Agri-food giants dominate global food chain more than ever, report warns

09/22/2022 — According to a study by ETC Group, only a handful of companies dominate the growing agri-food industry. The study reveals the power of corporations in Big Food and shows that many agri-food sectors are now so top-heavy that they are controlled by just four to six dominant companies. This leaves room for companies to “exercise tremendous influence over markets, agricultural research and policy development, which undermines food sovereignty”.

The report calls this “oligopolistic control of the market” and says that dominant companies have the ability to control market prices and alter natural market dynamics.

The study, titled “Food Barons 2022,” examines how the agrochemicals and seeds, synthetic fertilizers, livestock genetics, farm machinery, veterinary pharmaceuticals, agricultural commodities trading, big meat and protein, F&B processing, and food retail sectors are falling into crisis profits. Digitization and power shift.

The study looks at how the F&B processing and food retail industries are caught up in crisis profiteers, digitization and power shifts.“Economists typically see a four-firm concentration ratio of 40% or more as reflecting a sector operating as an oligopoly. Many of the sectors we monitor are already above that 40% threshold; others are on the verge of passing it,” the study points out.

agrochemicals and seeds
The study highlights that over the past 40 years, the largest agrochemical companies have used intellectual property laws, mergers and new technologies to take control of the seed sector.

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With the macro merger of SinoChem and ChemChina under the umbrella of the state-owned Syngenta group, just two companies now control 40% of the global seed market, compared to ten 25 years ago. Syngenta also controls a quarter of the world market for agrochemicals.

According to the study, with the commercialization of molecular biotechnology since the 1990s, tea seed and agrochemical companies have been “inseparably linked.” With Big Data, this bond expands.

“Digital technologies offer new forms of control and value extraction that threaten to further usurp farmers’ autonomy and decision-making, while enabling a new era of land grabbing,” say the authors.

synthetic fertilizers
The report does not characterize the artificial fertilizer sector as an oligopoly as many market players are involved in this product trade.

However, some key ingredients are held by few actors, with the world relying on their good faith to participate in negotiations as “geopolitics can play a significant role in trade”.

Morocco controls 72% of the world’s phosphate reserves – some of which are located in the disputed territory of Western Sahara. Furthermore, only four countries produce 80% of the world’s traded potash – Canada, Russia, Belarus and China.

With Russia and Belarus aggressing in the Ukraine war, fertilizer prices have more than doubled this year, according to a UN report. Because of the war, the US imposed 132.6% tariffs on Russian fertilizers until the US International Trade Commission rejected those tariffs.

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livestock genetics
With just three companies controlling the “vast majority” of poultry genetics, the study confirms that it is the most concentrated sector in the industrial food chain.

“Before the turn of the century, China was home to a greater diversity of pigs than any other country (with 72 breeds). By 2005, more than two-thirds of Chinese pigs (74%) were reared in industrial systems that rely on just one hybrid breed,” the study said.

As a result, from 2018 to 2020, African swine fever wiped out 60% of China’s pig population.

“Widespread adoption of industrial livestock genetics is the main reason behind the loss of genetic diversity in livestock worldwide,” the paper points out.

Machine and animal pharmaceuticalsWith just three companies controlling the “vast majority” of poultry genetics, the study confirms that it is the most concentrated sector in the industrial food chain.
US-based companies Deere, CNH and AGCO control 90% of heavy-duty tractor sales. Even more dominant in India is Mahindra & Mahindra, which owns 40% of the country’s agricultural machinery market.

In the face of increasing digitalization, the study shows how mechanical engineering companies are trying to sell new technologies (big data, precision farming, etc.) as key to productivity.

“Deere, the world’s largest farm equipment company, now employs more software engineers than mechanical engineers,” the report said.

Agricultural commodity, big meat
Ten soft commodity traders account for at least 40% of the world market. The authors call for more transparency as three of the world’s top commodity traders are privately owned and one is state-owned.

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No oligopoly claims are made for the large meat sector.

Meanwhile, the US government is cracking down on US meat giants to get out of the country’s current system, in which a handful of producers dominate the industry, raising prices, crowding out farmers and controlling opportunities.

F&B processing, grocery store
The authors warn that F&B processing is actively investing in technology to mine customer data to boost sales, and that this sector is particularly vulnerable to large mergers.

“The pandemic has not diminished the F&B sector’s appetite for mergers and acquisitions. In 2020, the number of these M&A deals increased by 36% to a total of $110 billion.”

In the grocery category, supermarkets and convenience stores continue to dominate sales. In the future, however, e-commerce giants could increase their dominance.

After Amazon moved to acquire Whole Foods Market in 2017, Big Tech is looking to conquer the grocery and e-grocery markets. During the pandemic, Chinese company Alibaba bought 72% of Sun Art (a supermarket chain), Meta (Facebook) invested 5.7 billion among some examples.

By Marc Cervera

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