Who's cashing in on the high price of food?

With food riots raging, let’s open the books on the finances of Big Ag 21

When we talk about the crisis in food prices, we should scrape below the surface to explore who's actually benefiting from the crisis.

Unless you've had your head stuck in the freezer at Dean & Deluca, you've heard about the food crisis across the planet.

A recent Financial Times displayed this staggering map of the globe: Black dots marked each of the countries were food riots have been sparked in outrage against the rising prices of food. Thirty dots in all. A recent CNN report noted that "Riots, instability spread as food prices skyrocket." These surging costs, warns World Bank President Robert Zoellick, "could mean 'seven lost years' in the fight against worldwide poverty."

With the food crisis as front page news, I couldn't help but notice which agribusiness company has just reported an 86 percent jump in its quarterly earnings.

Cargill, one of the world's largest private companies, noted that these strong earnings are being driven mainly by its commodities division, the booming demand for biofuels, as well as increasing demand in new markets, especially Asia.

Last year, Cargill posted total sales topping $88 billion, and a net profit of $2.34 billion. To put that in context: $2.3 billion is the GDP of Belize.

This post was originally published at the Bite Blog, over at Take a Bite out of Climate Change.

Anna Lappé is the co-author of Hope’s Edge and Grub. She is at work on her third book, Eat the Sky, and is the creator of the
Take a Bite Out of Climate Change campaign.

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  1. otocco Posted 11:20 am
    18 Apr 2008

    World food prices     Yes, big agricultural companies are making money hand over fist with regards to this crisis.  I think that the net you cast may not be cast far enough.  Global demand for commodities for food and feed also raise the prices.  As globalization continues to spread more wealth into places like China and India, they want to move up the food chain with respect to their diets.  The US meat-based, processed diet is what many of these countries aspire to.  As they continue to grow in wealth, they will demand more of these items.  We are nowhere near the peak demand for commodities as food and feed, let alone the debate over fuel.

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  2. Delay And Deny's avatar

    Delay And Deny Posted 11:30 am
    18 Apr 2008

    Only McCain

    Only John McCain has the guts to say he would cut corn subsidies -- when campaigning in Iowa!

    J. Bailo

    Participant

    Texeme.Construct()

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  3. enki Posted 11:13 pm
    18 Apr 2008

    In Human Terms     I have come to realize that the only way to really accomplish anything positive is to make the action necessary to achieve the desired goal profitable to someone. If we want to try to stop climate change we will need to line someone's pockets.
         For example, in Pennsylvania the rate caps on electricity come off in 2010. People are worried and projections are being made that retail electricity prices might rise between 25% and 75% when this happens.
         Pennsylvania has net metering laws in place though and suddenly renewable energy sources such as wind or solar are looking great as a way to reduce your personal energy bill. I see the probability for a large increase in interest in and sales of solar water heaters and solar/wind energy production devices among average consumers as a result.
         If you as an individual can produce as much electricity when the sun shines or the wind blows as you buy from the power company when it doesn't then you can break even and save money. Simple but totally effective.
         The result of course will be a reduction of greenhouse gas emissions as more and more people produce part of their own energy. But that is just a bonus to most people. The bottom line is personal financial gain or savings.

    Mike Johnston

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  4. trock Posted 1:08 am
    19 Apr 2008

    it's happened beforeIt's not unlike the gold strikes and gold mining many years ago.  Most of the prospectors didn't make much money, the real money was made on supplying the tools and supplies to the prospectors.    Same thing now, those selling what agriculture needs are really making out.
    I own farmland and we're really sticking in to the farmers in land rent.  It feels strange for myself to be very much against biofuels from food, but at the same time I am benefiting from it.

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  5. Zephaniah Posted 7:43 am
    19 Apr 2008

    Biofuel lessons?Biofuels are contributing to food shortages worldwide.
    Do other environmentalists feel as I do that we missed that call, badly?
    Was this foreseeable? We know about limits on water and soil resources. We know how many people worldwide are on the razor edge of hunger. We know that biofuels use fertilizer, irrigation, tractors, energy to process and transport it, thus raising the demand and therefore price for these items.
    I heard people justify support for biofuels, saying they would be a good stopgap measure that would demonstrate that alternatives can work.  As billions of dollars of investment capital poured into biofuels, it seemed that corporate America was participating in the green revolution.
    Did we really analyze the relative carbon output of biofuels, considering the energy costs of production and the forests being cleared to produce pulp? Or did we just take the corporate desire to greenwash their reputations and encourage biofuels because corporations were more willing to market an ownable fuel, than free sunlight?
    Should the environmental community have handled this  differently????

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  6. MikeB Posted 8:34 am
    19 Apr 2008

    These environmetalists...In fact most environmentalists were warning quite some time ago that first generation biofuels were unsuitable for large-scale use (old frying fat to power your local bus, yes; large-scale use in every car in Europe, no).  It was governments and certain interest groups (such as german car makers) who though this might be a great 'get out of jail free card'.  Biofuels have real promise as part of the solution (as fuel for ultra efficent hybrids for example), but these will be the 2nd and 3rd generation fuels, not the current ones.  I've read a number of articles decrying 'greens' for backing biofuels, but all seem to have conjured these greens out of thin air, instead of looking at the facts.

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  7. mike365 Posted 9:44 am
    19 Apr 2008

    Systems thinkingI have to wonder who the real proponents of biofuel are, since a liquid fuel substitute would fit so well with existing auto technology.  Perhaps hindsight is 20/20 in this case, but it doesn't seem like any thorough discussion of biofuels could have omitted the tremendous hurdles of land use, commodity demand and the questionable net energy balance of the ethanol production cycle.  
    With what we know now, corn-based ethanol cannot be part of our large-scale, long-term energy solution.  Investing millions into a short-sighted technology does not make sense economically, and takes resources that should be going to more reasonable energy options like solar and wind.  This is especially true of an environmentally malignant technology like biofuel, which not only encourages deforestation, but increases demand for basic food supplies like corn.

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  8. nsehgal Posted 10:03 am
    19 Apr 2008

    Food pricesI agree that large corporations are earning huge profits.  It is scary to hear the number of riots that have happened in the last few weeks.  Before food prices started to sky rocket, instability was already high due to corruption and bureaucracy, but now it seems like most developing countries are having riot breakouts.  It does not help that weather conditions are worsening - wet areas are becoming flooded and dry regions are facing severe drought - and making crops obsolete.  If farmers are not able to grow their crops, not only will end consumers and farmers suffer, but the large intermediates will too!  We are extremely dependent on produce from all over, so the food prices are positively correlated to gas prices.  With gas prices reaching $4.00 by the summer, I don't foresee cheaper produce any time soon. This is especially true for meat and corn goods.    
    At home, I believe consumers are feeling the effects of higher prices.  Price sensitive consumers are buying fewer fresh produce and organics.  It seems that locally grown food is the best choice.  This is a feasible option for states like Florida and California, but not for many others.  Farmer markets can only produce a limited variety of goods throughout the year.   Also, there is a slight decrease in how much Americans eat outside.  The restaurants and entertainment industry will be hit next.
    The next few years will be hard, especially if gas prices continue to rise.  Adding to this, is the recession our society is facing.  Change can only come if consumers start to think about what and how much they consume.  It is important that we become more dependent on local produce/goods, rather than produce being shipped from other nations.

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  9. Pangolin's avatar

    Pangolin Posted 12:35 pm
    19 Apr 2008

    Eggs $5/dozenFor organic free range eggs at todays farmers market. Anything that isn't currently producing a surplus has gone up 30 to 100 percent in price. Luckily greens are still very affordable at $1 a bunch from local growers.
    $4 per gallon gas hits people who live even a little bit out of town much harder than the rest of us. A 3 mile round trip for you is 8 miles for them. Since they only tend to have older pickups or vans that adds up the fuel costs fast.

    Put the Carbon Back

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  10. LGT Posted 2:09 pm
    19 Apr 2008

    "With food riots raging, let's ..."... change our lifestyles.
    If this isn't a good time and incentive enough to produce at least some of our own food, where possible, there'll NEVER be a better time!
    The Dynamics of Collapse

    ...
    - Poor global harvest/Food scarcity [Humans are one harvest away from starvation!]

    ...

     
    http://edro.wordpress.com/collapsing-cities/

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  11. Sam Wells Posted 2:32 pm
    19 Apr 2008

    Wait a minute hereA fundamental flaw in the argument is that the US is exporting more ag products than ever, thanks to a cheap dollar and bumper crops. The problem is more Malthusian, in that people are running out of staples like rice, wheat, and corn. Many of those food riots have nothing to do with ADM, Cargill, or whoever you're trying to attack.
    Thailand, India, and Vietnam are major rice producing areas yet due to population growth, have had to curtail exports, which drove up the price of rice 2-3 times. The US is not an active player in those markets at all. There is some good information about the topic out there if you'd research it.
    If you want to talk about the domestic/internal ag economics with ethanol production, you have a point, and there has been some deleterious effect on the Mexican corn market as well. But basically we're screwing ourselves - not causing food riots elsewhere in the world.
    Has market globalization and a recession had an impact? That's a topic for another blog but what I think you'll see is that many overseas ag producers protect their crops with subsidies, caps, and rent controls. Of course, "free trade" destroys all that and throws the system out of whack.
    If you want to lectured about how great NAFTA is, just ask a Mexican what the price of masa and corn tortillas is today.  -sam

    Onward through the fog

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  12. racc Posted 5:27 pm
    19 Apr 2008

    Just Stop DrivingDidn't miss the call. There likely are no good solutions that will allow people to continue to drive. Face the music and start supporting public transit and cycling.

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  13. trock Posted 5:53 pm
    19 Apr 2008

    its been all vetted alreadyAbout the question of whether we should have known that this would happen, shortages of food and troubles with land use if we use food for fuel, the answer is yes.   I remember reading about and discussing it with other college students in the late 1970's and we had the same conversations about food supply, ethanol, does it make economic as we are having now.    In the 1970's we said ethanol from corn didn't make any sense and it doesn't make any sense now. We just don't have a president who has a clue.  
    You want to use less gasoline.   Put hybrid electrical-gasoline on every vehicle that would benefit from it.   That would be cheaper and make more sense that making ethanol from food crops.

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  14. amazingdrx Posted 5:57 pm
    19 Apr 2008

    13 billion for biofuelhttp://www.dtnethanolcenter.com/index.cfm?show=10&mid ...
    "Total support for biofuels is projected to reach around $13 billion in 2008 and almost $16 billion by 2014, the report said. And under existing policies, the report said, the industry will obtain subsidies worth more than $92 billion between 2006 and 2012. The report is available at http://www.earthtrack.net/earthtrack/library/BiofuelsUSup ...
    That's just the US subsidy for biofuel, not including ag commodity subsidies.  Do Cargill and agribizz giants really need these billions?
    Or would those tax dollars be better spent on emergency food aid to those starving due to higher grain prices?
    Maybe the rest could go to subsidies for farm biogas, organic farming conversion, wind on farms, and solar cogeneration.
    With 20 billion from agribizz biofuel subsidies, 20 billion from oil, 20 biilion from coal, 10 billion from nuclear, and so forth; diverting these billions to direct subsidies straight to investors in renewables and conservation could really get this energy revolution going.  With no new taxes.  No hedge fund carbon permit trading disaster.
    Just a lot of money for consumers to pay off their solar panels and other green equipment.  After the payoff, in a few years, their power and electric "gas" for their plugin hybrid is free.

    http://amazngdrx.blogharbor.com/blog

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  15. LGT Posted 11:45 pm
    19 Apr 2008

    Latest on BiofuelChief executive of Royal Dutch Shell:
    Biofuels will not solve the world's energy problem
    Qatar's oil minister [answering a question on skyrocketing food prices]:
    I don't think we should blame oil, we should blame biofuels.
    http://www.guardian.co.uk/feedarticle?id=7474498

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  16. amazingdrx Posted 12:13 am
    20 Apr 2008

    Barack will listenI think he will listen to us on the food versus fuel issue.  Barack, drop those subsidies for biofuel like a bad transmission!
    Vinod and Bill C?  You better worry about your bad biofuel investments.
    With plugin hybrids plugged into solar and wind power, we have an alternative for Barack and the new democratic majority to back.  And dump ethanol farming.

    http://amazngdrx.blogharbor.com/blog

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  17. racc Posted 4:56 am
    20 Apr 2008

    Just Drive LessThere are no really good solutions that will allow people to continue to drive as much as they do today. While plug-in hybrids may seem like a good idea now, there will be enviably be significant problems and unintended consequences. This of course, assuming that there won't be significant shortages of resources needed to produce plug-in hybrids on a large enough scale to make any difference at all. And this is assuming any of this is economically feasible.
    An idea is one thing. Making it work on an industrial scale is far more difficult. Times anything by a billion makes it huge.
    For example, increased demand for electricity caused by plug-in hybrids will delay the decommissioning of dirty coal-powered plants. It will take long enough to meet our current demand for electricity with renewables.

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  18. Sam Wells Posted 7:50 am
    20 Apr 2008

    Good Point RACCI was just thinking about how battery and plug-in hybrid vehicles could actually improve the bottom line for dirty coal plants, and provide a justification for them to stay in commission longer.  
    Be careful about what you ask for ...

    Onward through the fog

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  19. Ron Steenblik Posted 8:19 am
    20 Apr 2008

    A startling statisticOver on another blog, I estimate that the U.S. is currently diverting 500,000 corn cobs to the production of fuel ethanol per minute!

    These are only my personal opinions.

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  20. amazingdrx Posted 3:48 pm
    20 Apr 2008

    NopePlugins won't do that.  been through that talking point quite a few times here.
    In fact solar panels over a typical garage and parking space will power a plugin just fine.
    There simply is no GHG free alternative.

    http://amazngdrx.blogharbor.com/blog

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  21. kiwiiano Posted 5:52 am
    24 Apr 2008

    8 mile round trip....Quoting Pangolin:

    "$4 per gallon gas hits people who live even a little bit out of town much harder than the rest of us. A 3 mile round trip for you is 8 miles for them. Since they only tend to have older pickups or vans that adds up the fuel costs fast."

    My heart bleeds for you. In NZ it's $7.50 per gal and it's worse in Europe.

    One of our major problems is that we and the car industry can't get our heads around the need to downsize vehicles, by about 90%. As it is the Tata Nano is ridiculed as too small when in fact it is 3x too big. The 3-wheel triportuers to litter the roads of Asia are the transport of the future.

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