This post originally appeared on Bitter Greens Journal.
In business terms, a commodity is a useful item, produced in bulk, with no characteristics that distinguish it from others of its kind. What brand of DVD player do you own? Few people know. DVD players have become a commodity; they’re all pretty much the same.
In commodity markets, prices tend to drop over time. Personal computers, for example, have steadily fallen in price over the past 15 years. Remember when “IBM or Macintosh?” meant something? Now it’s “PC or Mac,” and PC controls upwards of 90 percent of the market. In commodities markets, the producer that can churn out the most product at the cheapest price wins. Dell clawed its way to the top of the PC market by streamlining production and squeezing its suppliers for price breaks as it gained heft. Producing a great, innovative product had nothing to do with it.
It’s counterintuitive to me that we would surrender something as sensual and poetic as food production to the brutal economics of commodity markets. Food a commodity? Nonsense!
Well, it is. Last year, the UN’s Food and Agricultural Organization released a report called “The State of Agricultural Commodity Markets.” It provides an interesting look at what happens when food is treated as a commodity, and what role international aid organizations play in propping up the system. The report brims with interesting information. For example:
- Around 2.5 billion people in the “developing world” depend on agriculture for their livelihoods. (Those quote marks are mine; I’ve seen little convincing evidence of broad-based development in nations that have surrendered to the rules of IMF-style economic programs.) Note that in the U.S., something like 2 percent of the population is directly involved in agriculture.
- A graph of inflation-adjusted global ag commodity prices between 1961 and 2002 (see page 11 of the report) shows a steady downward trend line, just as we’ve seen with PCs and DVDs. Ag commodities cost on average a third less now than they did in 1961, adjusted for inflation. Remember, bigger is better in commodity markets. That’s why Nixon’s secretary of agriculture, the notorious Earl Butz, could command farmers to “get big or get out.”
- The “developed countries” — essentially, the U.S., the euro zone, and Japan — support their agricultural “producers” (what happened to “farmers”?) to the tune of $230 billion per year. That’s 30 times the amount these nations provide in agricultural aid to the “developing countries.”
- Three companies (Phillip Morris, Nestle, and Sara Lee) control about half of the world’s coffee roasting; the price of raw coffee plunged 70 percent between 1997 and 2001, “threatening the livelihoods of 25 million people and triggering food emergencies in several countries in Africa and Central America.” The report doesn’t make this point, so I’ll add it: While the price of raw coffee was plunging to the despair of coffee farmers, the price consumers were paying at the grocery store for their Folgers held steady with inflation. That spelled a windfall for Phillip Morris, Nestle, and Sara Lee.
- “During the 1990s, countries that depend on cotton exports for more than 20 percent of their trade revenues increased the volume of exports by over 40 percent. But their revenues fell by 4 percent following a steep drop in cotton prices.” These countries are mostly in sub-Saharan Africa. The study doesn’t note this, but that same time frame coincides with a surge in profits for mass-produced clothes companies like Gap Inc.
- The report concedes that the steady fall in commodity prices is “structural, reflecting the basic forces of supply and demand that drive markets: global supplies have grown more rapidly than demand, fuelled by increased productivity and the emergence of major new producers.” (That’s one reason I’ve written so much about Brazil, which is busily, and with World Bank financing, ripping into its vast savanna and rainforest areas to clear land for soy production. Who wins that game? Not Brazil’s farmers, who can be sure the price of soybeans will fall over time. Rather food processors, fertilizer/insecticide producers, and purveyors of genetically modified seeds will cash in.)
- Even as the IMF and the World Bank (and the FAO, for that matter) have promoted commodity agriculture production as a way for “developing” countries to earn foreign exchange to pay back debt (typically to developed-country banks and entities like the IMF), what the FAO calls the “terms of trade” for those countries’ ag products have deteriorated. “Terms of trade” refers to the purchasing power derived from exports. Say country A sells chewing gum and country B sells SUVs. Country A will have to sell country B a lot of chewing gum if it wants to buy an SUV. Thus it has horrible terms of trade. Meanwhile, country B has wonderful terms of trade with respect to country A. Now, as ag commodity prices drop, the income developing countries derive from producing ag commodities drops. Meanwhile, the price of manufactured goods they need to buy to stay competitive with developed-country farmers — think John Deere combines — has kept up with inflation. According to the report, the value of the manufactured goods that developing countries can buy with their ag-commodity income has halved since 1961.
I could write about this report all day. The overall thrust is that submitting to commodity markets has been disastrous for developing countries. The only thing it’s developed, judging from this report, is the profits of the transnational food giants. (It does make the claim that swelling urban populations have benefited from lower food prices; it forgets to add that failed ag policies have driven millions off the land.)
Yet even after teasing out all of this scandalous information, the FAO can only search for ways of “making commodity markets work for everyone.” It suggests that developing countries remove tariffs on goods from developed countries (which would be ridiculous) and also their developing-country peers (which makes sense). It urges developing countries to cut back subsidies to corn, cotton, and soybean farmers. Fine.
But all of its policy recommendations involve ways of keeping developing-country farmers in the game of producing for global commodities markets.
I believe agriculture should not be a tool to pay back debt owed by a wealthy elite to a bunch of international banks. Agriculture should be concerned with growing food for people to eat. The UN is serving the corporations, not the world’s people, when it urges farmers in Africa and and Latin America to produce, say, massive quantities of soybeans. A UN truly bent on helping create a just world would use its resources to identify and support local foodways. Let farmers produce for their local markets, and let Archer-Daniels Midland and Cargill grow their own damned corn and soybeans.
Missing from this 60-odd page report is any discussion of what the food-as-commodity system has done to food. Let’s end with a quote from the great Masanobu Fukuoka, author of The One Straw Revolution (Japan, 1978).
If you think commercial vegetables are nature’s own, you’re in for a big surprise. These vegetables are a watery chemical concoction of nitrogen, phosphorus, and potash, with a little help from the seed. And that is just how they taste. And commercial chicken eggs (you can call them eggs if you like) are nothing more than a mixture of synthetic feed, chemicals, and hormones. This is not a product of nature, but a man-made synthetic in the shape of an egg. The farmer who produces vegetables and eggs of this kind, I call a manufacturer.