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

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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

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African Women forge bold actions for climate justice at the 2024 Women’s Climate Assembly in Senegal.

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By Witness Radio and WoMin teams.

Hundreds of African women activists and climate leaders who attended the week-long Women’s Climate Assembly (WCA), held alongside the African People’s Counter COP (APCC) in Saly, Senegal, have declared to fiercely protect Africa’s natural resources from the rampant exploitation by countries in the Global North.

The Pan-African radical space ignited a powerful collective movement, uniting Africans most deeply affected by rampant resource extraction and ecological destruction, forging a path toward true environmental justice and liberation for Africa’s people.

The WCA highlighted African women’s central role in defending the continent’s natural resources, which countries in the Global North have long exploited. Activists and leaders called for urgent action to protect Africa’s wealth, including minerals like cobalt and lithium, oil, and vast tracts of forested land, which have fueled global industries while devastating local environments.

Activist Ndieme Ndong from Senegal spoke ardently about this exploitation: “All the wealth is coming from Africa. Gold, phosphate, oil, cobalt – everything is coming from Africa. But foreign powers bribe our leaders and rob us of our resources. If we look at all the wealth in Europe, all the wealth they are using in the factories and plants in Europe, everything comes from Africa.”

Held alongside the African People’s Counter COP, this annual assembly set a powerful precedent for future collaborations and united efforts toward a more just and sustainable future for Africa and the world. The activists noted that women have often been sidelined in climate advocacy despite the devastating effects Africa and the rest of the world are facing.

“The 2024 Women’s Climate Assembly has demonstrated that when women unite, they can be a powerful force for change. African women are determined to ensure that their demands and impactful organizing in the fight against the climate crisis are both heard and seen.” The activists mentioned in a statement released shortly after the event.

The assembly also served as a powerful platform for African women to demand gender-responsive climate policies. Africa continues to bear the brunt of climate change’s worst consequences as harmful development models driven by Global North companies, such as cobalt and lithium mining fuel conflict in the Democratic Republic of the Congo, oil pollution in the Niger Delta, forest and land grabs for monoculture farming in Cameroon and Uganda among others, and polluted water sources have intensified the call for environmental change. These destructive practices are driving African women, who are disproportionately affected, to lead the resistance.

“In my village in Côte d’Ivoire, if we want to get outside our community, we need a gate pass to explain why we are going out. When we are in our village, you cannot move your goods freely. There are guards, uniformed men, always in yellow, who monitor movements on behalf of the palm oil company. Many women have been arrested and put in prison by these wicked multinationals just because they are picking fruits of the palm for themselves. This is OUR land. We had to do something. We had to fight for the liberation of these women. So, as women, we organized.” – Josiane Boyo, from Cote d’Ivoire, revealed.

Ahead of COP29 in Azerbaijan this November, the WCA and APCC emphasized the critical need to include African women’s voices in global climate negotiations. African women are leading the push for sustainable solutions, demanding the right to say “NO” to harmful extractive and development projects, reparations for environmental damage, and advocating for an end to the climate debt that has burdened their communities.

Over 120 women activists and leaders from across Africa met from October 7th to 11th under the theme “African Women Rise to Defend their Lands, Oceans, and Forests. ” The assembly emphasized the power of women’s leadership in confronting Africa’s most pressing environmental challenges.

The assembly was organized by a steering group of women’s movements, grassroots networks, and a few NGOs working in solidarity with women in resistance, and 200 women from across West, Central, East, and Southern Africa were gathered last year. The delegates, representing 70 communities and organizations from 17 countries, are at the forefront of resistance against large development projects that extract and exploit Africa’s natural resource wealth at the expense of people and the planet.

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Women’s Climate Assembly, 2024: African women vow to protect human and environmental rights amidst an influx of destructive land-based investments on the continent.

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By Witness Radio team.

Africa’s path to recovery from the scars of destructive development projects will take decades. These projects, often presented as “development initiatives,” have caused untold suffering, including deaths, homelessness, infertility among women, food insecurity, flooding, and the relentless pollution of lands that were once flourishing homelands. This fallout is catastrophic for the environment and the people who depend on it.

In a radio program at Witness Radio, which was part of the Women’s Climate Assembly (WCA) 2024, women activists from across Africa, representing western and central African regions, revealed the dark reality behind projects disguised as “development,” which genuinely devastates their communities, lands, and the environment.

The rise of these destructive projects has galvanized African women to fight back. They demand alternative development solutions and projects that uplift women, support families, and sustain communities while protecting the environment.

Siya Foyoh, a community activist working with WoME from Kono District in Sierra Leone, shared the horrors her region faces from mining and deforestation. Kono, Sierra Leone’s one of the leading diamond-producing districts, has seen an increase in child deaths due to uncovered mining pits, which flood during the rains. “Every month, we lose one or two children who fall into these pits. This never happened before the mining began,” Foyoh explained.

Beyond the immediate dangers, the chemicals used in mining have led to widespread health crises. “In my district, hepatitis B is rampant because of these chemicals. Our health is suffering greatly,” she added.

But what is more disheartening is the response from government authorities. “When we report these tragedies to the government, we are told the mining companies are too powerful to be challenged,” Foyoh lamented.

Foyoh also pointed to the growing problem of timber logging in Sierra Leone, accelerating deforestation and disrupting rainfall patterns.

“This year, our community saw little and late rainfall, leading to food shortages. Deforestation is driving us toward famine,” she further added.

Another activist, Florence Naakie, from Nigeria’s Lokiaka Centre, highlighted the devastating impact of oil extraction on women and their communities. She revealed that “Countries may be different, but the struggles we face are the same,” recounting stories of coastal erosion in Senegal, deforestation for timber, and the increasingly erratic weather patterns affecting farming communities across Africa.

In Nigeria’s Niger Delta, Oil development operations have ravaged the land and waters, and farmers and fisherfolk are facing an ecological disaster. “Our soil is infertile; even when we use fertilizers, there’s no yield. Fisherwomen report catching fish that smell of crude oil, which we know can cause cancer,” Naakie explained.

She painted a bleak picture of life in the Niger Delta: “We’re being pushed to the brink. People cannot farm or fish, and the pollution has led to widespread infertility and cancer among women. Some of the babies born in these areas are deformed.”

In Nigeria, the oil spill crisis is staggering. The Nigerian Oil Spill Monitor recorded over 1,150 spills in 2023 alone.”Oil pollution has destroyed our environment, caused infertility in young women, and left us battling diseases like cancer,” Naakie added, with emphasis on the devastating impact on women, who bear the brunt of providing for their families in the face of environmental destruction.

“We have many women between the ages of 25 and 30 and above who are now unable to conceive because they have been exposed to a polluted environment. When these women go fishing, they come into contact with crude oil, leading to serious health consequences like cancer. We are seeing rising cases of skin cancer, cleft lips, and deformities in infants born to these women,” Naakie added.

Despite the overwhelming challenges, African women are refusing to back down. They call for projects restoring degraded lands and water sources and for the collective power to stand up to mining companies, governments, and other entities pushing harmful ” development ideas.”

“We will not give up,” vowed the activists. We are fighting for projects that prioritize women, families, and communities. We want a future where we can live dignified lives without fear for our children or our land.”

In-case you missed the live program,

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UN approves carbon market safeguards to protect environment and human rights

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The UN’s new carbon market will have a compulsory mechanism that aims to prevent developers of carbon credit projects from breaching human rights or causing environmental damage with their activities – a first for the UN climate process.

Developers of projects under the UN’s new Article 6.4 carbon crediting system will be required to identify and address potential negative environmental and social impacts as part of a detailed risk assessment under new rules adopted by technical experts in Baku, Azerbaijan, last Thursday.

Developers will also be asked to set out how their activities contribute to sustainable development goals like ending poverty or improving health, alongside their primary objective of reducing greenhouse gas emissions.

Maria AlJishi, chair of the Supervisory Body in charge of setting the rules, said in a statement that “these new mandatory safeguards are a significant step towards ensuring that the UN carbon market we are building contributes to sustainable development without harming people or the environment”.

The risk reduction measures introduced by the so-called “Sustainable Development Tool” represent an attempt to grapple with widespread concerns over the harm caused by some carbon credit projects around the world.

The Clean Development Mechanism (CDM) – the previous UN carbon market set up to help richer countries meet their emissions-cutting pledges – was dogged by accusations of social and environmental abuses linked to its registered projects. They included, for example, toxic pollution from a waste-to-energy facility in India, forced relocations due to infrastructure like a hydropower dam in Panama, and villagers in Uganda being denied access to land they used to grow food as a result of a tree-planting project.

The CDM had only a less-rigorous voluntary safeguarding mechanism that was heavily criticised by civil society.

The approval of the new Sustainable Development Tool this week marks the end of a two-year process to agree on the rules, which will work alongside an appeals and grievance procedure rubber-stamped earlier this year.

Kristin Qui, a Supervisory Body member closely involved in developing the tool, told Climate Home it had been “very challenging” to get it right. “Everyone wanted to find the right balance between making sure the tool can be used while at the same time being as stringent as possible,” she added.

Under the new rules, project developers will have to fill out an extensive questionnaire designed to assess the risk their activities could pose in 11 areas, including land and water, human rights, health, gender equality and Indigenous Peoples.

They will have to describe how they are planning to avoid any negative impacts or, if that is not possible, the measures they are taking to reduce them, as well as procedures to monitor their implementation.

External auditors will review the risk assessment, check that local communities have been properly consulted and evaluate the appropriateness of the actions proposed by the developers. The rules will apply to both new projects developed under Article 6.4 and to over a thousand more that are seeking to transfer into the new market from the CDM.

Isa Mulder, a policy expert at Carbon Market Watch (CMW) and a close observer of Article 6 negotiations, said the tool “should go a long way in upholding rights and protecting people and the environment”.

She added there is still room for improvement on certain provisions and said the mechanism will need to be used as intended for it to be effective, but called it “a really good start”.

The Supervisory Body will review and update the safeguarding tool every 18 months, striving to improve it based on feedback from those involved.

In addition to the risk assessment, the mechanism will require project developers to assess the potential impacts of their activities on country efforts to meet the 17 Sustainable Development Goals, adopted by the UN in 2015 and due to be met this decade.

Qui said the tool will make project developers reflect more closely on how they can share benefits with local communities.

“It poses the question of how the project is actually going to contribute to sustainable development in addition to simply avoiding harm and encourages a high level of engagement with Indigenous populations from the get-go,” she added.

The approval of the Sustainable Development Tool is seen as an important stepping stone towards achieving the full operationalisation of the Article 6 carbon market at COP29 in November – one of the main priorities for the incoming Azerbaijani presidency of the talks.

CMW’s Mulder said the tool’s adoption was “very significant”, as having a human rights protection package in place was “probably a prerequisite” for many countries to even consider approving other carbon market measures at COP.

After extended and heated discussions stretching into the early morning on Thursday, the Supervisory Body also agreed on guidance for the development of carbon-credit methodologies and carbon removal activities aimed at ensuring that emission reductions claimed by projects are credible.

These key building blocks for the establishment of the Article 6.4 carbon crediting mechanism proved an insurmountable hurdle at the last two annual climate summits where government negotiators rejected previous iterations of the documents.

That prompted the Supervisory Body to take a different route in Baku this week by directly approving those documents as “standards” instead of simply presenting its recommendations for diplomats to fight over at COP.

Jonathan Crook, a policy expert at CMW, interpreted the move as “a risky take-it-or-leave it strategy” to avoid intensive negotiations. “I think this approach aims to ensure the texts won’t be reopened at COP29 for line-by-line edits,” he said.

Climate Home understands that governments will still have the option of rejecting the body’s “standards” wholesale or directing it to make further changes.

Supervisory Body chair AlJishi said in written comments that “the adoption of these standards marks a major step forward in enabling a robust, agile carbon market that can continue to evolve”.

But a fellow member of the body, Olga Gassan-zade, voiced concerns over the process. “Personally I have huge reservations against creating a UN mechanism that can effectively evade the UN governance,” she wrote in a LinkedIn post, “but it didn’t feel like the SBM [Supervisory Body Mechanism] as a whole was willing to risk not adopting the CMA recommendations for a third year in a row.”…PACNEWS/CIMATE HOME.

Source: Post-Courier

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