of major disharmony. Some argue the future of WTO may be at stake if this issue cannot be resolved.
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2.8.2Leveragepoints Supply management and publicly owned grain reserves
The current food crisis around the world suggests that a return to supply management may be viewed more favorably by populations and governments. It may be time for a return to the New Deal-era policy in which the government helps farmers avoid overproduction through grain reserves, land set-asides, and other mechanisms. Under supply management, the government essentially tries to keep crop prices from falling too low, which would hurt farmers, or going too high, which would squeeze consumers. Farmer managed grain reserves that are cooperatively owned
A dominant ideology has existed that suggests that fully functioning markets are the only possibility for effectively allocating resources on the basis of supply and demand. What we have shown is that markets are social institutions and there are multiple ways of achieving the stability that populations and firms are seeking. Canada and Australia have kept quasi-state institutions such as the Australian Wheat Board and the Canadian Wheat Board that allow pooling of grains and single desk selling. This can allow farmers to play in the same league as transnationals. Food Sovereignty
This is probably the most important issue. The question is who decides? Who decides where food is produced, what food is produced, how it is produced and who is going to produce it? And who is going to get to eat it? The U.S. has de facto answered that the market will do this. However, that notion is currently being challenged by many food movements around the globe. The concept of food sovereignty is an overarching framework or paradigm employed by civil society groups to reclaim land, territory and human dignity. It emerged in response to free trade policies during the ministerial meetings of the World Trade Organization, beginning in Singapore (December 1996) and continuing to Hong Kong (December 2005). The call for food sovereignty by civil society groups is also a plan for prioritization of food production for local and national markets through authentic agrarian reform and sustainable, agro-ecological practices. Food sovereignty is a way to shift decision-making about food back into the public sphere where ideas of rural development, agrarian reform and food production can be debated and defined by the community. Via Campesina states that the fundamental pillars of food sovereignty include the recognition and enforcement of the right to food and the right to land; the right of each nation or people to define their own agricultural and food policies, (including) the right of indigenous peoples to their territories and the rights of traditional fisherfolk to fishing areas.
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3. Whydoesthestructureoftheglobalfoodsystemmatter?
We have attempted in this report to draw a picture of how the food system has changed in the United States, Brazil and globally. We have also outlined potential leveraging points that may lead to change in the food system at the local, regional and global levels. It is important to understand that we dont have the answers for how populations around the globe should approach or demand changes in the food system, despite the descriptions of possible leveraging points written above. As academics, we feel more comfortable pointing out trends, and what the implications for farmers, consumers and communities are, or will be, in terms of sustainable, equitable livelihoods. What is clear from our work and from many other recent development reports is that we need to rethink the way that we produce, distribute and choose to eat food in this world in order to reduce hunger and poverty and ensure sustainable livelihoods across the globe. Business as usual is not an option in agriculture, given the enormous challenges we are facing, said Bob Watson, director of the International Assessment of Agricultural Science and Technology, when reporting the conclusions from 400 experts who were involved in the production of six reports. As the IAASTD reports8 make clear, agricultural productivity has increased in many areas of the world. In North America and Europe, for instance, the increases in productivity have been especially dramatic, moving this region from one that suffered extensive hunger in the 1940s and 1950s, to a region where the agricultural system produced too much of the wrong kind of food, leading to an epidemic of diet-related diseases. This focus on productivity also has had negative social, economic and environmental consequences, particularly in terms of rural development, farm economics, and damages to soil and water quality and reduced biodiversity. What is needed is an understanding and embracing of the idea of agricultures multifunctionality, i.e. that is has important economic, social and environmental contributions to make.
3.1FarmersandRuralLivelihoods:
One of the reasons that we brought so many examples from the U.S. and Europe to the fore in this report is that the experiences of some of the wealthiest farmers and rural dwellers in the world may inform strategies and developments around the world. In a nutshell, these wealthy farmers (relative to the world standard) have ended up relatively powerless in food production chains over which they have very little or no control (c.f. Hinrichs and Welsh 2003; Lyson, Stevenson, and Welsh 2008). If this happened to U.S. and European farmers, with their protections and rights, what is to prevent it from happening to farmers around the world as long as we continue to pursue the same kind of organization of the food system?
The IAASTD was sponsored by the United Nations Environmental Program, UNESCO, WHO, FAO, World Bank and other global agencies to assess the potential of agricultural science and technology to contribute to reducing poverty, eliminating hunger and ensuring sustainable rural livelihoods across the world. Six reports were produced, including a Global report, and six sub-global reports covering different areas of the world. For more information see www.agassessment.org.
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We are cognizant that development strategies differ. We know that there are examples of farmers who have successfully entered these global food system clusters and done well in Brazil, in the U.S., and all over the world. There are different consequences for different farmers and rural dwellers depending on their position. However, the key problem remains that farmers and rural communities are embedded in a food and agriculture system that is part of a larger economic system. The globally organized economy has sucked capital and natural resources from some areas of the globe, and redistributed them in others, primarily among the wealthiest stockholders and consumers. Often this means there is little capital or even wages in an area that can be used to jumpstart local agricultural economies. At these times, accessing global markets seems like the best (if not the only) strategy. Our point is that an industrialized, consolidated agriculture producing for global markets has not been the best rural development strategy as evidenced by the rural areas of North America and Europe and this happens precisely because of the way agriculture and food is organized. When farmers provide the factors of production (as in a smallholder or family farm where the family provides labor, capital and management), returns to all three factors remain with the family which they tend to spend in the rural community. In the global food system, small-holder agriculture is being replaced by waged and non-waged labor, with control over management and capital moving to distant locations. Thus, only returns to labor stay within the community; and labor is sourced as cheaply as possible from anyplace in the world. It is true that farm households in the United States have larger household incomes than average; however, some of the poorest counties in the U.S. are farming dependent counties, meaning that farm earnings accounted for 15% or more of total county earnings. In 1969, Heffernan studied poultry growers in Union Parish, LA. At that time, this county was a persistent poverty county. Thirty years later, a restudy showed that the county had the highest agricultural sales recorded in Louisiana, but the county remained a persistent poverty county. The key is in the structure of the relationships that exist in the agriculture and food sector and how gains in the food system are distributed. Without some sort of equitable distribution throughout the production chain, farmers and their communities will not achieve any sort of sustainable livelihood. And equitable distribution of the gains is particularly related to how power is distributed throughout the food system cluster from genetics to production to processing to distributing to retailing. As we alluded to in the introduction, new capital is flowing into agriculture and natural resources around the world for a variety of reasons. Will this new capital help farmers achieve sustainable rural livelihoods? Will the agriculture that emerges enhance rural communities, reducing poverty and eliminating hunger? Or will the returns to capital and management remain far distant from the areas of production, dispersed to far-flung shareholders or wealthy consumers?
3.2Hunger,PovertyandHealth:
Absolute numbers of hungry people in the world have risen since the United Nations set their Millennium Development Goals in the mid-1990s. Poverty, of course, is the primary cause of hunger and close to half of the worlds population earns $2/day or less, with annual incomes of $800/year. Elevating wages could be a growth market for food manufacturers and retailers as gains in income between $2 and $8 per day are largely spent improving diets (Manternach,
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2005). Still hunger remains a stubborn problem across the world, even in wealthy nations. In the U.S., Canada and Europe, significant amounts of the population are food insecure (e.g. in the U.S., about 1 in 10 households does not know where the next meal will come from), and some are hungry. Considerable government programs exist to help families with food in the Global North in fact over 70% of the project expenditures in the 2008 Farm Bill will go to food programs for hungry Americans. The obvious question is this: With a wealthy nation, and an industrialized, consolidated food system, why are so many Americans (or Europeans, or Canadians) hungry or food insecure? It begs the second question: Is an industrialized agriculture the best way to feed hungry populations? Perversely, the food system we have established globally has led to a situation in which the number of overnourished in this world roughly matches those who are undernourished. Succinctly put, we produce too much of the wrong kind of food. Nestle (2006:11) says the American food system produces 3,900 calories per day for every man, woman, and child in the country, whereas the average adult needs only a bit more than half that amount. Overweight and obesity have risen in the U.S. and Europe, a phenomenon linked to increased incomes as well as the rise of mass produced high-fat, high caloric processed foods that have decreased the real costs of preparing and consuming meals (Cutler, Glaeser and Shapiro, 2003). The emerging food economy faces new, starker realities than have existed in the past few decades. The evolution of biofuels globally has been blamed for as much as 75% of the rise in food costs according to reports of a leaked World Bank analysis (Chakrabortty, 2008).9 Other demands, including increased meat consumption among some populations, and growing recognition of scarce natural resources, are pushing food prices higher. The problem of hunger, poverty, and rural livelihoods becomes even sharper, especially if the half of the population earning $2/day or less is forced into the market system as control over natural resources is exerted by newly emerging capitals.
3.3AgricultureandNaturalResources
From the time of European settlement, American agriculture has always been a capitalistic system, albeit with much of a subsistence nature built into early forms. As an agrarian nation, Americans generally produced enough for their family, with relatively little participation in the marketplace, although many raw materials found their way to Europe upon which the Industrial Revolution relied. Our own industrial revolution required farms to produce more products to support an expanding urban population, and to send their excess labor as industrial workers (Kautsky 1988). Labor-saving technological advances (machinery, tractors, combines, hybrid seeds, synthetic fertilizers, computers) resulting from private investment and public research expanded labor productivity in agriculture exponentially. As we noted before, this narrow focus on labor productivity the chief means of measuring efficiency in farming in rooted in the notion of labor as the scarce resource. Natural resources were viewed as abundant and freely available, a large reason that economists have not done well in valuing external costs like the
Estimates of the impact of biofuels on food prices range from 4% (USDA) to 75% (World Bank), so a more realistic number is probably around 30%.
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quality of water, air and soil, or the taking of finite resources like oil at least until relatively recently. Today, resource economists like Herman Daly and others have argued that we need to rethink scarcity and reorient our economic analyses to the idea that natural resources are the scarce ones, and labor is abundant. Such a change constitutes a radical rethinking of the concept of efficiency. Industrialized farmers in the U.S. and Brazil, and most other places, are likely unprepared for the radical shift in farm economics that is occurring. Potash, phosphate, nitrogen all these natural resources upon which crops in industrialized systems depend are being allocated by the companies that control them. Natural resources like land and water are being bought by investment funds. In the U.S., projected seed costs per acre will double next year for corn, and cash rents will skyrocket at a time when Midwestern maize farmers already need $4.50/bushel to break even. Despite recent highs in the futures markets, the fall price for maize will likely be somewhere near $5-$6/bushel a decent living this year, but perhaps not next year. Only recently, especially in the debate surrounding bio-fuels, has the public begun to address the issue of the finite nature of many of the agricultural inputs currently being heavily used. The cost of petroleum, in the three major ingredients used in fertilizers, the cost of seed and the cost of highly productive cropland have risen sharply. The cost of fertilizer in the Midwest has more than doubled in the last four years. A recent study by economists at the University of Illinois indicates that the cost of fertilizer for Illinois corn farmers was $118 per acre. They estimate that the cost for 2009 will rise to $215. Further, they estimate that all non-land costs for producing corn in 2008 is $388 per acre. They estimate that it will rise to $529 per acre in 2009. It is easy to understand why there is a global rush for securing water, land, fertilizer and seed. Current agribusiness firms and firms not previously engaged in farming are purchasing huge tracts of land, water resources and fertilizer ingredients because these elements will be critical to food and fuel production in the future.
3.4Conclusion
Despite the shifts from production-centered analyses of food systems, to those focusing on the turn to quality or demand-driven ideas of the food system, the structure of relationships in the food system has remained a key concern. The description of the global food system we have provided in this report, including the accompanying matrix of dominant firms, outlines a system that is capital-intensive, centralized and consolidated, that sources labor and natural resources wherever they are cheapest and sells the resulting products wherever they bring the most money. We have outlined several critical issues that are imperative to understand about sources of power in this food system, and suggested leverage points where farmers, rural dwellers, consumers and activists may come together to create more equitable relationships (see Table 2). The key point is to keep an eye on the relationships that are forming and reforming in the food system, and understand from which positions of power actors are operating. There are models and policies that offer hope that new relationships and structures can be built that will share the decisions and the benefits of the food system equitably. The global food system, with its trends toward supermarket penetration in even the remotest locations, and the commodification of land and water in almost every locale, is moving towards a market system for all people. Market systems can only exist if there is supply and demand.
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Need becomes a demand only when an individual has the money to act on that need. Are we moving toward a system where only those who earn money will be able to eat? In most other markets, if people cannot generate a demand, they can go without the product. However, food is different because it is a necessity needed on a regular basis. If people cannot buy food, they die or they riot. The final question then becomes: Is the food system so different that it needs special policies?
Table 2: Summary of Nodes of Power, Critical Issues and Leverage Points Node of Power Governance Critical Issues Shift from public regulations of food quality and safety to private sector setting food standards alters power arrangements where retailers, third-party certifiers may have more power than farmers or other suppliers. Because a great deal of governance remains in the public arena, multilateral agreements on trade, standards, and safety remain important Leverage Points More significant involvement of actual suppliers in standard setting and development of niche markets Ability of NGOs to publicly embarrass certain retailer brands A shift to more publicly negotiated standards to allow more transparency in the process Market-based change can be significant Competition Policy at National and International Levels Labeling Geographical Indicators
Access to Markets, both Inputs and Commodities
Farmers and producers access to input markets (seeds, chemicals, fertilizers) and commodity markets (buyers of grain, fiber, livestock). Potential for differentiated markets to close out access for small farmers or suppliers. Documentation of market consolidation available at http://www.marketsharematrix.org. The appropriation of innovations and creativity in ways of knowing and doing can protect creators, but can also serve as an accumulation of power, particularly in the control over life forms. Legal regimes (including trademarks, processing methods, geographic indications and the like) have developed to control genetic traits in plants and animals, which can lead to consolidation. There has also been a convergence in ownership among seed and agrochemical firms. Control over RR soy in Brazil strengthened ties between TNCs and disempowered farmers. Industrialized food and agriculture system highly dependent upon capital and vulnerable to disruptions in capital markets in larger economy. The advantage in such a system goes to those who can raise capital easily, cheaply and efficaciously. Private equitys need for short-term capital gains, and its movement
Intellectual Property
Challenge the legitimacy of IPR when dealing with food, since food is unlike all other commodities does society wants to give up control over the very foundation of life (seeds and livestock genetics) to protect intellectual property? Challenge intellectual property regimes by supporting public breeding programs which will allow farmers to reduce reliance on capital-intensive inputs Regulation of capital markets to protect against unnecessary risks Collective stockholder actions that can force publicly traded firms into different production practices.
Access to Capital
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Rise of social venture capital and potential for investment. Required reporting of all firms over a certain size no matter whether publicly or privately held Waterways and seaways are often developed and maintained at public expense and is therefore subject to public policy. Public investment in transportation routes may benefit some farmers although it may also benefit TNCs, and at exponential rates.
into agriculture and food system raise concern over TNC decisions. A key question is whether a highly industrialized, consolidated and capital intensive food system works for all people, particularly the hungry.
Logistics
Modern systems of transportation make it possible to move huge quantities of food and agricultural commodities around the world and allow dependence on distant food supplies. The control and management of information is also creating new sources of power based on logistics. The question of food sovereignty arises when logistics infrastructure is developed in the hands of transnational corporations that move food to viable markets worldwide and to the detriment of impoverished and vulnerable populations. Labor in the food system is highly fragmented, relationships are gendered, and tensions exist between waged, non-waged labor and those who consider themselves family farmers/peasants. The informalization of labor (i.e. move waged labor to non-waged relationships based on piece rate or deskilling) reduces labors power position in the agrifood system.
Labor in the Agrifood System
Labor organizing in many forms can be a key particularly in organizing those in more powerful positions vis--vis other labor who could advocate for workers in all agrofood sectors. Encourage and protect collective bargaining Develop niche markets based on fair treatment of labor Develop labor/family farmer coalition Brands can be fragile so can be a leverage point if consumer trust is broken. Not every actor in the supply chain has the same concerns or commitment, particularly if there is no premium for that particular actor associated with the protection of the brand. Unifying allies around brands can be a way of involving farmers and retailers together. Supply management and publicly owned grain reserves Farmer managed grain reserves that are cooperatively owned
Marketing and Branding
Since brands are the companies way of communicating information to consumers, they can become key target points for change. Retail consolidation has changed the nature of competition and power in the agrifood system, but those manufacturers with strong brands sill have negotiating power vis--vis retailers.
Shift in decisionmaking
Decisions in the food system have shifted from public arenas (national governments) where enhancing citizens well-being is the primary goal, to private arenas, such as the boardrooms of TNCs where profit is the honest goal. This change has serious social and
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Food Sovereignty which recognizes and enforces right to food and the right to land as well as the right of each nation or people to define their own agricultural and food policies
environmental implications, since neither communities nor the environment is wellrepresented in profit-based decisions.
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4. Appendix1:MatrixofDominantFirmsandSectors
Main Actors in the Food and Agriculture System: US-based; Canadian; Brazilian; W. European; Asian
Protein Sector Beef Pork Broilers Turkeys The protein sector remains more country or region specific. There are not just a few dominant firms in this arena as there are in food retail and grains. Grains Corn Soybeans Wheat Cargill, ADM and Bunge control the vast majority of grain that moves between nations. Beans
Global
North America
The US accounts for more than 80% of beef processing in N. America, and 2/3rds of the cow-calf production. Mexico has about 23% of the cow herd, and Canada 10%. Mexico has about 12% of beef processing and Canada 8%. PORK: N.Amer. Is 3rd behind China & EU in producing pork. US produces 70% of pig crop, Canada 20% and Mexico 10%. EU & NA are remaining relatively stable in production, but China increasing. POULTRY: US accounts for 84% of N. Amer. poultry production, Mexico 11%, and Canada 5%. (Farm Foundation 2004)
Cargill, ADM, Cenex Harvest States Corn can be used for feed (Cargill and ADM have dominant positions in feed sales), dry-milled into flour or flakes (but usually using a special kind), or wet-processed into High Fructose Corn Syrup (or other food ingredients) or Ethanol. ADM & Cargill are major producers of HFCS. CR3 - 71% Cargill, ADM, Bunge, Ag Processing (Note: Bunge was based in Brazil until the 1990s when headquarters moved to the US) Soybeans can be processed for feed and food purposes. These firms are dominant in feed sales and food ingredient sales to manufacturers. CR3 - 55% Cargill (with CHS, a cooperative), ADM, ConAGra. Wheat is milled into different flours and follows a slightly different path than corn/soybeans. This allows ConAgra to play a major role.
United States
Processing: (CR Processing (CR4 CR4 58.5% CR4 - 55% 4 83.5%) Tyson, 66%) Smithfield, Pilgrim's Butterball LLC Cargill, Tyson, JBS/Swift, Pride, Tyson, (JV SmithfieldJBS/Swift, Cargill, Perdue, Maxwell National Beef Production: Sanderson Foods), (Smithfield #5) Smithfield, Farms Cargill, Sara Production: Five Triumph Foods, Lee Rivers Seaboard, Iowa (Smithfield and Select Farms ContiBeef), Cactus Feeders Inc., Cargill (Caprock Cattle Feeders) , Friona Industries (Note: In early 2008, JBS Swift acquired National Beef and the operations of Smithfield, making it the largest beef processor in the US and the world.) TYSON, CARGILL, SMITHFIELD, JBS/SWIFT (Appear in 2 or more categories)
Cargill, ADM, Bunge: The grain sector is relatively dispersed at the collection point level (i.e. country elevators that exist in a particular town or county). However, terminal elevators, those that move grain along major rivers, or at ports, are highly concentrated among the big three. Grain Handling & Storage: Agricore United (ADM partner), Saskatchewan Wehat Pool, Pioneer Grain, Cargill Flour Milling: ADM, JM Smucker
MAIN FIRMS in US:
Canada
Cargill, Tyson (Lakeside Packers), XL Foods, Ecolait Ltee
Maple Leaf Foods (post Schneiders takeover), Olymel, Groupe Brochu, quality meat Packers Limited Tyson de Mexico, Industrias Bachoco SAB
Mexico Smithfield has presence South America
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Cargill Agrcola (R$ 11.517,5 M), Bunge Alimentos (R $ 10.846,8 M), ADM do Brasil (R$ 4.877,9 M), Moinhos Cruzeiro do Sul (R$ 743,5 M), Granol (R$ 662,5 M) Cargill, ADM, Bunge Cargill (R$ 10,147,4 M), Bunge (R$ 9,749,5 M), ADM (R$ 4,413,1 M), LD Commodities (R$ 2,715,2 M), Coamo (R$ 2,324,8 M)
Sadia (R 6,704,9 M), Perdigo ( R 4,556,8 M), JBS-Friboi (R 3,956,2 M)*, Bertin (R 3,615,8 M), Aurora (R 1,715,7 M), Seara (Cargill) (R 1,627,1 M) -- * JBS Friboli is known as JBS-Swift in the US and is now the largest beef processor). In the poultry arena, Tyson in JV with Pena Branco Co. Brazil
MAIN FIRMS: Europe Western Europe
Perdigo, Sadia, Cargill, JBS

ADM, Bunge, Cargill control 80% of oilseed processing
Central & Eastern Europe Asia
Danish Crown, Best Meat, NFZ, Westfleisch Smithfield is dominant in Poland & Romania
ADM, Bunge and Cargill have all invested extensively in new grain handling facilities, particularly in the Ukraine, which is set to become Europe's breadbasket again
China Thailand NewHope CPGroup
CPGroup (27%of poultry production); NewHope CPGroup
Cargill,ADM,Monsanto
Salim Group (edible oils);
PT Bogassari; Salim Group (noodles)
Indonesia CP Group Phillipines India Africa San Miguel San Miguel San Miguel
Seaboard is a major grain trader
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FreshFruits& Vegetables
Dairy Seeds CR4 - 29% DuPont, Monsanto, Syngenta, Limagrain
Inputs Fertilizers Yara, Cargill/Mosaic (Cargill/Mosaic: Mosaic (Cargill 67% and ICM 33%) -- 14.4% of the worlds phosphate, and 15.5% of the worlds potash), Potash Corp (world's 3rd largest producer of phosphate -top five firms control 60% of the world market. (IBD 11 May 07) Chemicals Syngenta, Bayer, BASF, Monsanto, Dow, DuPont Feeds CP Group is world's largest producer of animal feed (see D. Burch, appendix)
Food Manufacutring Cadbury Schweppes (UK), Coca-Cola (USA), ConAgra (USA), Danone (F), Kraft (USA), Masterfoods/Mars (USA), Nestl (CH), PepsiCo (USA), Tyson (USA), Unilever (NL/UK) * (Alphabetical, source Lang, T. et al 2006)
Global Cargill/Mosaic, CF Industries (coop owned)
North America
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Top Processors of Refrigerated/ Frozen Fruits and Vegetables 2006: 1. Fresh Express, with $1,400 million 2. Dole Food Co., $850, 3. NORPAC Foods Inc., $600, 4. General Mills Inc., $500 United States Dean Foods, Kraft Foods, Land O'Lakes, Saputo
Cargill/Mosaic: Mosaic (Cargill 67% and ICM 33%) estimates 50-60% share of the U.S. fertilizer market (Feedstuffs 2/4/04) Land O'Lakes/Purina Mills, Cargill Annimal Nutrition, ADM Alliance Nutrition, J.D. Heiskell Kraft, ConAgra
Corn (Maize) Seed: CR2- 58% DuPont (Pioneer), Monsanto
MAIN FIRMS in US:
Agrium, Saskferco, Canadian Fertilizer, Simplot Canada
Mexico
South America
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Nestl (R$ 6,995,0 M), Avipal (R$ 1,707,4 M), Itamb, (R$ 1,233,8 M), Danone (R $ 1,155,7 M), Batavia (R$ 529,0 M)
Bunge Fertilizantes, Cargill Fertilizantes SP, Heringer ES, Adubos Trevo RS, Ultrafrtil SP, Fosfertil MG CR 5= 60% (2006). Syngenta (16,85%), Bayer (14,96%), BASF (13,36%), Monsanto (8,07%), Dupont (6,65%)
Brazil
Coamo, Dupont/Pioneer, Syngenta Seeds, Sementes Mau, Prsementes
MAIN FIRMS: Europe Western Europe

Nestle, Unilver, Diageo, Danone, Cadbury Schweppes
Central & Eastern Europe Asia
China New Hope Thailand CP Group? Indonesia Phillipines India Africa Salim Group "Indomilk" San Miguel San Miguel CP Group CP Group, New Hope Group, Liuhe Group CP Group, Betagro, P. Charoenphan CP Group
CP Group
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Retail
Fast Food
Global
Wal-Mart, Carrefour, Ahold, Metro (Tesco is strong in Europe and SE Asia) Wal-Mart is the only US food retailer on the global level. European-based firms have invested in the US; dominant global retailers tend to be European.
Burger King (US), Compass (UK), McDonald's (US), Sodexho (FR) Yum! (US) * (Listed alphabetically, source: Lang, T. et al 2006)
U.S.
CR5 - 48% Wal-Mart, Kroger, SuperValu, Safeway, Ahold
1) McDonald's 2) Yum! Brands (announced expansions in China, india, Cambodia, Brazil and Russia in 2007 (Meatingplace))
Canada Mexico
Loblaw, Sobeys, Metro & AP Canada, Safeway (wholly owned by Safeway USA) Wal-Mart de Mexico (WMMVY), Organizacion Soriana (SORIANA.MX), Comercial Mexicana (COMERCI.MX) and Grupo Chedraui. (Soriano is a leader in North Mexico but Texas-based HEB has 29% of Northeastern Mexico grocery market) 1 Po de Aucar (R$ 9,973,5 M), 2 Carrefour (R$ 9,682,4 M), 3 Wal-Mart (R$ 9,590,5 M), 4 Sonae (R$ 5,078,1 M), 5 Atacado (R$ 3,672,3 M) (Sales in 2006). There has been movement. In 2007, the top food retailers by sales in Brazil were Carrefour (13%), Grupo Po de Aucar (13%), and Wal-Mart (11%) . Carrefour had gained 2 percent share between '06 and '07.
Brazil
Western Europe Central & Eastern Europe China
Carrefour, Metro, Tesco, Rewe, / CP Group+Tesco Tesco, Metro, Rewe are leading retailers Yum! Brands largest of American fast-
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food in China; CP Group KFC franchises + "Bua Baan" outlets CP Group KFC franchises + "Bua Baan" outlets KFC franchises
Thailand Tesco, Casino, Central Group, Makro, CP Group (7-Eleven) Salim Group "First Pacific Group" & "Indomaret" (7-Eleven clone) Nigeria -- no significant international chains have invested. Indian & Lebanese immigrants do run shops with imports from Eur., S. Africa & US. Metro and Auchan (Metro is a cash & carry wholesaler selling to small independents. Auchan is the leading hypermarket and supermarket operator operating in a joint venture with a local company.) In early 2004, Aswak Assalam, a modern-style retailer, entered a franchise agreement with French international Casino to rebrand its stores into Aswak Assalam Casino stores. Casino through its subsidiary Leaderprice (discount stores) opened Euromarch in Casablanca.
Indonesia Nigeria Morocco
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The Global Food System Nodes of Power - PHP

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TheGlobalFood SystemandNodes ofPower

Wegratefullyacknowledgethefundingprovidedforthisresearchby OxfamAmerica.Whilethisreportwascommissionedandpreparedfor OxfamAmerica,theviewspresentedheredonotnecessarilyreflect theviewsorpositionsofOxfamAmericaandaresolelytheresultof theresearchersstudyandanalysis.

Electronic copy available at: http://ssrn.com/abstract=1337273

2.3.3LeveragePoints Challenge the legitimacy of IPR for food

2.8.2Leveragepoints Supply management and publicly owned grain reserves

Access to Markets, both Inputs and Commodities

Labor in the Agrifood System

Marketing and Branding

MAIN FIRMS in US:

Cargill, Tyson (Lakeside Packers), XL Foods, Ecolait Ltee

Mexico Smithfield has presence South America

MAIN FIRMS: Europe Western Europe

Perdigo, Sadia, Cargill, JBS

Central & Eastern Europe Asia

China Thailand NewHope CPGroup

CPGroup (27%of poultry production); NewHope CPGroup

Salim Group (edible oils);

PT Bogassari; Salim Group (noodles)

Seaboard is a major grain trader

Dairy Seeds CR4 - 29% DuPont, Monsanto, Syngenta, Limagrain

Global Cargill/Mosaic, CF Industries (coop owned)

Corn (Maize) Seed: CR2- 58% DuPont (Pioneer), Monsanto

MAIN FIRMS in US:

Agrium, Saskferco, Canadian Fertilizer, Simplot Canada

Coamo, Dupont/Pioneer, Syngenta Seeds, Sementes Mau, Prsementes

MAIN FIRMS: Europe Western Europe

Central & Eastern Europe Asia

CR5 - 48% Wal-Mart, Kroger, SuperValu, Safeway, Ahold

Western Europe Central & Eastern Europe China

Indonesia Nigeria Morocco

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