Trade and Markets
Among the losers of global trade - and its ongoing liberalisation - are low-income countries, and the poor in the countryside.
Small and traditional rural livelihoods are being confronted with unfair competition from large, world market oriented agricultural companies.
The terms of international agricultural trade, which dictate this competition, 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 increase and liberalise international trade through the elimination of tariffs and trade restrictions. The conditions of global agricultural trade would have to be radically changed if the aim of providing basic food for everyone through sustainable production is to be achieved.>>more
Development of Producer and Retail Prices
Producer prices for agricultural commodities have steadily decreased over the past decades, and with that, so too has the income of the majority of farmers. At the same time, the share of available income which urban populations spend on food has also decreased (although these figures differ globally). The predicted increase of agricultural and food prices on the world market did not automatically improve the situation of food producers. This is due to the fact that their share in retail prices is decreasing for the benefit of retailers and processors, as well as for producers of seeds, fertiliser, pesticides and machinery.
Two Reports worth Reading: The Great Hunger Lottery & Broken Markets
In 2008 food prices reached record levels, rising almost 80% in 18 months. After this, peak prices declined. Since autumn 2010 however, the cost of food on the world market has started to climb again, with the FAO’s Food Price Index reaching record highs in February 2011 - exceeding those of the past crisis. Around the globe, basic food stuff became a luxury for millions of the hungry. Banks such as Goldman Sachs and Deutsche Bank created index funds to allow investors to ‘invest’ in the price of food, as if it were an asset like shares. They were effectively gambling with hunger.
The report ‘The Great Hunger Lottery’, published in 2010 by the World Development Movement, shows how food price increases were fuelled by the behaviour of financial speculators. The 2011 follow-up report ‘Broken Markets’ seeks to counter the arguments put forward by those sceptical of the influence of financial speculation on rising food prices.
Facts & Figures
Africa has turned from a net exporter of agricultural products to a net food importer. In the 1980s, prices of raw commodities (mainly coffee, cocoa and spices) dropped rapidly and local food production stagnated, since then agricultural imports have grown faster than exports. In 2007, imports reached a record high of $47 billion, yielding a deficit of around $22 billion. However, agricultural and food-trade balances vary across countries.
The United States and the European Union are the world’s top agricultural exporters with both economies reaching a record-breaking €105 billion worth of exports in 2011. The EU focuses on the export of final products, which make up 64% in the total EU agricultural exports. In 2011, the EU exported prepared food worth €4 billion, wheat worth €3.6 billion and frozen pig meat worth €2.9 billion.
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, Schwarz Group) control 48% of the revenues earned by these top ten retail food companies. With combined sales of $387.5 billion, the ten biggest food and beverage processing firms control 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.
