Companies at the heart of the global grain trade have enjoyed record bonuses amid rising food prices around the world, raising concerns about profiteering and speculation in global food markets that could put staple foods out of reach for the poorest. , and may require an unexpected tax. ,
The world’s four largest grain traders – which have dominated the global grain market for decades – have achieved record or near-record profits or sales. They forecast that demand will exceed supply until at least 2024, which should lead to even higher sales and profits over the next two years.
According to the Food and Agriculture Organization of the United Nations, food prices have increased by more than 20% this year. According to the World Food Program, about 345 million people are acutely food insecure, compared with 135 million before the COVID-19 pandemic.
Olivier de Shooter, co-chair of IPES-Food (International Panel of Experts on Sustainable Food Systems) and UN Special Coordinator on Extreme Poverty and Human Rights, said: “The fact is that the global commodity giant is making record profits at the same time. If hunger increases, it is clearly unfair and a terrible indictment on our food systems. Worse, there was little these companies could have done to stop the hunger crisis in the first place.
Four companies – the Archer-Daniels-Midland Company, Bunge, Cargill and Louis Dreyfus, collectively known as ABCD – control an estimated 70-90% of the world grain trade. “Global grain markets are more focused than energy markets and even less transparent, so there’s a greater risk of making a profit,” de Shutter said.
Food prices have risen this year, which are believed to reflect abundant global grain stocks, but there is insufficient transparency on the part of companies about how much grain they have and to force them to release stocks in a timely manner , he said. There is no possibility.
“We need to look at the grain giants and ask what they could have done to avert the crisis and what they can do now,” De Shutter said.
Cargill reported a 23% increase in sales to a record 165 billion (£140 billion) for the year ended May 31, while Archer-Daniel-Midland posted its highest profit in its history for the second quarter of the year.
Bunge’s second-quarter revenue rose 17% year over year, though earnings were impacted by earlier charges. Louis Dreyfus reported year-over-year gains of more than 80% for 2021 as revenue grew nearly a quarter to $1.62 billion.
John Rogers, an analyst at ratings agency Moody’s, said it’s not surprising that tight supply and accelerating demand pushed up food prices and led to higher profits. “I don’t think they’re colluding for big profits,” he said, adding that many other companies are also taking an increasing share of global grain markets. “I don’t think they’re doing immoral things – they’re not intentionally raising prices.”
A Cargill Inland Grain Terminal near Nesbit in Manitoba, Canada. Photo: Terence Klaasen/Alamy
He said grain companies’ overall profits are rising, but their percentage margins have not risen significantly. “It’s a relatively efficient market — I don’t think these guys can drive prices up.”
However, an unpublished analysis by an NGO provided to the Guardian suggests some food companies could also increase their margins. The analysis found that Archer-Daniel-Midland increased its profit margin to 4.46% in the first quarter of this year, up from 3.65% in the same quarter of 2021, and that Cargill’s margin grew this year from 2.5% in increased last year. The year grew to 3.2%.
Sandra Martinson, policy manager at Bond, a network of international development charities, said an unexpected tax is a way to restore some balance to food markets and help the poorest.
,[The big agrifood companies] Clearly benefiting from reduced supply and increased demand, which is further exacerbated by commodity trading,” she said. “When supply is significantly lower than demand, there is room for price increases. But this speculation has also been fueled by the stock markets as wheat and other commodities are traded on the stock markets and therefore prices fluctuate. ,
Oxfam has also called for an unexpected tax on the food giant’s profits. Alex Maitland, a senior adviser to the charity, said: “There are fears that speculation could lead to a rise in food prices. Anything that causes hunger and starvation is immoral.”
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British Greens colleague Natalie Bennett joined the call. “There is a strong case for an unexpected tax on the food oligopoly as a short-term measure – a handful of companies with significant hedge fund cross-investment, from seed to supermarkets contributing heavily to inflation and driving up the cost of living during the crisis. Take it to new heights,” she said.
Vicki Hurd, head of sustainable agriculture at UK food alliance Sustain, has shelved calls for the unexpected tax because she said it was difficult to isolate the price effects in supermarkets, where consumers buy most of their groceries. But she called on the government to enact regulations to stop the abuse. “While farmers, consumers and food workers face soaring food and fuel prices, those sitting in the middle of the food chain — a large number of big, big grain traders — are making huge profits.”
If governments oppose the windfall tax, they should consider other means to contain prices, Martinson said, including price caps or tighter regulation of commodity trades, such as commodities. B. Limiting inflation and price increases in India. Ban commodity trading. He said food companies and commodity speculators are also to blame for the rise in food prices seen more than a decade ago, when price hikes sparked unrest in several countries.
The reasons for the rise in food prices are complex. The Ukraine war played a major role as Ukraine is one of the world’s largest producers of grain, sunflower oil, corn and fertilizers. The war has pushed food prices to their highest levels in March, although some have fallen slightly. A standoff with Russia over grain shipments from Ukraine for export has been partially resolved and some shipments have now been postponed, but harvests from Ukraine and Russia will be affected this year and next.
Soaring energy and fertilizer prices, also due to the invasion of Ukraine, have had an impact, while the recovery in demand following the Covid lockdown has added further pressure.
Grain cultivation in Europe, North America and India is also affected by the climate crisis. Last year’s heatwave in Canada hurt wheat yields there, and this year it’s likely to be hurt by higher temperatures and wildfires.
All of this paints a good picture for grain producers. Demand for their products is increasing, supply is limited, and despite rising prices for inputs like energy and fertilizer, their profits seem secure.
The Guardian contacted all four ABCD companies for comment but received no response.
De Schutter said: “Ultimately we need to break the monopolies that dominate the food chain. A handful of companies control the world seed and fertilizer markets, animal genetics, the world grain trade and food retail. They are farmers making huge profits at the expense of consumers and the environment.”
Food prices for many staple foods have risen in the UK, compounding the crisis surrounding energy prices, which topped £3,500 a year for the average household this winter. Poverty activists warn people face tough choices this winter about where to eat or heat their homes.