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food supplies in a globalising economy
the role of transnational corporations
A small number of agribusinesses now dominate each part of the food chain in developed countries. Chemical companies that produce seeds are increasingly linked to grain traders and food processors in the production chain. The same companies buy, ship and mill grain, then feed it to livestock or turn it into cereal, often crossing several national borders in the process.
Horizontal integration occurs when a small number of firms effectively control a given market. Such concentrations increase the market power of the dominant firms, enabling them to secure large profits.
On a global scale, there are many examples where a small number of firms control large parts of trade in an international commodity. For example, three companies control around 90% of world coffee exports, each of them having an annual turnover larger than the economy of many countries. The dominant transnational agribusinesses are characterised not only by horizontal integration in a given sector but also by their dominance of multiple sectors of agricultural production, shipping and processing.
CASE STUDY: CARGILL
Cargill is the largest grain exporter in the USA. It is dominant in wheat, soya beans, corn and cotton and is ranked in the top ten in the world as a food and beverage company. It is also a major player in beef packing and ethanol and fertiliser production, and operates a large financial division which manages risks in the commodity market.
Vertical integration is where one company either owns, or controls through joint ventures, multiple stages in a production chain. For example, the company Dole owns plantations and canning facilities, and has the marketing power to bring pineapples from plantations in the Philippines to consumers around the world.
The role of large agribusinesses in the agricultural market is therefore increasing. However, many critics are unhappy with the amount of power these companies wield and their influence on governments and international organisations such as the WTO and World Bank. Critics argue that:
> the global nature of their operations gives agribusinesses a political voice in many countries, creating a powerful force for policies that reflect their interests
> they have been accused of allocating labour intensive processes to low wage economies and environmentally damaging processes to countries with lenient environmental regulations
> their operations use large amounts of fertilisers and pesticides
> their operations have led to the destruction of traditional agricultural communities and family farms
> they impose uniformity on agricultural production, undermining the long-term sustainability of agriculture in some parts of the world
> many agricultural products grown in developing countries are not directed at local needs but at the markets of richer developed countries, leading to possible food shortages in poorer countries
> some agribusinesses have been at the forefront of the promotion and use of GM crops
Horizontal integration occurs when a small number of firms effectively control a given market. Such concentrations increase the market power of the dominant firms, enabling them to secure large profits.
On a global scale, there are many examples where a small number of firms control large parts of trade in an international commodity. For example, three companies control around 90% of world coffee exports, each of them having an annual turnover larger than the economy of many countries. The dominant transnational agribusinesses are characterised not only by horizontal integration in a given sector but also by their dominance of multiple sectors of agricultural production, shipping and processing.
CASE STUDY: CARGILL
Cargill is the largest grain exporter in the USA. It is dominant in wheat, soya beans, corn and cotton and is ranked in the top ten in the world as a food and beverage company. It is also a major player in beef packing and ethanol and fertiliser production, and operates a large financial division which manages risks in the commodity market.
Vertical integration is where one company either owns, or controls through joint ventures, multiple stages in a production chain. For example, the company Dole owns plantations and canning facilities, and has the marketing power to bring pineapples from plantations in the Philippines to consumers around the world.
The role of large agribusinesses in the agricultural market is therefore increasing. However, many critics are unhappy with the amount of power these companies wield and their influence on governments and international organisations such as the WTO and World Bank. Critics argue that:
> the global nature of their operations gives agribusinesses a political voice in many countries, creating a powerful force for policies that reflect their interests
> they have been accused of allocating labour intensive processes to low wage economies and environmentally damaging processes to countries with lenient environmental regulations
> their operations use large amounts of fertilisers and pesticides
> their operations have led to the destruction of traditional agricultural communities and family farms
> they impose uniformity on agricultural production, undermining the long-term sustainability of agriculture in some parts of the world
> many agricultural products grown in developing countries are not directed at local needs but at the markets of richer developed countries, leading to possible food shortages in poorer countries
> some agribusinesses have been at the forefront of the promotion and use of GM crops
environmental impacts
Over the past 50 years, food has travelled increasing distances between farmer and consumer. This is a result of the globalisation of the food industry, the trends towards bigger farms at home, the centralisation of supermarket distribution networks, and out-of-town shopping by car. Mode of transport makes a big difference. Large volumes of food can be imported vast distances by sea at a low environmental cost whereas air transport produces high amounts of pollution for the low volumes it carries and has tripled since 1992.
Figure 1 below shows the carbon dioxide emissions associated with the transport of UK food, indicating that transport by HGV is by far the biggest source or air pollution. Some research, however, suggests that growing food in other parts of the world and importing it into the UK may not be as damaging to the environment as it first seems. A recent report maintained that it takes less energy to import tomatoes from Spain, where the climate is warmer and no heating is used, than to grow them out of season in gas heated greenhouses in the UK.
Figure 1 below shows the carbon dioxide emissions associated with the transport of UK food, indicating that transport by HGV is by far the biggest source or air pollution. Some research, however, suggests that growing food in other parts of the world and importing it into the UK may not be as damaging to the environment as it first seems. A recent report maintained that it takes less energy to import tomatoes from Spain, where the climate is warmer and no heating is used, than to grow them out of season in gas heated greenhouses in the UK.
Figure 1: Carbon dioxide emissions associated with UK food transport, 2002