September 2013 AGROOPPOLY A handful of corporations control world food production Introduction Battle of the giants The world’s human population and food consumption are growing – does this mean the number of companies involved in the food sector is growing as well? The opposite is true: big corporations buy smaller companies and thus increase their market share and power. Hence, companies can dictate prices, terms and conditions and, increasingly, the political framework. Much of what we consume in the North is being produced more cheaply in the Global South. The profits are made by only a few, predominantly Northern, companies. The big losers are the plantation workers and small farmers in the South, as they are the weak- est links in the “value chain”. In no other section of the population is hunger so widespread. More and more ecosystems are being degraded and destroyed. This document shows in Major concentration in a few years: In 1996, the and producing inputs. This is not about distrib- brief how industrialisation ten biggest seed companies had a market share of uting business risks across several sectors but and concentration in the less than 30 %. Today, the three largest control about controlling the value chain and access to global food sector under- more than 50 % of the market. Often seeds be- cheap raw materials. mine sustainable food sys- come more expensive with fewer varieties avail- tems and food sovereign- able. The three market leaders in seeds are also Value chains instead of nutrient and energy cir- ty. Sustainable agriculture major pesticide producers. culation: What used to be produced on the farm is based on small-scale, as part of a circular economy – seeds, young ani- diverse farming and local The powerful control the chain: Farmers are mals, feed, fertiliser – is today a global indus- and regional production. pressurised by corporations; they are paid low trial “value chain” for food and agrofuels, with prices for their products such as soya, wheat, negative consequences for soil, water, climate, and maize, and they pay high prices for seeds, animal protection, and health. pesticides, energy, fertilisers and animal feed. The record food prices of 2008 resulted in higher Lobby instead of competition: The influence of profits for corporations, and not for farmers who food corporations on politics and the public is have to bear all the risks. growing. Thousands of lobbyists promote cor- porate interests. Corporate lobbyists often also Who gains? Vietnamese aquaculture farmers work in government institutions. They often suc- produce Pangasius fish, for which Northern con- cessfully lobby for corporate interests on food sumers pay around US$ 10 per kilo. The farmer standards, approval of pesticides, GM seeds, gets US$ 1. After deduction of production costs trade agreements, or the public research agenda. their income is 10 cents per kilo. And the farm- ers bear all the risks of aquaculture such as fish World trade dominates prices: 85 % of all food diseases and weather problems; many also have is consumed close to where it is produced. Nev- debts to the aquaculture companies. ertheless, global trade has a disproportionate in- fluence on prices. On the stock market, batches Controlling the chain: In addition to horizontal of the same soya and maize may be traded specu- integration, where one company controls a large latively several times over, thus increasing price share of the market, corporate strategies aim at volatility. vertical integration by processing the product BERNE DECLARATION/ECONEXUS_AGROPOLY_2 Sectors in the value chain Who controls our food? Market share of the 15.5 % TOP 10 corporations: Turnover volume of the sector: Animal Feed (p. 6) US$ 350 billion Market share of the 99 % Livestock Breeding (p. 7) TOP 4 corporations: Only four companies worldwide for breeding chickens. Market share of the 75 % Turnover volume TOP 10 corporations: of the sector: Seeds (p. 9) US$ 34.5 billion Turnover volume Market share of the 55 % of the sector: TOP 10 corporations: Fertiliser (p. 11) US$ 90.2 billion Market share of Pesticides (p. 12) Turnover volume of the sector: TOP 11 corporations: US$ 44 billion Pesticide market leaders also dominate the seed market. “Traditional Farm” , Feed, Fertil als iser nim a g n u o Y , s d e e S Sale Production Consumer External Inputs Feed, seeds, fertiliser and young animals were only a few external inputs and the were once produced and used on the food produced was sold locally. farm as part of a circular economy. There Now those markets are all separate. 3_ AGROPOLY_BERNE DECLARATION/ECONEXUS There are about 1 billion farmers on around 450 million farms worldwide, of which 85 % are small- scale; plus 450 million farm labourers. Trade (p. 14) Processing (p. 15) Grains and soya Market share of the 28 % TOP 10 corporations: Market share of the 75 % TOP 4 corporations: Turnover volume of the sector US$ 1,377 billion Production (p. 13) 97.8 % Cargill: Example of vertical integration Market leaders enter other sectors. biggest cereal trader Cargill extends Syngenta does not just produce pestici- credit to farmers, produces food des and seeds, but also provides and feed, trades in energy, stock exchange credit for vegetable production. The products, and much more. = Contracts with farmers for cereal production and cattle and pig fattening Feed: Soy Buys, transports, and exports grain and soya Retail Stock breeding Processing Trade Has contract Seeds Beef, pork, to supply Kroger and soya Supermarkets Consumer Delivers Fertiliser feed, Production seeds and fertiliser Pesticides to farmers 4_AGROPOLY_BERNE DECLARATION/ECONEXUS Market share of the TOP 10 corporations: 10.5 % Turnover volume 6 billion of the sector US$ 7,180 billion Consumers Retail (p. 16) Despite having a small share of the global market the biggest supermarket corpora- tions are more powerful than many states. TheThe coffee coffe value chain Small-scale farmers and labourers 25,000,000 International Traders 5 (Neumann, Volcafe, ECOM, Kraft, Nestlé) – 55 % of world trade) Roasters 3 (Nestlé, Kraft, Sara Lee) – 40 % of the world coffee market) Retail Consumers 500,000,000 Around 25 million farmers produce cof- Nestlé already controls part of the coffee fee that is consumed by 500 million planting material. In Mexico, Thailand, consumers. Just three companies roast in the Philippines, and in Indonesia, Nestlé 40 % of the global coffee harvest and five has 16 million coffee bushes under contract companies trade in 55 % of the coffee. farming. By 2020, Nestlé wants to in- crease this to 220 million coffee bushes. Source: www.nestle.com BERNE DECLARATION/ECONEXUS_AGROPOLY_5 Animal feed The ten largest feed manufacturers control by volume 16 % of the world mar-mar- ket. The feed giants are verticallyy integrated. Cargill, for example, is the world’s largest buyer of agriculturalal commodities and Charoen Pokphand is the largest producer of meat and shrimp.iThthtlltfth Thus, they control large parts of the value chain. Furthermore, they develop and control markets for specialty feeds. For example, 90 % of salmon feed is produced by only three companies: Skretting (belongs to Europe’s largest feed manufacturer Nutreco); EWOS Market leader Charoen Pokphand (CP (owned by Cermaq), and BioMar. The feed manufacturers pass on price in- Group) was founded in Bangkok in 1921 as creases to the salmon producers via contracts. a vegetable seed shop. In 1956, a feed mill was added, and in 1970, farmers were contracted for chicken fattening and export to Japan. TOP 10 feed corporations Pig fattening and shrimp production, supermarkets, fast-food chains and petrol New Hope Group (Taiwan) 1.8 % stations followed. Today, CP Group is Cargill (USA) 2.3 % the largest food company in Asia and the Charoen Pokphand world’s largest feed manufacturer. The (CP Group) (Thailand) 3.4 % total turnover of CP Group amounts to US$ 5 billion (2009). 30 years ago, the company was the first foreign investor in China and today owns 130 feed mills, representing a market share of 20 %; and large facilities for chicken fattening and Land O`Lakes Purina (USA) 1.5 % processing, fast-food restaurants, shop- Tyson Foods (USA) 1.5 % ping malls, and motorcycle factories. In the Brazil Foods (Brazil) 1.5 % value chains for shrimp, chicken and Nutreco Holding N.V (Netherlands) 1.3 % pork meat, CP Group leads the market in Other companies 84 % Zen-noh-Co-operative (Japan) 1.0 % most Asian countries. East Hope Group (Taiwan) 1.0 % Hunan Tangrenshan Group (Taiwan) 0.7 % Problems Producing one kilogram of meat requires on average three kilos of grain and soya. These re- sources could feed an extra 3,5 billion people, according to the UN. The feed market amounted to 870 million tonnes in 2011, But growing consumption of industrial ani- worth US$ 350 billion. The Top 10 had a share of around 16 % in 2009. mal products requires ever more industrially Source: Feed International, Alltech Global Feed Survey, own calculations produced feed. More than 90 % of global soya- bean production goes into feed; with maize it Major soya 3 % India is two thirds. Now soya is increasingly used 6 % China in aquaculture. Feed production occupies one producing third of the earth’s agricultural land and uses countries 21 % Argentina agrochemicals. Soyabean cultivation is linked to Source:ce: USDA 2009/10 season forest destruction, especially in South America. Two thirds of nitrous oxide emissions, which 27 % Brazil remain more than 100 years in the atmosphere, and are particularly