Monday, August 22, 2011

More power to the consumers or?

Has powered over the food chain moved from farmers to consumers or from farmers to huge corporations? 


The power in the food chain has moved further and further away from farmers. It has on the one hand  been lost to input suppliers who now control most of the factors of production, financial capital, manufactured capital and all sorts of inputs such as seeds, pesticides and fertilisers. The market share of the four biggest[1] seed companies went from 23 percent (1997) to 33 percent (2004) and for pesticides from 47 percent to 60 percent. Many companies (Monsanto, DuPont, Syngenta and Bayer) work in both segments. One company, Monsanto, has 91 percent of the market for GMO soy beans. 

There are, very roughly, 25 million coffee farmers in the world, while 40 percent of the trade and 45 percent of the roasting is made by the four biggest companies. Simultaneously as coffee consumption doubled during the 1990s, the coffee producing countries share of the price decreased from one third to ten percent. The trend is the same for cocoa and tea (World Bank 2007). This pattern is not unique for developing country produce; it is basically the same all over the planet. Eighty percent of the meat market in the USA is controlled by four companies; three companies control 80 percent of the maize export and 65 percent of the soy export; four companies control 60 percent of the domestic grain market. Many companies integrate production both ‘upstream’ and ‘downstream’[2], e.g. by contract farming. Most of the transnational companies in the food sector are from the USA or Western Europe (USDA 2005). 

One could say that the power over food has moved from farmers first to raw material traders (e.g. Cargill); thereafter to food processing giants like Nestlé and Unilever and now finally to multiple retailers. This is also expressed by the spread of supermarket owned brands; private labels. The retail share of private labels among food products has reached 50-60 percent in Switzerland and 20-40 percent in most other Western European countries (Regmi and Gehlhar 2005). The revenue of the world's four biggest multiple retailers was year 2005 for Wal-mart (USA) US$339 billion; Carrefour (France) US$117 billion; Ahold (Netherlands) US$80 billion and Tesco (UK) US$72 billion. Wal-mart was the biggest company of all categories in the world measured in sales, with sales of US$408 billion 2009 (Forbes 2010). The dominance of the retailers is almost total. That the power in this way has moved further away from farmers should mean – at least in theory – that it has moved closer to consumers. But consumers are easily manipulated by advertising, so the much heralded "consumer power" and "voting with the wallet" is to a large extent one of the modern myths of our world.

[1]       This measure, CR4 (the market share of the four biggest), is a common measure of concentration in a given sector- With a CR4 above forty percent the market might be subject to harmful limitations in competition. 
[2]       This terminology is used regarding value-chains and supply-chains, where ’upstream’ denotes something ’earlier’ in the process, e.g. a supplier and ’downstream refers to those ’after’ a process, e.g. a buyer.

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