<nettime> Making a Killing from Hunger

[Brian Holmes <brian.holmes@wanadoo.fr>]

Hello friends -

I don't forward a tremendous amount of articles, but this overview
of the current world food crisis, pasted below, is really worth a
post-Mayday read.

What emerges from the text and its many references is the existence of
a "commodities super-cyle" on Wall Street, connected to and driving
the increase in food prices all over the world. The successive
speculative bubbles around communications technology, suburban
housing, and now food, have fed ambiguously off our minds, insidiously
off our need for housing, and now, desperately and dangerously off the
most basic human requirement: getting something to eat. Each time, the
speculators have moved to a broader, more distributed terrain from
which profit can be extracted. Now they have reached the very basis of
existence, the ground from which the harvest springs.

For them this is a kind of endgame: the still-unfolding credit crisis
is so big and so threatening to speculators that another terrain for
bubble-formation had to be found, lest capital itself become sterile
and useless. But the new field of speculation had to have a larger
base then the previous one, it had to reach deeper into the pockets of
ordinary people, so that even greater amounts of world savings could
be pooled into a pyramid scheme that would guarantee profitability for
the biggest investors. The question then arose: how to extract savings
from people who don't have any, who aren't anywhere near the status of
the first-time home buyer, let alone the small-fry day trader who got
fleeced at the end of the dot-com boom?

The answer was already discovered about a year ago. It is commodities,
things that everyone needs, ranging from oil to wheat, rice, corn and
soybeans, with plenty of gold stashes and biofuel schemes along the
way. Rising world demand provides every reason to be sure these things
will be more valuable in the future: so let the speculation begin! But
since each bubble collapses, don't we now have to imagine a collapse
in grain markets? And who can really imagine the consequences on the
distribution, in a world where basic needs have been so thoroughly
marketized? Can people living on 1 or 2 dollars a day really afford to
pay 20, 30 or 100 percent more, just to be sure there's a cut for the
speculators?

Everyone needs a better future!

best, BH

******

Making a Killing from Hunger

http://www.grain.org/articles/index.cfm?id=39

For some time now the rising cost of food all over the world has taken
households, governments and the media by storm. The price of wheat
has gone up by 130% over the last year.[1] Rice has doubled in price
in Asia in the first three months of 2008 alone,[2] and just last
week it hit record highs on the Chicago futures market.[3] For most
of 2007 the spiralling cost of cooking oil, fruit and vegetables,
as well as of dairy and meat, led to a fall in the consumption of
these items. From Haiti to Cameroon to Bangladesh, people have been
taking to the streets in anger at being unable to afford the food they
need. In fear of political turmoil, world leaders have been calling
for more food aid, as well as for more funds and technology to boost
agricultural production. Cereal exporting countries, meanwhile, are
closing their borders to protect their domestic markets, while other
countries have been forced into panic buying. Is this a price blip?
No. A food shortage? Not that either. We are in a structural meltdown,
the direct result of three decades of neoliberal globalisation.

Farmers across the world produced a record 2.3 billion tons of grain
in 2007, up 4% on the previous year. Since 1961 the world’s cereal
output has tripled, while the population has doubled. Stocks are
at their lowest level in 30 years, it’s true,[4] but the bottom
line is that there is enough food produced in the world to feed the
population. The problem is that it doesn’t get to all of those who
need it. Less than half of the world’s grain production is directly
eaten by people. Most goes into animal feed and, increasingly,
biofuels – massive inflexible industrial chains. In fact, once you
look behind the cold curtain of statistics, you realise that something
is fundamentally wrong with our food system. We have allowed food
to be transformed from something that nourishes people and provides
them with secure livelihoods into a commodity for speculation and
bargaining. The perverse logic of this system has come to a head.
Today it is staring us in the face that this system puts the profits
of investors before the food needs of people.

Market realities

The policy makers who have shaped today’s world food system – and who
are supposed to be responsible for averting such catastrophes – have
come out with a number of explanations for the current crisis that
everyone has heard over and over again: drought and other problems
affecting harvests; rising demand in China and India where people are
supposedly eating more and better than in the past; crops and lands
being massively diverted into biofuel production; and so on. All of
these issues, of course, are contributing to the current food crisis.
But they do not account for the full depth of what is happening. There
is something more fundamental at work, something that brings all these
issues together, and which the world’s finance and development chiefs
are keeping out of public discussion.

Nothing that the policy makers say should obscure the fact that
today’s food crisis is the outcome of both an incessant push towards
a “Green Revolution” agricultural model since the 1950s and the
trade liberalisation and structural adjustment policies imposed on
poor countries by the World Bank and the International Monetary Fund
since the 1970s. These policy prescriptions were reinforced with
the establishment of the World Trade Organisation in the mid-1990s
and, more recently, through a barrage of bilateral free trade and
investment agreements. Together with a series of other measures,
they have led to the ruthless dismantling of tariffs and other tools
that developing countries had created to protect local agricultural
production. These countries have been forced to open their markets
and lands to global agribusiness, speculators and subsidised food
exports from rich countries. In that process, fertile lands have been
diverted away from serving local food markets to the production of
global commodities or off-season and high-value crops for Western
supermarkets. Today, roughly 70% of all so-called developing countries
are net importers of food.[5] And of the estimated 845 million hungry
people in the world, 80% are small farmers.[6] Add to this the
re-engineering of credit and financial markets to create a massive
debt industry, with no control on investors, and the depth of the
problem becomes clear.

Agricultural policy has completely lost touch with its most basic
goal of feeding people. Hunger hurts and people are desperate. The
UN World Food Programme estimates that recent price hikes have meant
that an additional 100 million people can no longer afford to eat
adequately.[7] Governments are frantically seeking shelter from the
system. The fortunate ones, with export stocks, are pulling out of the
global market to cut their domestic prices off from the skyrocketing
world prices. With wheat, export bans or restrictions in Kazakhstan,
Russia, Ukraine and Argentina mean that a third of the global market
has now been closed off. The situation with rice is even worse:
China, Indonesia, Vietnam, Egypt, India and Cambodia have banned or
severely restricted exports, leaving just a few sources of export
supply, mainly Thailand and the US. Countries like Bangladesh can’t
buy the rice they need now because the prices are so high. For years
the World Bank and the IMF have told countries that a liberalised
market would provide the most efficient system for producing and
distributing food, yet today the world’s poorest countries are forced
into an intense bidding war against speculators and traders, who are
having a field day. Hedge funds and other sources of hot money are
pouring billions of dollars into commodities to escape sliding stock
markets and the credit crunch, putting food stocks further out of poor
people’s reach.[8] According to some estimates, investment funds now
control 50–60% of the wheat traded on the world’s biggest commodity
markets.[9] One firm calculates that the amount of speculative money
in commodities futures – markets where investors do not buy or sell
a physical commodity, like rice or wheat, but merely bet on price
movements – has ballooned from US$5 billion in 2000 to US$175 billion
to 2007.[10]

The situation today is untenable. Look at Haiti. A few decades ago
it was self-sufficient in rice. But conditions on foreign loans,
particularly a 1994 package from the IMF, forced it to liberalise
its market. Cheap rice flooded in from the US, backed by subsidies
and corruption, and local production was wiped out.[11] Now prices
for rice have risen 50% since last year and the average Haitian
can’t afford to eat. So people are taking to the streets or risking
their lives to journey by boat to the US. Food protests have also
erupted in West Africa, from Mauritania to Burkina Faso. There, too,
structural adjustment programmes and food-aid dumping have destroyed
the region’s own rice production, leaving people at the mercy of the
international market. In Asia, the World Bank constantly assured the
Philippines, even as recently as last year, that self-sufficiency in
rice was unnecessary and that the world market would take care of its
needs.[12] Now the government is in a desperate plight: its domestic
supply of subsidised rice is nearly exhausted and it cannot import all
it needs because traders’ asking prices are too high.

Making a killing from hunger

The truth about who profits and who loses from our global food system
has never been more obvious. Take the most basic element of food
production: soil. The industrial food system is a chemical-fertiliser
junkie. It needs more and more of the stuff just to keep alive,
eroding soils and their potential to support crop yields in the
process. In the current context of tight food supplies, the small
clique of corporations that control the world’s fertiliser market
can charge what they want – and that’s exactly what they are doing.
Profits at Cargill’s Mosaic Corporation, which controls much of the
world’s potash and phosphate supply, more than doubled last year.[13]
The world’s largest potash producer, Canada’s Potash Corp, made more
than US$1 billion in profit, up more than 70% from 2006.[14] Panicking
now about future supplies, governments are becoming desperate to boost
their harvests, giving these corporations additional leverage. In
April 2008, the joint offshore trading arm for Mosaic and Potash hiked
the price of its potash by 40% for buyers from Southeast Asia and by
85% for those from Latin American. India had to pay 130% more than
last year, and China 227% more.[15]

While big money is being made from fertilisers, it is just a
sideline for Cargill. Its biggest profits come from global trading
in agricultural commodities, which, together with a few other big
traders, it pretty much monopolises. On 14 April 2008, Cargill
announced that its profits from commodity trading for the first
quarter of 2008 were 86% higher than the same period in 2007. “Demand
for food in developing economies and for energy worldwide is boosting
demand for agricultural goods, at the same time that investment monies
have streamed into commodity markets,” said Greg Page, Cargill’s
chairman and chief executive officer. “Prices are setting new highs
and markets are extraordinarily volatile. In this environment,
Cargill’s team has done an exceptional job measuring and assessing
price risk, and managing the large volume of grains, oilseeds and
other commodities moving through our supply chains for customers
globally.”[16]

Managing and assessing are not so difficult for a company like
Cargill, with its near monopoly position and a global team of analysts
the size of a UN agency. Indeed, all of the big grain traders are
making record profits. Bunge, another big food trader, saw its profits
of the last fiscal quarter of 2007 increase by US$245 million, or 77%,
compared with the same period of the previous year. The 2007 profits
registered by ADM, the second largest grain trader in the world, rose
by 65% to a record US$2.2 billion. Thailand’s Charoen Pokphand Foods,
a major player in Asia, is forecasting revenue growth of 237% this
year.

The world’s big food processors, some of which are commodity traders
themselves, are also cashing in. Nestlé’s global sales grew 7%
last year. “We saw this coming, so we hedged by forward-buying raw
materials”, says François-Xavier Perroud, Nestlé’s spokesman.[17]
Margins are up at Unilever, too. “Commodity pressures have increased
sharply, but we have successfully offset these through timely pricing
action and continued delivery from our savings programmes”, says
Patrick Cescau, Group CEO of Unilever. “We will not sacrifice our
margins and market share.”[18] The food corporations don’t seem to
be making these profits from of the retailers. UK supermarket Tesco
reports profits up 12.3% from last year, a record rise. Other major
retailers, such as France’s Carrefour and the US’s Wal-Mart, say that
food sales are the main factor sustaining their profit increases.[19]
Wal-Mart’s Mexican division, Wal-Mex, which handles a third of overall
food sales in Mexico, reported an 11% increase in profits for the
first quarter of 2008. (At the same time Mexicans are demonstrating in
the streets because they can no longer afford to make tortillas.[20])

It seems that nearly every corporate player in the global food chain
is making a killing from the food crisis. The seed and agrochemical
companies are doing well too. Monsanto, the world’s largest seed
company, reported a 44% increase in overall profits in 2007.[21]
DuPont, the second-largest, said that its 2007 profits from seeds
increased by 19%, while Syngenta, the top pesticide manufacturer and
third-largest company for seeds, saw profits rise 28% in the first
quarter of 2008.[22]

Such record profits have nothing to do with any new value that these
corporations are producing and they are not one-off windfalls from
a sudden shift in supply and demand. Instead, they are a reflection
of the extreme power that these middlemen have accrued through the
globalisation of the food system. Intimately involved with the shaping
of the trade rules that govern today’s food system and tightly in
control of markets and the ever more complex financial systems through
which global trade operates, these companies are in perfect position
to turn food scarcity into immense profits. People have to eat,
whatever the cost.

The urgent need for a policy rethink

The larger backdrop to this perverse food market situation is the
global financial system, which is now teetering on its flimsy axis.
What began as a localised housing loan collapse in the US in 2007 has
unravelled into something far more serious, as people realise that the
emperors of the global financial system have no clothes. The world
economy is living on debt that no one can pay. While central bankers
and Lear jet executives try to patch the holes and restore confidence,
the underlying truth is that the system is close to bankruptcy and
no one in power wants to take the necessary tough measures: not the
IMF, nor the World Bank, nor the leaders of the world’s most powerful
nations. Not much more than public relations glitter can be expected
from the G8 meeting in June.

Similar problems lie at the heart of the food crisis: an ideologically
driven elite has forced countries to wrench open markets and let
the free market run, so that a few megacorporations, investors and
speculators can take huge payoffs. Many countries have lost that most
basic power: the ability to feed themselves. This loss, coupled with
the corruption that plagues our countries and trading systems, shows
that neoliberalism has lost any legitimacy that it might once have
had. It is a measure of how out of touch these ideologues are that
many now openly call for more trade liberalisation as a solution to
the food crisis, with some even proposing that the rules of the WTO
be changed to prevent countries from imposing export restrictions on
food.[23]

The World Bank president, Robert Zoellick, has tried to win the world
over with his call for a “New Deal” to solve the hunger crisis, but
there is nothing new about it: he calls for more trade liberalisation,
more technology and more aid. Today’s food crisis is the direct result
of decades of these policies, which must now be rejected. While
immediate action is necessary to lower food prices and to get food
to those who need it, we also need radical changes in agricultural
policy so that small farmers around the world gain access to land and
can make a living from it. We need policies that support and protect
farmers, fishers and others to produce food for their families,
for the local markets and for people in cities, rather than money
for an abstract international commodity market and a tiny clan of
corporate boardroom executives. And we need to strengthen and promote
the use of technologies based on the knowledge and in the control
of those who know how to grow food. To put it another way, we need
food sovereignty, now – the kind that is defined and driven by small
farmers and fisherfolk themselves.

Social movements around the globe have been struggling to promote
such a reversal of strategy, only to be dismissed as unrealistic and
backward by those in power, and often violently repressed. The glimmer
of hope in this crisis is that the situation can be reversed. Peasant
organisations have concrete proposals about what needs to be done to
resolve the crisis in their countries, and governments should listen
to what they are saying. Already some governments are talking of a
policy change towards food self-reliance.[24] Others are starting to
question the fundamental rationale of pushing for more free trade.
Neoliberal hawks at the top of the global food policy pyramid have
lost whatever credibility they may think they once had. It is time for
them to move out of the way so that the visions of food sovereignty
and agrarian reform that come from the grassroots can take their place
and get us out of this hellish mess.

Going further:

     * Overview: FAO, World Food Situation: 
http://www.fao.org/worldfoodsituation
     * Overview: Financial Times, “The global food crisis”, interactive 
map, last updated 21 April 2008: http://tinyurl.com/6knmy8
     * Overview: Stefan Steinberg, "Financial speculators reap profits 
from global hunger", Global Research, Centre for Research on 
Globalisation, Montreal, 24 April 2008.
       http://globalresearch.ca/index.php?context=va&aid=8794
     * Overview: Confédération Paysanne, “Les révoltes de la faim dans 
les pays du Sud : l’aboutissement logique de choix économiques et 
politiques désastreux”, Press release, 18 April 2008: 
http://tinyurl.com/5glx8u (French only)
     * Structural Adjustment Programmes: “UNCTAD official blames food 
crisis on structural adjustment programme,” This Day, Lagos, 23 April 
2008: http://allafrica.com/stories/200804230375.html
     * Food sovereignty: http://www.viacampesina.org and 
http://www.nyeleni2007.org
     * Agrofuels: GRAIN, Agrofuels special issues, Seedling, July 2007, 
http://www.grain.org/seedling/?type=68
     * Rice in the Philippines: GRAIN, Philippines and beyond: rice 
crisis – reaping the 'fruit' of market capitalism, Hybrid rice blog, 22 
April 2008, http://www.grain.org/hybridrice/?lid=201

References

1      Bloomberg, quoted by the BBC, London, 14 April 2008, 
http://news.bbc.co.uk/2/hi/business/7344892.stm

2      BBC, “Action to meet Asian rice crisis”, London, 17 April 2008, 
http://news.bbc.co.uk/2/hi/business/7352038.stm

3       See http://www.riceonline.com for daily reports. With many Asian 
rice exporters out of the game, needy countries from Asia and Africa are 
turning to the US market where prices are going through the roof.

4       Brian Halweil, “Grain harvest sets record, but supplies still 
tight”, Worldwatch Institute, Washington DC, 
http://www.worldwatch.org/node/5539

5      Katarina Wahlberg, “Are we approaching a global food crisis?”, 
World Economy & Development in Brief, Global Policy Forum, 3 March 2008,

6      Food policy expert interviewed on Radio France International, 
Paris, 20 April 2008.

7      “UN food chief urges crisis action,” BBC, London, 22 April 2008, 
http://news.bbc.co.uk/2/hi/americas/7360485.stm

8      Sinclair Stewart and Paul Waldie, “U.S. food producers, 
speculators square off”, Globe and Mail, Toronto, 23 April 2008,

9      Ibid. and Paul Waldie, “Why grocery prices are set to soar”, 
Globe and Mail, Toronto, 24 April 2008,

10     Paul Waldie, “Why grocery prices are set to soar”, op cit.

11    Bill Quigley, “USA role in Haiti hunger riots”, ZNet, US, 23 April 
2008,

12    World Bank, “Can the world market for rice be trusted”, Box 1 on 
p. 52 of “Philippines: Agriculture Public Expenditure Review,” Technical 
Paper, World Bank, Washington DC, 2007, http://go.worldbank.org/TGRSK19300

13    Potash and phosphates are two of the main ingredients in chemical 
fertiliser.

14    David Ebner, “Saskatchewan: A lot more than wheat” Globe and Mail, 
Toronto, 11 April 2008,

15    John Partridge and Andy Hoffman, “China deal sends Potash soaring” 
Globe and Mail, Toronto, 17 April 2008,

16    “Cargill income up sharply in third quarter”, World Grain, Kansas 
City, 14 April 2008,

17    “Tightening belts,” The Economist, London, 10 April 2008,

18    Jonathan Sibun, “Unilever profits surge despite price pressures,” 
Daily Telegraph, London, 3 November 2007, http://tinyurl.com/6p8tcx; 
and, “Get set for more price hikes: Unilever chief,” Business Standard, 
India, 16 March 2008, http://tinyurl.com/694cqn

19    Foo Yun Chee, “Major European retailers post higher profits for 
2007,” Reuters, 6 March 2008, 
www.iht.com/articles/2008/03/06/business/RETAIL.php

20    Associated Press, “Wal-Mart de Mexico’s 1Q profits rise 11 percent 
on higher sales, cost controls,” 8 April 2008,

21    Monsanto, Annual Report, 2007.

22    DuPont, Annual Report 2007, and “Syngenta anuncia cifra negocio en 
progresión 28 por ciento primer trimestre”, EFE, 22 de abril 2008,

23    Isabel Reynolds, “WTO should pressure food exporters – Mandelson”, 
Reuters, 23 April 2008,

24    See, for example, recent comments from West African farmers and 
officials: Noel Tadégnon, “Le ROPPA préconise une pression sur les 
autorités politiques pour soutenir l’agriculture africaine,” APA, 23 
April 2008, http://www.apanews.net/apa.php?article61599; and, “Réunion 
extraordinaire du Conseil des ministres de l`UEMOA, hier : 200 milliards 
pour freiner la flambée des prix,” Le Nouveau  Réveil, Abidjan, 24 April 
2008, http://www.lenouveaureveil.com/a.asp?n=290011&p=1903
Ref: articles|atg-16-en






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