The grain giants turned hunger into a gold mine. time to take them apart


As economies collapse, inflation spikes and global food prices soar to critically high levels, two sectors appear to have hit the jackpot in 2022 – energy giants and grain traders.

An estimate 345 million people possibly acutely food insecure now, compared to 135 million before the pandemic. In poorer countries that import food, such as Lebanon, Yemen, Sudan and Somalia, vulnerable populations face poverty. Poor consumers in rich countries are struggling to get food on the table.

Supply shocks caused by the COVID-19 pandemic and the Russian invasion of Ukraine were the spark for this famine. But the kindling for the fire was already stoked: the severe, underlying weaknesses in our food system.

This includes many countries strong dependence on food imports, deadlocked production systems, financial speculation and cycles of poverty and debt. Dysfunctional grain markets and the record bonanza enjoyed by grain traders are symptoms of these failings.

For decades, four companies dominated the global grain trade and at least 70% of the market. They are collectively known as ABCD (Archer-Daniels-Midland Company, Bunge, Cargill and Louis Dreyfus). China’s state-owned COFCO and a few other competitors in Asia are now joining the ABCD to share in booming profits. Cargill reported a Revenue increased 23% to a record $165 billion by mid-2022. And in the second quarter of the year, Archer-Daniels-Midland had its highest profits ever.

With food prices skyrocketing and hunger rising, and the prospect of even more supply shortages, such profiteering is clearly unfair and a sign of blatant market failure. The price spikes have occurred despite plentiful public and private ones stocks of grain. There is no correlation between the grain traders’ outsized profits and what they deliver in terms of food security or sustainability. The ABCD have failed to fulfill their basic functions of ensuring food gets to the people who need it and at a stable price.

There is a lack of transparency about the grain stocks of the ABCDs. There is also no way to ensure that they will be released in a timely manner. Instead, the grain giants have an incentive to hold back inventories in hopes of higher prices.

But while these companies are posting big profits, others are feeling the impact of the food systems they helped shape. The globalized just-in-time food distribution system can quickly be disrupted at a single point. The system is highly specialized, linear and designed to optimize large flow rates assuming stable conditions. It is efficient for the ABCD to handle only a handful of plants – standardized varieties from specialized production regions transported on centralized shipping routes. But when the system goes into shock, it can be staggering. The real test of any system is how it behaves under stress and under unexpected conditions. When it comes to securing the global food chain, resilience is fundamental – even more so in a world confronted with increasingly extreme weather conditions.

The level of monopoly in the grain markets also contributes to their failure. The global grain markets are more concentrated than the energy sector and even less transparent. The grain giants exert such influence over markets and the development of government policy that there is no incentive to change or relinquish their power. This is a trait shared with many other parts of the “agrifood” chain, from seed and agrochemical monopolies to farm machinery and meat production, as documented in a new ETC Group report. And all of them are essentially owned by the the same group of wealth management firms: State Street, Vanguard and Blackrock.

What should I do?

A one-time windfall tax on the grain giants’ unearned profits would temporarily help correct market failures. It would also free up billions for food security efforts, mirroring the taxes levied on the record profits of fossil fuel giants in India, Britain, Germany and China soon the EU.

More transparency about grain markets is key. There has never been a stronger argument for the United Nations Agricultural Markets Information System (AMIS) incorporating food stocks and trade data from major grain traders to reduce speculation and the risk of economic bubbles.

The just-in-time model also needs to be revised. Food systems should have spare capacity as a buffer against production or trade disruptions. Toyota pioneered just-in-time manufacturing in the 1960s and was to be emulated by all other industries. But unlike its rival automakers, Toyota has always made sure its supply chain is diversified and production centers localized. This made it more shockproof. For food systems, this would mean backup networks of regional grain reserves controlled jointly by different governments, and regionalized networks of more diverse foods, crop varieties, seeds, trade routes, businesses, and producers. Climate change adds urgency to the task of spreading risk by prioritizing the diversity of crops, producers and supply routes.

Ultimately, the ABCDs of this world are the wrong ones to pull us out of the multiple crises of the food system. The world’s indigenous and small-scale producers have domesticated over 7,000 crops. That’s 6,988 more than is regularly traded by the ABCD. Their crops and non-globalized food webs are the true diversity and resilience we need to supplant our precarious dependence on ABCD.

Teaser photo credit: Allis Chalmers SAME L2. By Bryan Wittal (Northwest user) – Transferred from [1]: 2007-01-16 21:37 . . Northwest . . (GLEANER L2, photo by Bryan Wittal.), Public Domain,


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