Trade and Markets
The misery of millions of small-scale farmers is often the result of unfair competition between large, world market-oriented agricultural companies and small family farms. Millions of smallholders worldwide produce just enough for their families to survive. However, smallholders are often unable to produce enough and suffer from hunger. Only small-scale farmers who are able to sell their products at an adequate price will produce more than their families consume, and only under these circumstances can these farmers contribute to feeding other people and make provisions for hard times. The first precondition for this is access to markets. The second requirement is the possibility to invest and handle the risks associated with the investment. Millions of farmers, especially women, fail to comply with these basic prerequisites. Local, regional and national markets remain closed to them. The necessary infrastructure, incentives, information, protection from competition and systematic development are all missing. It is often easier for cheap finished products from industrialised countries to gain access to the markets in the cities of the Global South than it is for products from the region itself.
The international terms of trade - the conditions of global agricultural trade - emerged in the colonial era of the 19th century. Today they are regulated by the World Trade Organisation (WTO) and a large number of bilateral and multilateral trade agreements. Their declared objective is to expand and liberalise international trade through the elimination of tariffs and trade restrictions. In theory, free markets and worldwide competition reduce the global costs of production, thus increasing prosperity. However, it is frequently doubted that this can hold true for agricultural production and, at the same time, for the management of our limited natural resources, as long as the local ecological and social conditions differ completely.
Facts & Figures
With agri-food exports reaching €122 billion in 2014, the EU became the world's number one exporter of agricultural and food products, followed by the US with €121 billion worth of exports. Final products for direct consumption made up most of the EU’s exports. The top ranking product in EU agri-food imports in 2014 was tropical fruit, with imports worth €10.3 billion. Other popular imported products were oilcakes from soybeans (€8.7 billion), soybeans (€5.1 billion) and palm oil (€5.6 billion).
Africa has turned from a net exporter of agricultural products to a net food importer. In 1980, agricultural trade was balanced with both exports and imports at about $14 billion. In 2007, imports reached a record high of $47 billion, yielding a deficit of around $22 billion. By 2023, Africa's trade deficit in volume terms will increase to 44 million tonnes for wheat and 18 million tonnes for rice. Asia is expected to exhibit a trade deficit for all commodities except rice, vegetable oils and fish.
In 2009, out of 153 developing countries, 92 depended on commodities for at least 60% of their export earnings. Dependency was particularly high in Western and Central Africa, where commodities made up 95% of exports. Commodity dependence in developing regions rose 20% between 1999-2001 and 2009-2011.
"On average, 15% of EU farms sell more than half of their production directly to consumers. This enables them to retain a greater share of the products' market value, through the elimination of intermediaries, which can potentially increase their income."
The world’s ten largest food and beverage companies (Associated British Foods, Coca-Cola, Danone, General Mills, Kellogg's, Mars, Mondelez, Nestlé, PepsiCo and Unilever) collectively generate revenues of more than $1.1 billion a day. However, none of these companies has committed to paying a fair price to farmers, nor are they committed to fair business arrangements with farmers.
With combined sales reaching $753 billion, the top ten retail food companies accounted for around 10.5% of all groceries bought worldwide in 2009. The top three supermarket retailers (Walmart, Carrefour and Schwarz Group) control 48% of the revenues earned by these top ten retail food companies. With combined sales of $387.5 billion in 2009, the ten biggest food and beverage processing firms controlled an estimated 28% of the global market for packaged food products.
Subsidised EU milk causes unfair competition to poor farmers in Bangladesh according to a recently released ActionAid report. An example of this advantage can be seen in the way that the European dairy giant Arla Foods profits from EU-subsidised milk powder sales to Bangladesh, giving it a huge advantage over local producers. In 2010, the EU exported 378,000 tonnes of skimmed milk powder to developing countries, mainly in Africa and the Middle East.