MEDIA FOR CHANGE NETWORK

Food inflation: The math doesn’t add up without factoring in corporate power

Published

4 months ago

March 22, 2024

TXJCX1 Jason Kelly, a trader in the Wheat Options pit at the CME Group throws up his arms as traders toss confetti at the closing bell for the year on December 31, 2009 in Chicago. UPI/Brian Kersey

Large farmers’ protests broke out in at least 65 countries over the past year. From India to Kenya through Colombia and France, desperation has hit a breaking point. Farmers warn that without better prices and more protection, their future is at risk. Peasant movements like La Via Campesina, for over three decades now, have denounced the World Trade Organisation and the growing number of bilateral free trade agreements for destroying their livelihoods.

However, these protests unfold against the backdrop of record-high global food prices. The prices spiked first during the pandemic and then again at the start of the war in Ukraine hitting an all-time high in 2022. Food prices have been rising faster than other products: if the global general consumer price index (CPI) doubled between 2021 and 2022, the food CPI inflation almost tripled. According to the World Food Organisation (FAO) food price index, even if international prices have moderated in 2023, they are still higher than in 2019 (see Graph 1). And all indications are that this is a crisis of prices, and not a food shortage at the global level. For the past 20 years, world grain production has exceeded available stocks.

The impact of these food price increases on millions of people, especially the poor, is devastating. In 2022, 9.2% of the world’s population was chronically hungry, an increase of 122 million people since 2019.

But, as this year’s farmers’ protests make clear, the increase in food prices is not going into their pockets. So, who is benefiting from these food price rises?

Volatility by design

The FAO and corporate executives have attributed recent food price increases to disruptive supply chains for oil, gas, fertilisers and staple goods. This is a half truth, and thus deceptive. They don’t mention how the current structure of the food system encourages and amplifies such disruptions.

For decades, the World Bank and the International Monetary Fund (IMF) have promoted structural adjustment policies, and green revolution technologies (hybrid seeds + chemical pesticides and fertilisers) across the world. We now have a global food system designed around the production of a small number of agricultural commodities (wheat, rice, maize, soybeans, palm oil) in a few areas of the world totally devoted to the massive industrial production of monocultures dependent on the supply of inputs, and concentrated in the hands of a few companies. Any disruptions within this global system, be it war or drought, can have major impacts on people’s access to food.

This is particularly acute in countries of the global South that are now highly dependent on food imports because of policies imposed on them through multilateral banks and free trade agreements. Moreover, we are entering a period of intense climate crisis, water crisis, geopolitical tensions, and declining crop yield gains that are set to generate more frequent and more severe disruptions.

For some, however, this volatility is an opportunity. Because of deliberate policies implemented since the 1980s (see box), there is today a large and growing part of the financial sector that profits from shifts in food prices using what are called “derivatives”. In theory, the use of these instruments helps buyers and sellers to lock in prices and protect themselves against the risk of price fluctuations. The most common and important of these instruments are futures contracts, which are agreements to buy or sell agricultural commodities at a specified future date. In futures markets, it is not the agricultural product itself that is traded, but the contract. The price of the contract changes according to supply and demand. But price variations on the futures markets have a direct influence on price fluctuation of the goods to which the futures contract relate. For example, if the price of a wheat futures contract rises, this indicates that the estimated future price of wheat is high. Consequently, the real current price of wheat rises. With increased activity in the financial futures markets, food trading has come to be referenced to futures prices. In a vicious circle, the volatility of food prices attracts more speculative money into the commodity futures market. This, in turn, amplifies the volatility of the futures markets and pushes up or down real food prices.

The price volatility experienced during the 2007 – 2008 food price crisis was partly a result of a surge in financial speculation. Similarly, when the war in Ukraine began, investments in commodity futures and commodity-linked funds rocketed. Speculative positions in the Paris wheat market increased from 35 million euros in January 2021 to 1 billion euros in March 2022. A report by IPES-Food found that the price of wheat on futures markets rose 54% in nine days, and the US Commodity Futures Trading Commission noted that volatility was 20% higher than normal. While this drove price increases that penalised consumers, hedge funds and pension funds speculating on food markets made huge profits.

The world’s agricultural trading companies have also benefited massively from this situation, including through their participation in financial markets. In 2022, profits achieved by the top five firms in this sector doubled and even tripled compared to the period 2016 – 2020. A report by the United Nations Conference on Trade and Development found that corporate profits of global food traders “appear to be strongly linked to periods of excessive speculation in commodity markets and to the growth of shadow banking – an unregulated financial sector that operates outside traditional banking institutions”.

They have some important advantages over purely financial players. For one, as ‘commercial actors’ they are not subject to the same restrictions or regulations of financial actors on commodity trading markets. Also, because of their global presence they have the most in-depth and up-to-date information about the availability of products and are the first to know about poor harvests or bumper crops. A study by SOMO found that the largest agricultural commodity trading companies ADM, Bunge, Cargill, COFCO International and Louis Dreyfus (usually referred to as “ABCCD”) control 73% of the global grain and oilseed trade as well as a combined 1 million hectares of farmland.

A perverse and well prepared alignment of the stars in the 1980s

Three parallel developments in the 1980s were key to financialising the global food system. First, the liberalisation of agricultural markets was promoted by the World Bank and other international agencies. Until then, governments in different regions had adopted policies to protect farmers from production risks. Second, financial markets were deregulated in the United States and investment banks and commodity trading firms began marketing index funds that tracked the prices of various commodities. In addition, large institutional investors (such as pension funds) sought to diversify their investments. To hedge their risks, they increased their investments in commodity derivatives and physical assets. As a result, a growing number of financial players began to speculate on food prices.

Third, like other companies, agribusiness companies experienced a dramatic shift in ownership with the entry of large asset management firms. CEO salaries became linked to the value of shares, creating a strong incentive to restructure companies in ways that generated more profit for shareholders. To this end, mergers and acquisitions multiplied, laying the foundations for today’s deep corporate concentration in the agri-food sector.

Source: Jennifer Clapp and S. Ryan Isakson, “Speculative Harvests: Financialization, Food, and Agriculture”, Agrarian Change & Peasant Studies, 2021.

Price manipulation and sellers’ inflation

Financial markets are not the only space where big agribusiness and food companies have an impact on food prices. A growing number of voices, such as the economist Isabella Weber, point to the monopoly power of corporations as a major factor in recent price inflation, including with food. What they call “sellers’ inflation” happens in contexts of supply-chain bottlenecks and cost shocks. When price hikes in upstream sectors (such as the gas needed for fertilisers) spread along the supply chain, companies in downstream sectors pass on cost increases to protect margins and even take the opportunity to increase margins. They can raise prices knowing that all their competitors will do the same.

Such strategies are only possible in contexts where a handful of companies have the power to set prices, as is the case in the food and agriculture sector. For example, just four companies, Bayer, Corteva, Syngenta and BASF control half of the seed market and 75% of the global agrochemicals market. Since 2018, their profits have nearly doubled. On the fertilisers side, the global market is controlled by a small number of companies. Four of them control a third of all nitrogen fertiliser production. From 2018 to 2022, the profits of the top 9 fertiliser corporations more than tripled, as they increased prices far beyond the production costs. Another example can be found in the world’s second largest meat processor, Tyson. The company more than doubled its margins and profits at the end of 2021. This was due to price increases it initiated and then continued to raise to protect margins against cost pressures from grain prices. A similar strategy was followed by large branders as Nestlé, Unilever and Mondelez who increased prices and ended by recording high profits in 2022.

This combination of monopoly power and unregulated activity in financial markets allows agricultural commodity traders, big agribusiness and food companies to make huge profits from food price rises.

Countering corporate power in food systems

The big culprit when it comes to today’s high food prices for consumers and low prices for farmers is corporate power. The climate crisis will only make this situation worse, unless urgent actions are taken to dismantle corporate power and shift to more localised food systems, based on diversified food production and catered to people’s food needs. The struggle against free trade agreements, at the forefront of many of today’s farmers’ protests, is therefore critical.

At the same time, actions are needed to reign in the power of those actors in the casino economy who are amplifying food price volatility and increases. When it comes to financial speculation, an important driver in food price volatility, regulations need to be tightened. And, to tackle the so-called “sellers’ inflation”, we need measures to prevent profiteering, which could include taxes on windfall profits anti-trust measures, and, more importantly public controls over food prices and programmes that ensure a fair, equitable and secure distribution of nutritious foods to everyone.

Source: grain.org

TXJCX1 Jason Kelly, a trader in the Wheat Options pit at the CME Group throws up his arms as traders toss confetti at the closing bell for the year on December 31, 2009 in Chicago. UPI/Brian Kersey

MEDIA FOR CHANGE NETWORK

Oil activities in Murchison Falls National Park threaten Wildlife Conservation – AFIEGO study reveals.

Published

2 days ago

July 25, 2024

witnessradio.org

By Witness Radio team.

A study conducted by the Africa Institute for Energy Governance (AFIEGO) and its partners has revealed that oil development activities are threatening the existence of Wildlife conservation at Murchison Falls National Park (MFNP).

Uganda has 10 National Parks including Queen Elizabeth, Lake Mburo, Murchison Falls, Kidepo Valley, Kibale, Mount Elgon, Rwenzori Mountains, Semuliki, Mgahinga Gorilla, and Bwindi Impenetrable National Parks and are managed by Uganda Wildlife Authority, (UWA).

Murchison Falls National Park, one of the oldest and most visited national parks in Uganda, is highly attractive to tourists due to its rich biodiversity. According to the Ministry of Wildlife, Tourism, and Antiquities’ 2024 report, Murchison Falls National Park received the highest number of tourists among all the national parks in Uganda between 2019 and 2023.

Data from Ministry of Tourism shows that in 2023, the Murchison park received 141,335 visitors which is equivalent to 36.4% of the 387,914 tourists that visited Uganda’s ten national parks.

The 24-page document titled Murchison Falls National Park is dying: How oil activities, climate change, and poaching are negatively reshaping the Park’ reveals that the Tilenga oil project infrastructural development presents immense risks to Murchison Falls National Park.

The Tilenga Oil project, part of the East African Crude Oil Pipeline (EACOP) is operated by Total Energies E&P (U) B.V. According to the EACOP website, EACOP is being constructed in parallel with two upstream development projects known as Tilenga and Kingfisher respectively.

Between February and June 2024, AFIEGO and partners conducted research to assess the progress of the development of the Tilenga oil project infrastructure and to examine the impact of this infrastructure on biodiversity.

In Murchison Falls National Park, oil sector infrastructure such as drilling rigs, well pads, flowlines, pipelines, roads, and others are being developed to enable commercial oil production by TotalEnergies under the Tilenga oil project.

Findings reveal that there has been progress in developing oil sector infrastructure in park assessed through satellite images. According to the study analysis of May 2024, satellite imagery shows rapid development of the tens of well pads and clearing for roads and the pipeline network inside the park.

The progress in oil development has had chilling effects on humans and biodiversity. Findings from the study expressed growing concern and fear towards light pollution, increased poaching risks, and increased motorization. Elephants are invading different areas of residence because of vibrations from the oil rig.

Among the impacts seen is the escape of wild animals from the park and the killing of people neighboring it. The study reveals that between 2023 and April 2024 in Buliisa district, five people have been killed by elephants. Oil host communities that live around the Park reported that elephants are moving from the Park and are invading communities destroying croplands and killing people.

According to experts in the study, the elephants could feel the vibrations from the drilling rig in their feet which causes them to move away from the Park and into communities.

The study also noted that the Tilenga oil project drilling rig is responsible for increasing light pollution in the Park and the surrounding communities. The light from the rig can be seen at long distances up to 13.9km away. Concerns were raised by this research’s respondents, who observed that the feeding and other patterns of nocturnal and light-sensitive wildlife could be negatively impacted by the rig’s light pollution. Such wildlife includes leopards, lions, birds, and others. These could migrate from the Park, or suffer worse impacts such as death.

Away from the above, the study observed that the paved roads that have been constructed in Park to support the Tilenga oil project activities have opened it up to more motorised traffic exposing wildlife to poaching, accidents as well as noise and air pollution.

Furthermore, Well-pads are located an estimated 950 and 750 metres respectively from the Murchison Falls-Albert Delta Ramsar Site in Park which is an Important Birding Area and important spawning ground for the Lake Albert fisheries.

“The development of good pads near the Ramsar site has been implicated in risking the conservation of aquatic biodiversity such as water birds especially the vulnerable Shoebill, fishes, and mammals like the hippopotamus” the study mentioned.

Additionally, the development of well pads and other oil sector infrastructure were also implicated in increasing the human population in Park. “The presence of human beings has been shown to lead to avoidance by wildlife, especially larger mammalian predators, of areas where human beings are. Wildlife such as the Uganda Kob was said to be slowly acclimatizing to the human presence and can be found near oil sector workers”. The study revealed.

Also, it pins oil activities in the Northern sector of the Park where the rig that will drill the Jobiri wells is located, the Northern side is characterized by savanna vegetation hosting more wildlife than the Southern sector, endangering the conservation of the savanna grasslands. According to experts in the study, predators such as lions, hyenas, leopards, and others also prefer to live in the Northern sector of the Park where they can easily access prey among others.

This study was released barely a few weeks after a group of 828 civil society organizations (CSOs) led by Afiego, oil host communities, fisherfolk, small-scale farmers as well as tour and travel operators, and other individuals from Uganda and the Democratic Republic of Congo (DRC) petitioned President Yoweri Kaguta Museveni to stop the ongoing TotalEnergies’ oil drilling in Murchison Falls National Park and its planned deployment of a second oil rig in the Park.

The petition followed reports that Total Energies E&P (U) B.V. was sweet-talking the President to allow them to deploy the second rig in the Park following the Petroleum Authority of Uganda’s (PAU) refusal, to allow them to deploy another oil rig in the Park over biodiversity conservation concerns.

As Total looks to add more oil rigs escalating the impacts, the recent study reveals that its current infrastructural projects—including oil rigs, well pads, pipelines, and roads—continue to cause negative impacts on biodiversity conservation in the Park.

In a bid to strengthen biodiversity conservation, the research study recommends that TotalEnergies and the Ugandan government stop all oil exploitation activities in the Park and calls for the intervention of the United Nations (UN), Ramsar secretariat, and UNESCO World Heritage Committee to engage the Ugandan government to stop the oil activities in Park.

Furthermore, the Ugandan government and development partners called upon to support the Uganda Wildlife Authority (UWA) in addressing risks such as climate change, poaching, and human-wildlife conflicts that are endangering the conservation of vital wildlife that supports the multi-billion tourism and other industries in Uganda.

The Uganda Wildlife Authority refused to comment on the study findings. The spokesperson of the Authority Mr. Bashir Hangi in an interview with Witness Radio said he was unable to comment on its contents.

“We haven’t read the detailed report and cannot comment on its contents. Allow us to read the report,” he wrote in a WhatsApp text message to Witness Radio.

Dr. Patricia Litho Kevin, the Assistant Commissioner for Communication in the Ministry of Energy and Mineral Development, acknowledged that there are potential risks associated with oil exploration and production, a reason why they established robust regulations, monitoring mechanisms, and contingency plans to prevent and respond to any environmental incidents.

She adds that the Government of Uganda is committed to ensuring that the oil projects are executed in an environmentally sustainable and responsible manner because it also understands the importance of preserving the natural heritage and biodiversity.

MEDIA FOR CHANGE NETWORK

A Financial gap: Can China be stopped from financing the EACOP?

Published

3 days ago

July 24, 2024

witnessradio.org

By Witness Radio and Südnordfunk team.

The East African Crude Oil Pipeline (EACOP) faces a financial hole. Numerous Western banks and insurers have already bailed out – meanwhile, the pipeline construction is in full swing. The shareholders seem confident that they will be able to finance the project. And Chinese banks, in particular, are coming into play.

Witness Radio’s Partner, Südnordfunk, a community radio in Germany, speaks to Zaki Mamdoo of the StopEACOP Movement and Ryan Brightwell of BankTrack about the reasons for the delay and the question of how China can be stopped from funding this disastrous project during the -Project is no longer attractive. China intends to close EACOP’s financial gap program.

The program was first broadcast in Germany, and Witness Radio is bringing you the same program in the English version.

Südnordfunk is partnering with Witness Radio to shed light on the different ways the construction of the EACOP pipeline is and will be affecting people, the resettlement programs, evictions, the socio-ecological consequences, and the entanglements of European politics.

Tune in. In case you missed both live programs (English and German broadcasts).

MEDIA FOR CHANGE NETWORK

NEMA suspend operations to evict the World Bank project-affected community and other residents accused of being located in wetlands.

Published

4 days ago

July 22, 2024

witnessradio.org

By Witness Radio team

The National Environment Management Authority (NEMA) has halted all evictions in the Kawaala Zone II and Nabweru villages until community petitions protesting against the evictions are heard. Witness Radio has learned.

This decision to halt the evictions followed several petitions by hundreds of residents affected by the Lubigi wetland restoration exercise. In June, the residents from the two villages petitioned NEMA, seeking a review of the eviction orders issued by evictors and compensation for those whose properties got demolished.

Some of the petitioners are waiting to receive compensation after signing a remedy agreement from a mediation process facilitated by the World Bank’s Dispute Resolution Services (DRS).

In one of their petitions, the World Bank project affected community accused NEMA of hiding behind the Lubigi restoration exercise to deny them compensation for their land which was earmarked for Lubigi drainage expansion, that they had been waiting for over a year.

Since June 2024, many residents in Kawaala Zone II, Nansana, Nabweru, and other villages have forcefully been evicted from their land, while others have faced eviction threats from NEMA claiming these residents encroached on Lubigi wetland.

However, victims have contested NEMA claims, asserting that they have not infringed on wetlands. Some residents claim to have land ownership titles issued by the government of Uganda, while others are tenants of the Buganda Land Board from whom they have been paying ground rent. It is on these grounds that they petitioned the NEMA.

Addressing the affected residents, their lawyers, and village leaders at NEMA offices in Kampala, Dr. Akankwasah Barirenga, the Executive Director of NEMA, confirmed that NEMA was in receipt of several partitions and stated that the authority will hear all communities’ petitions. He further emphasized that no one should be evicted or disturbed from their land until all petitions are heard.

According to NEMA, it has received 137 petitions, and a final decision on whether to evict or not will be made upon completion of hearings.

“No one is going to evict you from your homes before the completion of the hearing of your petitions. After hearing these petitions, you will be informed of the decisions. If it is established that the petitions have substance, the tribunal will decide based on what has been heard,” Dr. Akankwasah revealed