Making a Killing from the Food Crisis

Making a killing from the food crisis

The Real News

Devlin Kuyek: "Right now Cargill is making approximately $471 000 an hour in profits"

Tuesday May 13th, 2008

While people around the world are suffering from hunger and protesting the rise in global food prices, major grain traders, such as Cargill, are reporting big profits. Making a Killing from Hunger, a report by international NGO, GRAIN, says that the global food crisis is more than a food shortage or a price blip, it's a structural meltdown, resulting from globalization and neoliberal policies.

Devlin Kuyek is a researcher on global agribusiness for GRAIN, an international NGO which promotes the sustainable management and use of agricultural biodiversity. He is also the author of The Real Board of Directors: The construction of biotechnology policy in Canada, and Good Crop/Bad Crop: Seed Politics and the Future of Food in Canada .

Transcript:

VOICE OF ZAA NKWETA, PRESENTER: Global food prices continue to soar, causing hunger and rioting in many parts of the world. But according to a recent report by international NGO GRAIN, there is another side to the story. The report, "Making a Killing from Hunger," says big profits are being made by several food corporations and investors. Devlin Kuyek, a lead author of the report, finds that the problem is more than a food shortage or a price blip; he says the food system is experiencing a structural meltdown.

DEVLIN KUYEK, RESEARCHER, GRAIN: The food crisis is essentially a structural problem. It goes much deeper than this kind of perfect storm scenario that a lot of people have been painting. It has to do with three decades or more of structural adjustment programs, trade liberalization policies that have forced many countries to dramatically alter their food production and to shift to becoming, in many cases, import-dependent. So there's been this move to push production into places that they say is more efficient, and the advice given by agencies like the World Bank and the IMF has been to say, "Let others look after your food production. They can do it more efficiently. You focus on other things." There's the example of Haiti and how it used to be, three decades ago, self-sufficient in rice. It was told to open up its markets by the IMF and its donors. Cheap rice flooded in from the US. It undercut local production; a lot of that declined. So Haiti is put in a position where now it's dependent on imports from the US. And when you get this escalating market prices, of course, the country and large numbers of poor people who live there are extremely vulnerable. And we're in a situation today where the food crisis is really not even a problem with supply; it's more a problem of price, and people can no longer afford to buy it. You've got a shift also in production, the type of agricultural production. Governments have pursued policies to industrialize their agriculture, and this has made agriculture highly dependent on inputs, so whether it's seeds, chemical fertilizers, or machinery, and often dependent on petroleum for production as well. And in the midst of all this, in the global food system that's been created over the last few decades, we have some corporations that sit in the middle of it all and who really have taken a stronger and stronger position in managing the food system. They're the ones who are profiting immensely now from this food crisis. So even though we're in a situation where millions of people can no longer afford to fulfill their basic food needs, you have corporations making record profits, a company like Cargill, which is one of the world's biggest grain traders. There are only a small number of companies that control the trade in basic cereals, and Cargill's one of these companies. And its profits are higher than they've been in years. Right now, Cargill's making approximately $471,000 an hour in profits. Cargill's also one of the world's largest fertilizer companies. And so in a time like this where countries are desperate to increase their food production, Cargill and other fertilizer companies are taking advantage of this and boosting up the prices that they're charging for the fertilizer. I mean, in some cases they're doubling, almost tripling the prices that they were asking for last year, which were already high. Cargill's profits from fertilizer are also topping, you know, $2 billion from last year alone. And then, of course, you have companies like the seed companies, the Monsantos and Syngentas and Duponts, who have been taking an increasingly large share of the global seed market through policies of privatization, through the expansion of GM agriculture, genetically modified crops, and they too are raking in enormous profits. Monsanto's profits, I think, from last year are up about 44 percent. This is a situation we're seeing across the board. It's hard to imagine how you could look at the current scenario and say, well, we need more globalization, we need more trade liberalization. It makes much more sense in this kind of situation that countries get back to basics and start looking at how they're going to satisfy the food needs of their people and not be so dependent on exports and on the world market, not be dependent on a market where corporations can essentially make as much profits as they want, especially in crisis times, when the need is higher and the demand is higher, when people are more desperate. I think if anything we need a complete rethink of the model that we're in.

Food Profiteering and Starvation

Profiteers Drive 100 Millions Towards Starvation

By Geoffrey Lean, Independent UK

Giant agribusinesses are enjoying soaring earnings and profits out of the world food crisis which is driving millions of people towards starvation, The Independent on Sunday can reveal. And speculation is helping to drive the prices of basic foodstuffs out of the reach of the hungry.

The prices of wheat, corn and rice have soared over the past year driving the world's poor -- who already spend about 80 per cent of their income on food -- into hunger and destitution.

The World Bank says that 100 million more people are facing severe hunger. Yet some of the world's richest food companies are making record profits. Monsanto last month reported that its net income for the three months up to the end of February this year had more than doubled over the same period in 2007, from $543m (£275m) to $1.12 billion. Its profits increased from $1.44 billion to $2.22 billion.

Cargill's net earnings soared by 86 per cent from $553m to $1.030 billion over the same three months. And Archer Daniels Midland, one of the world's largest agricultural processors of soy, corn and wheat, increased its net earnings by 42 per cent in the first three months of this year from $363m to $517m. The operating profit of its grains merchandising and handling operations jumped 16-fold from $21m to $341m.

Similarly, the Mosaic Company, one of the world's largest fertiliser companies, saw its income for the three months ending 29 February rise more than 12-fold, from $42.2m to $520.8m, on the back of a shortage of fertiliser. The prices of some kinds of fertiliser have more than tripled over the past year as demand has outstripped supply. As a result, plans to increase harvests in developing countries have been hit hard.

The Food and Agriculture Organisation reports that 37 developing countries are in urgent need of food. And food riots are breaking out across the globe from Bangladesh to Burkina Faso, from China to Cameroon, and from Uzbekistan to the United Arab Emirates.

Food Distribution Problem Not Production

Southeast Asia

Mong Palatino, Global Voices

Prices of rice and other basic food items are increasing in the world. The global food price crisis is affecting millions, possibly billions of people. Food policies are challenged. Governments are imposing emergency measures to calm down their restless constituents. The Southeast Asian region, home to several emerging and developing economies, is also struggling to cope with the situation.

For want of a better title more or less sums up the problem in the region:

“The biggest problem with our rising rice prices is that it’s more a distribution error than a problem with the rice yields. It’s more about politics than it is about agriculture…What’s probably going to happen though is an even higher rise in rice prices. The thing about a necessary product is that when price goes up, people buy more. And since they’re spending more on rice, they’ll spend less on the things that accompany that rice.”

Even Singapore, one of Asia's richest countries, is now scrambling to offer cheap food prices as reported by Singapore News Alternative.

Rice exporting nations are also gripped with panic. Thanh Nien cites that “Rice fever runs hot in several Vietnam provinces.” Details are Sketchy is worried because nearly half a million kids in Cambodia are expected to start missing meals in the coming weeks as a result of the rising cost of rice.

Vuthasurf describes the mood in Phnom Penh:

“The rice price is remarkably increasing in Phnom Penh. Phnom Penh residents have been buying and stocking rice. All type of rice price is increasing too fast and making Cambodian people worried. The price of rice is going up across the nation by more than 20 percent, comparing to the previous year. Rising the rice price is helping the farmers but it is hitting badly the poor such as garment workers, teachers, civil servants who have low-income.”

But Cambodia’s government is optimistic that rice production will improve. Im Sokthy explains:

“Cambodia has about two million hectare of land for rice production. Its existing irrigation system can cover 30 percent of the land. It can expand to three million hectares for rice production. Adding to this, Cambodia could cultivate about two to three times per year on the same land areas. Based on this, it is seen that Cambodia has huge potential to become the world's largest rice exporting country.”

Youthful Insight notes the anomaly in policymaking in Indonesia, which may be applicable as well to other countries:

“On one side the government must keep inflation and food price low enough so its does not hurt the poor. But on the other side the government must maintain a reasonable high price to give incentive to farmers to increase their production and increase rural welfare. Is there any policy to achieve both objectives above? Yes! Give high subsidy to the farmers like what the developed countries are doing. But the problem is our government does not have the money to do it.

“Cheap food price is good for poor urban, whose main sources of income are the service and manufacturing sectors. But bad for rural poor whose main source of income is agriculture sector. Lower food price means lower income and also lower welfare for rural area. The government sacrifices the rural for the sake of the urban. Why? Because urban poor is more attractive politically than rural poor.”

New Mandala mentions the ongoing debate in Thailand about the extent to which farmers will benefit from high rice prices. Thailand Crisis is surprised to hear the Thai Prime Minister exhorting the people to eat less so that Thailand can export more rice.

The Malaysian quotes a politician who is asking the Malaysian government to stop the space mission program so that the money can be used to develop Sabah as a food producing state.

Filipino journalist Ricky Carandang points to another reason for the rising food prices:

“Yes, there are real supply and demand factors driving up rice prices, but one must concede that a big chunk of the increases in the prices of oil, gold, and rice, are due to speculation on the international commodities markets.”

Lengua et Pluma blames the economic policies of the Philippine president:

“The government is quick to blame the traders, when it hides on the background its policies that pave the way for cartel operations and the declining rice production in the country. This crisis that has brought about the overdependence on the importation of food, and an agriculture that is geared mainly towards the production of raw materials for export, has put on the forefront the long-running problems that beset our agriculture and farmers –lack of irrigation, lack of subsidy on the production of our farmers, land use and crop conversion, and the monopoly of land by a few land owners and transnational corporations, to name a few.”

Local Freakonomics hopes the Brunei government will continue subsidizing the price of basic food items:

“While I don’t expect the government to subsidize all food but I do expect some food price subsidies/food security packages are being planned for Brunei’s staple food (in addition to rice and sugar) such as cooking oil, flour, milk, eggs, chicken.”

The World is not Kind

The increase of power and control of organizations such as the World Bank and the WTO exacerbate the problem. They replace national food banks without a care for local conditions. They promote cash crops for export over basic foodstuffs. They force concentrations of production into areas far from markets. Sharply rising fuel costs can have an exponential effect on commodity prices. A relatively small number of traders in futures can devastate the lives of ordinary citizens.
Already, the Americans speak of geopolitical power by allocating grains to offset the fuel advantages of potential foes. I'm waiting for them to shift water supplies to their advantage.
The world is not kind.