AGRIBUSINESS CONSOLIDATION

Introduction Over the past decade, fewer and fewer agribusiness firms are controlling more and more of our food markets. For example, only one or two firms controls the dairy market in Zimbabwe---Diaryboard and Lyons maid, beef packing------Colcom. While grocery store shelves appear to provide abundant choice s, most of these products are marketed by a small and decreasing number of firms. Gigantic multinational corporations are consolidating their control over food/ agribusiness system, including the organic sector. This trend raises concerns about how this power is exercised, as most of these corporations are accountable to the shareholders, not to the communities in which they operate. The Dynamics of Consolidation The food system can be thought of as a long chain, with food passing through a number of steps or links in the chain on the way from farmers to consumers, such s food storage and processing. There are three processes by which this is occurring:    Horizontal integration Vertical integration Global expansion

Horizontal Integration This refers to consolidation of ownership and control within one stage of the food system, such as processing, for one particular commodity. Horizontal consolidation gives the few firms involved a lot of power. It allows these few firms to influence the prices that they pay agricultural producers and the prices that are charged to consumers. It also provides them with increased political power that they use to influence politicians around food and agricultural policy decisions. The concentration ratio (CR4) developed by Dr. William Hefferman and his colleagues in 1999 suggests that when firms control 405 of the market, it is no longer competitive. This means that the largest firms will have a disproportionate influence on not just the price of a commodity, but also the quantity, quality and location of production

they are able to drive down the prices they pay to producers.Vertical Integration In addition to seeing to fewer firms control more of a given market. A high level of consolidation is one contributing factor to dumping. 1. and environmental erosion. spurred by the recent entry of Wal-mart into food retailing and its expansion to other continents. When few agribusiness firms buy goods from thousands of farmers. however. in given markets. it is able to sell the product abroad very cheaply because of the low price it paid to the farmers. This form of consolidation is called vertical integration. Effects of Consolidation in Agribusiness Among the problems with consolidation in the agribusiness industry are agricultural dumping. is that there are high levels of leverage-if economic developments depress one industry. Agricultural dumping: the process whereby an agricultural company in one country exports its product to another country at a price that is lower than what it actually cost to produce the product is known as „agricultural dumping‟. from “field to table”. as some analysts have predicted there may soon be only few global food retailers. This is most apparent on the retail end of the food chain. compoundi ng the problem. Vertical integration involves linking firms at more than one stage of the food chain such as upstream suppliers or downstream buyers. The advantage in vertical integration is having an assured supply in case of a “tight‟‟ market. For example. increased corporate influence over public policy. there has also been a trend towards firms controlling more of the process. Global Expansion This is an attempt by agri-business firms to increase their market share worldwide. Since the agribusiness firm then controls the processing of the good. The disadvantage. this may “ripple” through the value chain. a seed manufacturer might be able to buy a chemical firm that supplies fertilizer used in the process of producing the seed and be able to use some research and development investments in both processes. . loss of family farms. A massive wave of mergers has been occurring in this industry recently.

Heightened levels of consolidation within the agri-business industry have negative impacts on small farmers and consumers worldwide.2. Through donations and lobbying. which means that seed prices are often very high. such as seeds and fertilizer and receiving low prices for the goods that they produce. Conclusion. Farmers are getting squeezed from both sides: paying high prices for their inputs. . Loss of family farms: high levels of agribusiness consolidation hurt family farming in two ways: i. Consolidation also increases the influence of a small number of profit-driven corporations in the policy-making process. A decentralization of power within the agricultural system is an important step in ensuring the livelihoods of small farmers worldwide and promoting an agricultural system where everyone has a right to food. ii. as well as loss of biodiversity. the seed industry is highly consolidated. Environmental Impacts: there are serious environmental impacts of agribusiness consolidation. consolidation is a serious issue. 4. Corporate influence: an increased level of agribusiness consolidation also means that agribusiness corporations have incredible influence over agricultural policy decisions. There are thousands of farmers who produce a given crop or animal product. First. this gives agri-business firms incredible power in setting the prices they will pay to farmers. Farmers are often paid extremely low prices for their goods. For those who care about environmental sustainability. but there are only a few agri-business firms who buy those crops and animal products. Consolidation contributes to soil and water contamination due to increased dependence on pesticides and other chemicals. 3. agribusiness firms make sure that government policies will not restrain their ability to make profits. soil erosion from producing only one crop.