Multinationals make billions in profit out of growing global food crisis

A friend e-mailed this & I responded at the bottom.

 

—– Original Message —–

Sent: Tuesday, May 06, 2008 7:05 PM

Subject: Multinationals make billions in profit out of growing global food crisis

 

Speculators blamed for driving up price of basic foods as 100 million face severe hunger

 

By Geoffrey Lean, Environment Editor
Sunday, 4 May 2008

Giant agribusinesses are enjoying soaring earnings and profits out of the world food crisis which is driving millions of people towards starvation, The Independent on Sunday can reveal. And speculation is helping to drive the prices of basic foodstuffs out of the reach of the hungry.

 

The prices of wheat, corn and rice have soared over the past year driving the world’s poor – who already spend about 80 per cent of their income on food – into hunger and destitution.

The World Bank says that 100 million more people are facing severe hunger. Yet some of the world’s richest food companies are making record profits. Monsanto last month reported that its net income for the three months up to the end of February this year had more than doubled over the same period in 2007, from $543m (£275m) to $1.12bn. Its profits increased from $1.44bn to $2.22bn.

Cargill’s net earnings soared by 86 per cent from $553m to $1.030bn over the same three months. And Archer Daniels Midland, one of the world’s largest agricultural processors of soy, corn and wheat, increased its net earnings by 42 per cent in the first three months of this year from $363m to $517m. The operating profit of its grains merchandising and handling operations jumped 16-fold from $21m to $341m.

Similarly, the Mosaic Company, one of the world’s largest fertiliser companies, saw its income for the three months ending 29 February rise more than 12-fold, from $42.2m to $520.8m, on the back of a shortage of fertiliser. The prices of some kinds of fertiliser have more than tripled over the past year as demand has outstripped supply. As a result, plans to increase harvests in developing countries have been hit hard.

The Food and Agriculture Organisation reports that 37 developing countries are in urgent need of food. And food riots are breaking out across the globe from Bangladesh to Burkina Faso, from China to Cameroon, and from Uzbekistan to the United Arab Emirates.

Benedict Southworth, director of the World Development Movement, called the escalating earnings and profits “immoral” late last week. He said that the benefits of the food price increases were being kept by the big companies, and were not finding their way down to farmers in the developing world.

The soaring prices of food and fertilisers mainly come from increased demand. This has partly been caused by the boom in biofuels, which require vast amounts of grain, but even more by increasing appetites for meat, especially in India and China; producing 1lb of beef in a feedlot, for example, takes 7lbs of grain.

World food stocks at record lows, export bans and a drought in Australia have contributed to the crisis, but experts are also fingering food speculation. Professor Bob Watson – chief scientist at the Department for Environment, Food and Rural Affairs, who led the giant International Assessment of Agricultural Science and Technology for Development – last week identified it as a factor.

Index-fund investment in grain and meat has increased almost fivefold to over $47bn in the past year, concludes AgResource Co, a Chicago-based research firm. And the official US Commodity Futures Trading Commission held special hearings in Washington two weeks ago to examine how much speculators were helping to push up food prices.

Cargill says that its results “reflect the cumulative effect of having invested more than $18bn in fixed and working capital over the past seven years to expand our physical facilities, service capabilities, and knowledge around the world”.

The revelations are bound to increase outrage over multinational companies following last week’s disclosure that Shell and BP between them recorded profits of £14bn in the first three months of the year – or £3m an hour – on the back of rising oil prices. Shell promptly attracted even greater condemnation by announcing that it was pulling out of plans to build the world’s biggest wind farm off the Kent coast.

World leaders are to meet next month at a special summit on the food crisis, and it will be high on the agenda of the G8 summit of the world’s richest countries in Hokkaido, Japan, in July.

Additional research by Vandna Synghal

******************************

MY REPLY:

—– Original Message —–

From: Leslie Riley

To:

Cc: Leslie Riley

Sent: Wednesday, May 07, 2008 6:10 AM

Subject: Re: Multinationals make billions in profit out of growing global food crisis

Dear ____________,

 

Also, worth mentioning to your list as a “flip side”:  (The unexpected rant below was a large motivation for my ill-fated, windmill-fighting run for Mississippi Commissioner of Agriculture last year)

People are starving in poor nations & even the wealthiest Americans are pinched by soaring food prices, yet the help these “soaring prices” have offered to family farmers & rural communities has been minimal, at best.

Costs have increased as rapidly or more rapidly than the prices farmers receive.

Concentration in the both the suppliers farmers buy from & markets they are able to sell to has allowed big agribusiness to siphon off almost all of the increased profits these unusually high grain prices should provide.

For instance:
*  A ton of fertilizer for corn/ cotton/ wheat that cost my dad $300 last year ( which even that was way out of line historically and based on real cost-of-production market value) now is well over $700.

* Off road diesel fuel — a dirty, cheaper to produce by-product which should always be cheaper than gasoline — was less than 40 cents when gas was a $1.00. Now the cost of fuel alone could push many farmers out of business. Off road (cheaper, less refined) is either at or over $4.00 per gallon already. That’s right, more than even gas. When my dad harvests his wheat later this month, it will cost him about $800 per day to fill up his combine. This could well mean that half of my the value of the wheat crop is being spent just on fuel to harvest & get it to market.

* The last several years — thanks to socialistic government programs that actually encourage something like this – there has been a marked increase in ownership of large tracts of high quality farmland by absentee landowners who do not know or care anything about farming or the local communities where the land they purchase is. People from far away cities ( as well as corporations) “invest” in “recreational property” and take large swaths of land out of production to hunt on; then tax breaks & enviormental subsidies make it profitable to do so. This shrinks the land base.
The land that is left in production is then rented to the highest bidder. A few years back, cropland in the hill country of Mississippi rented for $50 to $60/ per acre per year. In the Delta, irrigated, premium rice or cotton land might bring $100/ per acre. Now, it is not uncommon for bidding wars to drive Delta land up to $200 plus & hill land to have similar or greater increases.

Bottom line — increased commodity prices have not kept up with increased costs.

 

* This doesn’t even mention what evil empire A ( Monsanto) and evil empire B (USDA) are doing. ( I could write a book). I will probably write a follow up about Monsanto, but if I don’t you should do some research.

On the other side of the spectrum. Country grain elevators will be extinct within another couple of years. Leaving only giants like ADM & Cargill to buy/ controll all the grain.
The livestock industry is taking a huge hit. It is entirely possible that within two or three years there will not be a pork industry. I do not mean that pork will be expensive at the grocery store, I mean it will not be available. There are areas of the Midwest now where so many pig farms are liquidating that there is a month long wait at the packing house.

Due to heating fuel & feed costs the same thing many happen to the poultry industry. ( although chicken won’t disappear from the supermarket, it will just be so expensive as to become a luxury).

And finally, what is happening in the Commodities Futures Trading sector & with grain buyers is downright criminal. For the layman:

Commodity Futures are where buyers bid on “futures” in commodities like corn, gold, oil, etc. This is a huge market ( similar to stocks) which allow investors to not only buy and sell these commodities but also the right to buy/ sell them on a certain day in the future. So, if someone thinks corn is going up next year they buy “May 2009 Corn” for $3.00 if it’s $2.00 now. If they think it’s going down, they do the opposite.
How this affects farmers is that it allows them to plan ahead when budgeting, renting land, borrowing funds for production, etc. So, a farmer could call and “pre-book” his expected production. If beans were high & corn was low, he could sell beans for fall delivery & plant less corn. Or, if he had some of last year’s crop in storage, he could hold it until the market went up and sell. 
The market used to have safeguards in place that required speculators to actually have funds to back most of what they bid on. However, these safeguards have been relaxed. Recently a large number of speculators & “institutional investors” have flooded commodity funds to the point that there are investment banks that “own” more bushels of wheat than can possibly be produced.

So when wheat goes from $4.00 per bushel to $15.00 and a farmer calls & wants to “book” some wheat at this price he is told that he cannot.

Nearly as insidious, now that there are fewer grain elevators companies like ADM can pay a farmer less than fair market value for his grain. In the past the price received locally for his crop would have a “basis” value that would give him a few more cents a bushel if he were closer to a major shipping location/ had a larger local market ( like a feed mill or ethanol plant) he would receive a few pennies less if he were further from a final use market. This meant he could decide if he wanted to sell to a local elevator for less or pay the expense to haul it to a town on a major river or where there was a larger profit available & get a few cents more.
My dad has been lately having to take a significat basis & dockage fee ( nearly a dollar a bushel) for grain delivered to a port on the Mississippi River. ( in a real free market, not distorted by foolish or wicked government programs, grain would ALWAYS bring more on the river than anywhere else)

 

If I haven’t bored you to tears by now, the bottom line is that while the price of food is going up to the point that it could bankrupt Western economies & starve most of the “Third World” this in no way means that farmers & rural communties are benefitting at all. In fact, the trend towards fewer farms & a more depopulated countryside is increasing. Papa Joe Stalin would be proud.

 

In the end of Brave New World — Revisited there is a scene in which the masses chant to the leaders :
“Make us slaves, but feed us.” I think, unless the Lord shows us mercy, this hideous picture may be reality soon.

In 1990 the three largest meat companies controlled less than 15% of the market. Now they controll between 80 & 90 %. This has become the common trend. If things don’t change in a drastically unforseeable way soon, we will have a handful of companies ( less than 10) controlling most of the production & distribution of food. They will sell to a small handful of national food chains. Three or four companies will controll the energy market. A handful of big banks & investment firms will controll money, & things like mortgages & insurance. AND THERE ARE SO-CALLED CONSERVATIVES WHO ACTUALLY BELIEVE THIS IS A FUNCTION OF THE “FREE MARKET” AND IS A GOOD THING.
The two big political parties are both committed to using the power of regulation & subsidies to prop up this system. Or even sending our sons ( & daugthers, God help us) off to the far corners of the world to kill or die to ensure it is perpetuated.

 

Soothsaying propaganda artists in the media have convinced us that there is this battle between big governement & big business. “Liberals” are for big gov & against big biz. “Conservatives” are against big gov & for big biz. This false dichotmy fails to recognize that the two are merely different faces of the same beast. ( I used to say the two were working hand-in-hand, but the reality is that they are in many ways one & the same). For more on this click here, here, or here.

 

I used to be a chicken-little. Then I spent several years irritated with myself & other chicken littles because all of the time/ money/ energy that buying into gloom-and-doom scenarios had cost me. But I am as concerned right now as I have ever been about the direction the economy & the country are going.

IF you have the ability to do so, grow a garden. Get a milk cow or goat. Either start raising your own meat or find someone local to buy from. Buy some open-pollinated corn seed. Buy from/ build relationships with local farmers.
BUY AS LITTLE AS POSSIBLE FROM WAL MART, KROGER AND THE AGRIBUSINESS GIANTS.

DO NOT BE FOOLED BY “ORGANIC” LABELS ON THE SHELVES AT BIG SUPERMARKETS WITH PICTURES OF NORMAN ROCKWELL-LIKE FARM SCENES.

 

And, if you have ever considered getting out of dodge & still have the ability to do so, it might be a good time. Most of all, cling to Christ & cry out to God for mercy on our families & nation.

Les Riley

 

http://www.independent.co.uk/environment/green-living/multinationals-make-billions-in-profit-out-of-growing-global-food-crisis-820855.html