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Food giants reap enormous profits during times of crisis

Food giants make huge profits in times of crisis

Billionaires in the food and agribusiness have reportedly increased their collective wealth by 42 percent in the past two years. Credit: Shutterstock

A recent report by Oxfam International shows that: 62 new “food billionaires” were created during the pandemic. The report, released ahead of this year’s World Economic Forum in Davos, Switzerland, highlights record profits made by industry titans

Billionaires in the food and agribusiness have reportedly increased their collective wealth by 42 percent in the past two years, while global food prices are up 33.6 percent in 2021 and are expected to rise another 23 percent by 2022.

Cargill, the food company giant, is expects to report record profits this year, surpassing last year’s record-breaking $5 billion. Indeed, three members of the Cargill family joined the Bloomberg Billionaires List mid April.

Canadian food companies are also showing strong growth. Loblaws reported that the profit in the first quarter increased by almost 40 percent from last year.

Sky-high food inflation

While inflation is caused by a variety of factors, one of the most damaging factors can be traced to the extreme levels of corporate concentration in the food supply chain.

The pandemic initially visible cracks in our supposedly efficient industrialized food system through supply chain failuresstaff shortages and trade restrictions† Now we can add high food prices and growing inequality to the list.

Food price inflation has grown much faster than general inflation for decades. Canada’s headline inflation at highest point since 1991and food inflation in the country has reached 7.4 percent.

According to this year Canada Food Price Reportbetween 2000 and 2020, the average grocery bill has increased by a whopping 70 percent, and median incomes have not kept pace.

Meanwhile, companies have made record profits. This indicates that they have the market power to protect against these shocks by: pass the risk on to the consumer

Concentrated food supply

canada is home to one of the most concentrated food systems in the world: Cargill and JBS Foods slaughter 95 percent of Canada’s livestock, while Weston Bakeries and Canada Bread account for 80 percent of the bread market. Loblaws, Sobeys, Metro, Walmart and Costco all control about 80 percent of the grocery market’s sales.

Consumers are not the only ones affected. Retailers have continued to raise food prices, while farmers’ profits have stagnated or fallen for decades.

Business concentration is closely linked to the industrialization of food systems. Agricultural industrialization favors mechanization and specializationboth aimed at increasing efficiency.

Economies of scale – profits made as a result of economies of scale – and government policies aimed at increasing production have led to a drastic decrease in the number of farms in Canada and the US between the mid-20th century and today.

This shift has led to a concentration of competition between companies and along supply chains, enabled by lax government oversight. Companies were also motivated to merge with others and acquire others as a strategy to deliver shareholder value.

‘greed’

While many recognize the negative outcomes of our industrialized food systems – high greenhouse gas emissions, biodiversity loss and the promotion of highly processed foods, to name a few – they are often positioned as plentiful, affordable food for growing populations.

however, the recent flurry of articles show that great food could contribute to the rise in food prices casts doubt on the validity of this claim.

A recently New York Times article on “greed” examines the relationship between firm concentration in general and higher prices. Greed occurs when big companies drive up their prices in times of extreme strife, such as a global pandemic.

The article notes that while corporate concentration has been around for decades with no corresponding inflation, the unique set of circumstances that have emerged from the pandemic has changed things.

Shortages in supply, coupled with greater bargaining power for workers, have pushed companies to move from pressuring suppliers to pressuring consumers. Both approaches demonstrate the dangers of concentrated corporate power.

More diverse food production

Higher food prices, partly due to business concentration, have fueled the case for supporting more diverse, local food production, processing and markets. With luck, this growing evidence will translate into investments in alternative food systems.

During the pandemic, these alternative food systems have proven their capability to adapt to a crisis in a way that the longer, more distant and concentrated supply chains of industrialized markets could not.

Community-supported farming programs, food hubs and online direct distribution platforms between farmers and consumers remained agile in unpredictable times

If market concentration allows firms to raise prices in their favor, it follows logically that smaller, decentralized markets are simply not structured to allow for such tactics. In other words, these smaller markets will not be able to benefit from the crisis as the industrialized markets have been.

To prevent big companies from exploiting crises like the pandemic, the war in Ukraine and climate change for their own benefit, we need our governments to invest in smaller alternatives.


The delicate balance between supermarket profit and food security


Provided by The Conversation


This article was republished from The conversation under a Creative Commons license. Read the original articleThe conversation

Quote: Food giants make huge profits in times of crisis (2022, June 14) retrieved June 14, 2022 from https://phys.org/news/2022-06-food-giants-reap-enormous-profits.html

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