There is no neutral market

People are gradually accepting that a healthy body requires healthy food produced in a regenerative farming system. But most tend to forget that this healthy relationship needs to be expressed through regenerative relationships between producers and consumers.

In the dominating narrative, The market is a neutral and disinterested institution where consumers meet producers and demand meet supply. In this view, the market can be filled with any content as long as there is a demand from consumers. If consumers want high quality regional food, or organic, or halal, or fairly traded it will in some way materialize and be supplied. Or conversely, if you are a small scale producer with diversified production, there is always an opportunity there in the market place. If you fail, it is just because you weren’t ingenious enough.

So the story goes. But is this really a correct description of The market? 

Banana market in Samoa

Of course not, the market is neither neutral nor disengaged. To begin with there is normally not one market, there are many different markets which fulfil different needs.  At the same time that there is a large wholesale market for food, servicing major food retailers, there can be a smaller market for farmers selling directly to small shops and yet another one for farmers who sell directly to consumers.  And each one of these markets serves different needs both on the supply and the demand side.

If you have a large farm with one or two crops you will not sell your crops with direct marketing but will be bound to large wholesale markets or being a supplier to a food, feed or biofuel industry. This also means that you will fine-tune your production according to that buyer’s demand. This will direct your choice of variety, the fertilization strategy, the time of sowing and harvesting. All in all there is a need for strict coherence between your production and the kind of market you are aiming at.

In a similar way, if you have a diverse farm with a mix of animals and plants it is highly unlikely that you can be a successful supplier to the same kind of markets. Your quantities are too small for shipping, you lack the right seed cleaner or packing technology for each of the crops, or your quality is another than demanded. So you are de facto locked out from the main market. If your farm is located close to a population center you might be able to sell your produce to affluent consumers directly or to a shop targeting those. But, even here, you will constantly be driven towards less diversity and more standardization. Your best bet if you want to keep the diversity is to become an educational farm or some kind of community supported farm. This can also be observed in all affluent countries.

If we bring the discussion even further, if you farm primarily to produce food for your family and only try to sell a surplus you will find that you are not a very interesting partner in any markets. Your supply is inconsistent, your priority is the food of the family and not of the client, and you don’t have the logistic machinery for bringing your stuff to the market. Therefore if you at all can sell, it is most likely to a middleman of some sort, who will pay you very badly. This can also be observed in most developing countries today.

The globalized food market with increasing dominance of a few retailers, a handful of food industries and wholesalers and very few input suppliers is not conducive for many kinds of producers, regardless of if there is a theoretical or potential consumer demand for their produce.

This makes it apparent that “markets” in no way are neutral towards producers and consumers. On contrary, they are based on certain types of production (and producers) and and certain types of consumption (and consumers). It is simply not true that “consumer demand” will create markets for organic, high quality, artisan regional food within the dominant market structures. Or if they do, the market will pervert the production and consumption to fit in.

This makes it quite easy to understand why the “market forces” are pushing also organic farmers in to larger scale and less diversity. As I write in Global Eating Disorder:

A study of ten organic farms in Denmark show that they too have to focus excessively on short term profits and ever-changing market requirements and have little time, energy or money to develop their farming system into a more ecologically sound system…. This experience is echoed in England and Germany. A German organic farmer explains: ‘in the beginning I carried out experimental cultivation of heritage grain varieties. But then I gave up everything that didn’t bring in money, because when the business is in the red it doesn’t make much sense’.

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This insight makes it pertinent to discuss which kind of market that is conducive for which kind of production and vice versa. An attempt to do just that was made by the FAO in a seminar in Rome 8-9 June 2016, Sustainable value chains for sustainable food systems. The workshop report contains a lot of interesting papers on various form of “marketing”, including a paper on food self-provisioning in Hungary, i.e. clearly a non-market solution.

The paper What types of markets to support agroecology, by Maryam Rahmanian, Jimena Gomez, Lorenzo Banno and Alexandre Meybeck describes four types of solutions; producer organizations, public procurement programmes, participatory guarantee systems (PGS) and community supported agriculture (CSA). The paper questions if formal global markets can support the ecological, social and economic conditions needed for an ecological production system.

The authors also note that there is a need to consider how consumer diets are affected by the market system. I believe this is a very important conclusion. There are many observations on how our modern food system has changed the diet of the population. For instance, it is gradually recognized how the diversity in soils and farms might be reflected in the gut, and how the lack of that diversity makes people sick. 

People are gradually accepting that a healthy body requires healthy food produced in a regenerative farming system. But most tend to forget that this healthy relationship needs to be expressed through regenerative relationships between producers and consumers. Some of those relationships will perhaps be new forms of markets, but I think most of them will be non-market relationships. 

While I still don't have the full "theory" developed it seems to me that any form of "market" will be based on competition and division between producers and a certain degree of exploitation. None of these are conducive for sustainable and regenerative relationships.

Why competition is unsustainable

Large farms now dominate crop production in the United States. Although most cropland was operated by farms with less than 600 crop acres in the early 1980s, today most cropland is on farms with at least 1,100 acres, and many farms are 5 and 10 times that size. Meanwhile In 1987, the midpoint dairy herd size was 80 cows; by 2007, it was 570 cows. The change in hogs was even more striking, from 1,200 hogs removed in a year to 30,000. This long-term shifts in farm size have been accompanied by greater specialization—beginning with a separation of livestock farming from crop farming in the latter half of the 20th century. For instance in 1900, there were dairy cows and hogs on three-fourth of the farms, while in 2005 only one farm in twenty had either hogs or dairy cows. This allowed crop farmers could devote more time to crop production, invest in crop production and gradually increase yields and acreages[i].

Larger crop farms perform better financially, on average, than smaller farms. The difference is mainly in the cost of production. The larger farms don’t have higher revenue or yields per acre, but they simply have lower costs or as expressed by a report from USDA: “larger farms appear to be able to realize more production per unit of labor and capital. These financial advantages have persisted over time, which suggests that shifts of production to larger crop farms will likely continue in the future.” Their research shows that farms with more than 2,000 acres spend 2.7 hours of work per acre of corn and have cost for equipment of $432, while a farmer with 100-249 acres will spend more than four times as much labour and double the amount for equipment[ii].

At he same time, the number of production and marketing contracts to govern the sale of products has increased, which also acts as a driver for increased size of farms. Contracts covered 32 percent of United States crop production in 2011, compared with 23 percent in the mid-1990s. Larger operations are more likely to use contracts, which can reduce the price and marketing risks faced by farmers[iii]. The same report, Farm Size and the Organization of U.S. Crop Farming, also explains that it is cost saving that is the main driver for the use of GM crops. By and large, similar developments are seen in other parts of the world, e.g. in Sweden 1927 there were 350,000 farms having an average of 4 hogs, while 2010 there were only 1,700 farms having hogs and they had an average of 1,900 hogs[iv].


Agriculture suffers from a paradox which many outside of the sector is not aware of and even fewer understand. The secretary of agriculture of the United States wrote in his annual report 1910 that “year after year it has been my privilege to record ‘another prosperous year in agriculture’”. What has been called a golden age for American agriculture, the period between 1900 and 1914, was a period of almost no growth in the sector. Output per worker increased with only 1 percent between 1900 and 1910. And total farm output only 8 percent. Meanwhile the population increased by a whopping 21 percent. The result of this was better prices for farmers and thus the prosperous years.

Conversely in the 1950s, agriculture output increased in a rapid pace, and all of it as a result of increased agriculture productivity. However, the decade is remembered as a time of hardship for most farm families. Input prices went up and farm product prices fell. A million and a half farm families ultimately gave up farming in this decade as they couldn’t make ends meet. Those that survived were of course the more advanced and commercially successful farmers, which could buy up the land from those that lost out. A similar period came in the 1980s when productivity grew with 3 percent annually, while product prices fell, input prices and interest rates soared. “in term of agricultural development for the national economy the decade of 1980s was a huge success; in terms of the financial well-being of most farmers it was an economic nightmare” writes Willard W. Cochrane[v].

By and large farmers are stuck in a treadmill. They are forced by competition to increase productivity, and the increased productivity leads to lower prices. Product development and innovation which allows industrial companies to stay out of a similar treadmill is taking place in the subsequent chains in the food chains, among food processors and retailers. And even there, there are much less elasticity in food consumption than for most other products. The fact that “people will always need food” is a small comfort for the farmer who can’t compete. This treadmill is the reason for the enormous pace in increase in size and productivity in farming. The vanguard farmers will constantly develop and improve and mostly increase in size, at the expense of their less successful colleagues.

For farmers who can’t participate in this stiff competition there is no way out – or rather there is only the way out – get out! This is the fact for a group of farmer with similar conditions. But ultimately it works in the same way globally, where all farmers compete with each other. Some production disappear all together. In some parts of the world the available nature resources are clearly limiting the possibilities for large scale farming. Compare for instance the conditions for a farmer growing grain in a traditional agriculture areas in Europe. The landscape is varied and roads, rivulets, hills and not the least buildings make fields small. Because of scarcity of land, land prices are also high and not determined primarily by agricultural productivity. The farmer will end up with a small farm and the size of machinery can never be the same as on the Great Plains. Those farmers can never produce grain for the same costs as their competitors in United States, Russia or Argentina, even if they can intensify production and get higher yields per hectare.

Of course, for economic development at large, this constant productivity increase in farming sets free resources that are used in other sectors. It is quite clear that reducing the proportion of workers in the farm sector from eighty percent to, say, twenty percent was a precondition for a lot of modern developments, including both good and bad developments. But one might wonder if there are advantages to continue this process in an endless treadmill? But “enough” is a word that doesn’t really exist in the language of economist, or politicians for that matter.

The treadmill is both driven by specialization and drives further specialization, filling each area with just one or two crops or huge livestock operations. The economic and social implications are huge, but the environmental implications are even bigger. The large scale landscapes are stripped of variation and bio-diversity, it doesn’t produce the eco system services we need and we will have to produce them elsewhere at high costs. The systems also cost direct and indirect damages on nature which have to be compensated for.

This model has replaced most local reproductive systems and energy with a linear model, an industrial model of production. This model is part and parcel of the success and therefore the agriculture treadmill och unlimited competition will never be sustainable. It leads us further astray.

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[i] Farm Size and the Organization of U.S. Crop Farming, ERR-152, Economic Research Service/USDA
[ii] Farm Size and the Organization of U.S. Crop Farming, ERR-152, Economic Research Service/USDA
[iii] Farm Size and the Organization of U.S. Crop Farming, ERR-152, Economic Research Service/USDA
[iv] Hållbarhet i svenskt jordbruk 2012, SCB 2012
[v] The Development of American Agriculture, Willard W. Cochrane, University of Minnesota Press 1993

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A mosaic of regenerative agriculture systems

"The world needs a paradigm shift in agricultural development: from a “green revolution” to an “ecological intensification” approach. This implies a rapid and significant shift from conventional, monoculture-based and high- external-input-dependent industrial production towards mosaics of sustainable, regenerative production systems that also considerably improve the productivity of small-scale farmers. We need to recognize that a farmer is not only a producer of agricultural goods, but also a manager of an agro-ecological system that provides quite a number of public goods and services (e.g. water, soil, landscape, energy, biodiversity, and recreation)".

This is one of the key messages of a new report from United Nations Conference of Trade and Development, UNCTAD. The Trade and Environment Report 2013, subtitled Wake up before it is too late: Make agriculture truly sustainable now for food security in a changing climate, warns that continuing rural poverty, persistent hunger around the world, growing populations, and mounting environmental concerns must be treated as a collective crisis. It says that urgent and far-reaching action is needed before climate change begins to cause major disruptions to agriculture, especially in developing countries.

Agricultural development, the report underlines, is at a true crossroads. Food prices in the period 2011 to mid-2013 were almost 80% higher than for the period 2003-2008. Global fertilizer use increased by 8 times in the past 40 years, although global cereal production has scarcely doubled at the same time. The growth rates of agricultural productivity have recently declined from 2% to below 1% per annum. The two global environmental limits that have already been crossed (nitrogen contamination of soils and waters and biodiversity loss) were caused by agriculture. GHG emissions from agriculture are not only the single biggest source of global warming in the South, besides the transport sector, they are also the most dynamic. The scale of foreign land acquisitions (often also termed land grabbing) dwarfs the level of Official Development Assistance, the former being 5-10 times higher in value than the latter in recent years.

But most important of all are the persistent problems with hunger, malnutrition, and access to food. Almost 1 billion people currently suffer from hunger, and another 1 billion are malnourished, the report notes, even though current global agricultural production already provides sufficient calories to feed a population of 12 to 14 billion. Some 70 per cent of the hungry or malnourished are themselves small-scale farmers or agricultural labourers, indicating that poverty and access to food are the most critical challenges.

The report recommends adjusting trade rules to encourage “as much regionalized/localized food production as possible; as much traded food as necessary.” The past strategy of relying on international markets to meet staple food demand, while specializing in the production and export of “lucrative” cash crops, has recently failed to deliver its desired results, because it has relied on low staple food prices and no shortage of supply in international markets, conditions that have drastically changed since the turn of the century, the report notes.

TER13 highlights that the required transformation is much more profound than simply tweaking the existing industrial agricultural system. However, the sheer scale at which modified production methods would have to be adopted, the significant governance issues, the power asymmetries' problems in food input and output markets as well as the current trade rules for agriculture pose considerable challenges.

More than 60 international experts contributed to the report’s analysis of the topic. It is incredibly comprehensive with a lot of interesting discussion, some of which I will comment on later on this blog. The full report is available at http://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=666. I have written one of the chapters in the report on Agriculture, Food and Energy.