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Concentration, Cartels and Free Trade Buccaneers

16-Jul-2008



The European Commission raided agribusiness giants Cargill Inc and Bunge Ltd on Thursday in a sweep of traders and distributors of cereals and other agricultural products for human consumption and animal feed in two EU countries. The raids come at a time when grain prices have soared to record highs amid strong demand, production problems and the use of grain to produce biofuels that have lifted food prices. "The Commission has reason to believe that the companies concerned may have violated (EU) ... rules on cartels and restrictive business practices," it said in a statement.
Reuters, July 11

Agriculture conglomerate Cargill said on Monday that its third-quarter profit rose 86 percent to $1.03 billion on strong growth in its commodity sourcing and finance business. It said the largest profits came from its origination and processing segment, which processes and sells food commodities.
Associated Press, April 14, 2008

"Increased trade offers a more stable and secure global food system. Trade promotes prosperity and prosperity promotes peace."
Cargill Vice-President Rich Torres speaking on May 23, 2008 at the All Candy Expo in Chicago




Cargill, the agrofood giant whose former Vice-President drafted the original text of the WTO's Agreement on Agriculture, has never shied from using its market position to manipulate prices up and down (often simultaneously) to extract maximum value at every point along the food chain while preaching the gospel of "free trade". So the recent EU raids on their European offices come as no surprise.

Cargill, after all, is the company which was suspended from the Chicago Board of trade for cornering the maize market in 1937, and faced a similar situation with regard to wheat (1963) and soybeans (1973). In 2004, Cargill paid out USD 24 million to settle a class action lawsuit initiated by over a dozen major agrofood companies (few of them innocent of abusing their dominant position in their own markets) contesting global cartel arrangements to manipulate the multi-billion dollar world market in high fructose corn sweeteners.

In the 1970's, Cargill capitalized on extreme volatility in global wheat markets - volatility in part induced by its own operations - to ramp up its sales from $2.2 billion in 1971 to $28.5 billion over a mere ten years. The profits funded consolidation of its dominant trading/processing position, expansion into new sectors like meat and processed foods and development of the company's financial services network. In the second half of the 1990s, Cargill lobbied hard to knock out price support systems for US grain farmers, crushing many under oversupply and low prices while simultaneously cashing in on export subsidies to capture new markets abroad through dumping.

In 2004, Cargill sold its Brazilian orange juice processing operations to two companies, one of which, Cutrale, is now the global leader, providing concentrate for nearly a third of all orange juice consumed around the world. For over a decade, the Brazilian orange processing companies were prosecuted for conspiring to lower farmgate prices (and repeatedly violating Brazilian labour law). In 2007, US authorities began investigating alleged dumping of Brazilian orange juice concentrate imported into the US.

At every opportunity, Cargill and the other dominant traders and processors have used their market positions to profit from and even generate price volatility. Concentrated buying power allows them to raise and lower prices through systems of global arbitrage, formal and informal cartel arrangements and "strategic partnerships" with other TNCs, political lobbying and a global trade and investment regime which reinforces their power over workers, farmers and consumers. The United Nations' FAO, in its World Commodity Review for 2007- 2008, dryly expresses this in these words: "The presence of [transnational corporations] may also result in a decrease in competitiveness with negative effects for consumers and domestic firms… a number of international food and feed ingredient cartels were discovered during the 1996-2002 period, though illegal price-fixing had existed, in some cases, since the 1980s." The former head of ADM, Dwayne Andreas, expressed it more forcefully (at a time when the company was also under investigation for fixing the price of high fructose corn syrup) when he said "There isn't one grain of anything that is sold in the free market. Not one! The only place you see a free market is in the speeches of politicians." Bunge, the other company targeted in the recent EU raids, boosted its 2008 first quarter profits by 77% on the backs of the enormous subsidies paid to the socially and environmentally devastating oilseed biodiesel industry. They as well know a thing or two about the "free trade" behind the recent quantum leap in the number of the world's hungry.

Politicians and lobbyists promoting the rapid completion of the WTO Doha "development round" as the solution to world hunger are complicit in this matchless cynicism. The UN High Level Task Force on the Global Food Crisis is also promoting the Doha Round agenda as an essential ingredient in the recipe for eliminating hunger. The Task Force is seeking to define a function for strategic grain reserves without any reference to the power of the transnationals in swallowing, reconstituting, manipulating and trading these reserves in all their real and (through the financial markets) virtual forms. Implementing the full WTO agenda would extend still further the corporate grip on world food stocks.

Neither free trade nor free reign for the Cargills of the world will feed the planet. The solution to mass hunger begins with exposing, understanding and transforming the mechanisms of power which underpin the current global food system.