Agricultural Resources

At all stages of the food system—from seeds and other inputs to food processing and retail food sales—market power is concentrating in an ever smaller number of corporate firms. This trend is transforming how the world produces food, squeezing millions of farmers between a small group of input suppliers and an equally concentrated group of commodity purchasers, and in turn influencing the food choices available to consumers.

Concentration begins at the input stage in agriculture. Three companies control about half of the global agrochemical market: Bayer, Syngenta, and BASF.1 Use of genetically modified (GM) seeds has risen dramatically since these were first commercialized in the mid-1990s— now 45 percent of the corn and 85 percent of the soybeans grown in the United States are GM.2 By branching out into plant biotechnology, huge chemical and pharmaceutical companies such as Monsanto have gained control over critical agricultural inputs that reach into food systems around the world. In 2004, land planted with Monsanto seeds accounted for 88 percent of the total area in GM crops worldwide. 3 Once a global commons, genetic resources are now subject to Intellectual Property Rights protections. Developing countries are forced to deal with large transnational companies to get access to improved seed varieties and plant breeding technologies.4

Other input markets are similarly concentrated. In the United States, Mosaic—a company created out of a merger between Cargill and IMC Global—controls 50–60 percent of the synthetic fertilizer market, while four firms control over 80 percent of the market for farm equipment.5 Four companies control 60 percent of terminal grain facilities, and Cargill, Archer Daniels Midland, and Zen Noh control 81 percent of U.S. corn exports and 65 percent of soybean exports.6 Cargill has the largest global terminal capacity, handling significant grain exports in Canada, the United States, Brazil, and Argentina.7 It owns and operates a worldwide transportation network of ships, trucks, barges, railcars, and grain elevators for storage. Cargill is also among the top three beef producers in the United States and plays an important role in poultry production.8

Genetic stock, a crucial input into animal production, is another area where concentration has rapidly taken hold.9 Control over the development and dissemination of livestock genetics is shifting from farmers and ranchers to specialized genetics companies. They hold exclusive contracts with the largest livestock producers and play a key role in determining which livestock breeds will dominate the market. 10 Today, virtually all white eggs sold on the U.S. market come from a single breed of layer, the white leghorn.11 A depleted genetic pool will weaken the global food system’s ability to respond to disease, to changes in climate or available inputs, and to shifts in consumer preference.12

A growing share of farmers and ranchers in the United States, Europe, and some developing countries work under contract for companies that also control food processing and distribution. These firms may mandate the use of a certain technology to maximize yield or animal weight gain. If producers stray from the prescribed methods, they may find their contracts terminated.13 Virtually all U.S. poultry is produced under contract, as are close to 60 percent of hogs, cotton, rice, fruit, and dairy.14 Contracts tend to shift risk from the company to the producer, and producers are often forced by necessity into contracts that pay little or are excluded altogether from markets if they do not contract.15

Whether producing independently or under contract, farmers have few choices when it comes to selling their product to a packer or processor. In Brazil, 68.5 percent of the soybean oil refineries are controlled by just three companies.16 In the United States, 81 percent of beef packing plants are run by four firms.17 (See Table 1.) Concentration in livestock and dairy markets is likely to continue in developing countries as well, as rising incomes and shifting dietary preferences boost meat consumption.18

Globally, transnational supermarkets dominate the retail sector for food. In 2003, the top 30 retailers held 19 percent of the market in Asia and Oceania, 29 percent of the market in Latin America, and 69 percent of the market in Europe.19 Globalized supply chains give supermarkets the ability to get products from wherever they are cheapest, and the large firms exert pressure on suppliers to accept lower prices. Suppliers in turn demand that farmers accept lower prices. Squeezed between low returns and high-priced farm inputs, farmers around the world have experienced declines in net farm income. In the United States, farmers’ share of the retail food dollar fell from a high of 40 percent in 1973 to below 20 percent in 2000.20 In Canada, the National Farmers Union reported that farmers’ net income, adjusted for inflation, was lower over the last decade than at any time since the 1930s.21

Some analysts argue that large supermarkets like Wal-Mart’s Supercenters have helped consumers by using market power to drive down prices.22 But a growing body of economic research suggests that, over time, concentration tends to lead to higher prices.23 Because of the power they exert over the market, giant retailers have no incentive to pass on savings to consumers, even as they squeeze producers and suppliers by offering lower and lower prices for their products.24

In a striking example of the power of large processors and retailers, U.S. hog prices fell to Depression-era lows in real terms in 1998, sending many family hog producers into bankruptcy. 25 Meanwhile, the average price of pork in the grocery store dipped by less than 2 percent.26 This wide farm-retail price spread helped the giant meatpacking company IBP bring in record profits and facilitated market dominance by industrialized hog operations.27

Around the world, individuals, communities, and civil society organizations are working to counteract the negative impacts of concentration in the food system. In the United States, they are trying to strengthen existing laws, such as the Packers and Stockyards Act, that have been weakened by lax enforcement, underfunding, or legal loopholes.28

Campaigns against abusers of market power are taking shape. In Europe, a major campaign has been launched against the largest supermarket, Tesco. It demands fair treatment of U.K. farmers and those abroad; protection of workers’ rights; an independent watchdog agency to protect consumers, farmers, and workers against exploitation; a moratorium on mergers with other supermarkets; and stronger planning policies to protect local shops.29 Organizations are using class action lawsuits and penalties against retail giant Wal-Mart for discrimination against women, forced overtime without pay, abuse of Family Leave laws, and other labor problems.30 International networks such as the Agribusiness Accountability Initiative are helping campaigners to connect across national boundaries.

For farmers, the most effective strategy is strength in numbers: forming cooperatives so that they can supply enough reliable quantity and quality of crops or livestock products to negotiate with supermarkets. At the same time, public education campaigns worldwide are raising awareness about direct marketing options for farmers and consumers, including farm stands, farmers’ markets, and Internet sales. But farmers need government support to keep agribusinesses in check and to meet the quality standards that these large companies impose.

In 2003, the latest year with data, the world’s irrigated area stagnated at about 277 million hectares—150,000 hectares less than in 2002.1 (See Figure 1.) The annual expansion rate of world irrigated land has fallen from an average of over 2 percent from 1961 to 1992 to around 1 percent from 1993 to 2003.2 Irrigated area per person in 2003 stood at 0.044 hectares, 7 percent below the 1978 peak.3 (See Figure 2.)

Irrigation is distributed unevenly around the world: 42 percent of arable land in Asia was irrigated in 2000, while in sub-Saharan Africa the figure was only 4 percent.4 Irrigated areas in China, India, Pakistan, and the United States account for half of the world total, but China and India each have almost 20 percent.5 (See Figure 3.) In 1992, India passed China as the country with the most irrigated land.6

Irrigated area accounted for only 20 percent of total arable land in 1997–99, yet farmers worldwide harvested 40 percent of all crops and nearly 60 percent of cereals from these lands.7 In China, the 45 percent of agricultural land that is irrigated produced 75 percent of the nation’s food in 2002.8 By 2030, 70 percent of world cereal grains will come from irrigated land.9

The worldwide slowdown in irrigation expansion has several sources. For one, it is becoming more expensive for farmers and governments to put in new irrigation because of rising costs of investment in irrigation systems and difficulties developing new sites.10 But the two major constraints on expansion are soil salinization—a particularly acute problem in semiarid areas when salts build up in the soil as irrigation water evaporates—and shortages of irrigation water, which are driven by both aquifer depletion and competition for water.11 An estimated 20–30 million hectares of world irrigated land have been degraded by the accumulation of salts.12

The overpumping of groundwater for irrigation is now a widespread problem.13 The number of tubewells supplying underground water to irrigated land has grown rapidly in the last 40 years in India, China, Pakistan, Mexico, and many other countries.14 Groundwater levels in large areas in India and China are estimated to drop 1–3 meters each year, allowing saltwater to intrude into aquifers, raising pumping costs, and causing land subsidence.15

Agriculture accounted for nearly 70 percent of the world’s use of fresh water in 2000, although in Asia and the Pacific region the figure was as high as 90 percent.16 Nevertheless, more irrigation water continues to be transferred to nonfarm uses because of the rapidly growing demands of industries and cities.17 Yet in China, irrigation’s share of total water use dropped from 85 percent in 1980 to 64 percent in 2005.18 More municipal and industrial wastewater is reused for irrigation, although this raises significant environmental and health concerns when the wastewater receives little or no treatment.19

Climate change also threatens irrigation by shifting world rainfall patterns, changing river flows, raising sea levels, and intensifying hurricanes and monsoons.20 Irrigated areas that rely on water from mountain snowmelt are at particular risk.21 In South Asia, accelerated glacial melt and reduced rainfall pose problems for the major local crops, such as paddy rice and wheat.22

More than half of the irrigation water removed from rivers and aquifers disappears before bene- fiting a crop, either wasted through evaporation and inefficient irrigation practices or recharged to groundwater.23 In Asia, the widespread use of pump irrigation is believed to create natural incentives for farmers to be more careful in water management, as they have to pay for energy even though the water is free.24

Low-cost treadle pumps and small mechanical pumps have been introduced in South Asia and Africa to help poor farmers get access to irrigation.25 Drip irrigation is a more efficient technology than flooding and sprinklers, reducing water use by 30–70 percent and increasing crop yields by 20–90 percent.26 In Kenya, a type of bucket drip irrigation kit costing some $15 has been used for irrigation of small plots of vegetables and fruit trees, generating monthly revenue of about $20.27 Planting more water efficient grains can also help reduce water use.28

In 2007, meat production remained steady at an estimated 275 million tons; in 2008, output is expected to top 280 million tons.¹ (See Figure 1.) Experts predict that by 2050 nearly twice as much meat will be produced as today, for a projected total of more than 465 million tons.² For more than a decade, the strongest increases in production have been in the developing world-in 1995 more meat and dairy products were produced in developing than in industrial countries for the first time, and this trend has continued ever since.³ In fact, in 2007 at least 60 percent of meat was produced in developing nations.⁴

Consumption of meat and other animal pro­ducts also continues to grow. Currently nearly 42 kilograms of meat is produced per person worldwide, but meat consumption varies greatly by region and socioeconomic status.⁵ In the developing world, people eat about 30 kilograms of meat a year.⁶ But consumers in the industrial world eat more than 80 kilograms per person each year.⁷ (See Figure 2.)

Rising food prices are pushing consumers to choose cheaper cuts of meat, like chicken. (See Figure 3.) Global poultry output in 2007 was expected to reach 93 million tons, a 4-percent increase from the previous year.⁸ The United States is the biggest poultry producer, but other major producers, including Argentina, Brazil, China, the Philippines, and Thailand, are all expecting increases in production. India, however, is likely to have lower poultry production because of the spread of the H5N1 avian flu virus and the culling of millions of chickens.⁹

Pig meat production in 2007 was expected to rise nearly 2 percent, to 101 million tons.¹⁰ It declined the previous year as a result of Porcine Reproductive and Respiratory Disease in China and the massive culling of at least 1 million pigs.¹¹ China, however, continues to be the world's largest producer of pig meat, although production is expanding in South America. Argentina, Brazil, and Chile are all increasing pig production, thanks to ample supplies of feed.¹²

Beef output rose by 2.3 percent, with nearly 67 million tons produced in 2007.¹³ The United States is still the world's largest beef producer, but 56 percent of production now takes place in the developing world.¹⁴ China's beef production is expected to grow by 3 percent in 2008, and despite traditional religious beliefs about the sacredness of cows, India, along with Pakistan, is responding to growing consumer demand for more-western diets by increasing beef produc­tion and slaughter.¹⁵

Much of the growing demand for animal products worldwide is being met by concen­trated animal feeding operations, or factory farms.¹⁶ Worldwide, some 56 billion animals are raised and slaughtered for food each year.¹⁷ Factory farms account for 67 percent of poultry meat production, 50 percent of egg production, and 42 percent of pork production.¹⁸ These facilities rely on commercial breeds of livestock, usually pigs and chickens, that have been bred to gain weight quickly on high-protein feeds. Factory farms are also very crowded, confining animals closely together-many of the world's 17 billion hens and meat chickens each live in an area that is less than the size of a sheet of paper.¹⁹ Cattle in feedlots often stand knee-high in manure and arrive at slaughterhouses covered in feces.²⁰

In addition, such operations are increasingly located in or near cities in the developing world, making urban areas the center of industrial meat production in some countries. And while city dwellers have kept livestock privately for centuries to help dispose of some urban waste, as well as a source of income and food, large industrial operations can create a host of environmental and public health problems. According to the World Bank, the "extraordin­ary proximate concentration of people and livestock poses probably one of the most serious environmental and public health challenges for the coming decades."²¹ Diseases such as avian flu, pig fever, and Nipah virus can all spread very quickly among animals living in confined animal feeding operations because of the crowded and filthy conditions. BSE, or mad cow disease, was likely the result of feeding cattle the ground-up bits of other ruminants.²² And the use of antibiotics in factory farming is leading to antibiotic resistance.²³ In the United States, livestock now consume 70 percent of all antimicrobial drugs.²⁴

Livestock are also responsible for 18 percent of greenhouse gas (GHG) emissions, as meas­ured in carbon dioxide equivalent, which is higher than the share of GHG emissions from transpor­tation.²⁵ They produce 37 percent of methane, which has more than 20 times the global warming potential of carbon dioxide, and they emit 65 percent of nitrous oxide, another powerful GHG, most of which comes from manure.²⁶

Another environmental problem is water use: livestock operations are major water users and polluters. The irrigation of feed crops for cattle accounts for nearly 8 percent of global human water use.²⁷ The large amount of waste pro­duced on factory farms exceeds the capacity of nearby cropland to absorb it. As a result, manure goes from being a valuable agricultural resource to what is essentially toxic waste. Nitrates, heavy metals, and antibiotics present in manure can seep into groundwater and pollute surface water, threatening public health.²⁸

One way to prevent some of these problems is to discourage large producers from keeping animals in or near cities. A combination of zoning and land use regulations, taxes, incentives, and infrastructure development can encourage them to raise animals closer to croplands, where manure can be used as fertilizer and where there is less risk of disease transmission to people. Controlling land and livestock nutrient imbalances means raising livestock in areas that have enough land to handle the waste from large operations. Thailand, for example, has levied high taxes on poultry production within a 100-kilometer radius of Bangkok.²⁹ As a result, over the last decade poultry production near Bang­kok has dropped significantly.³⁰

Consumers will need to rethink the place of meat and other animal products in their diets to promote better human and environmental health. A recent article, for example, in the European Journal of Clinical Nutrition notes that "vegetarian and vegan diets could play an important role in preserving environmental resources and in reducing hunger and malnutrition in poorer nations."³¹ And the authors of a September 2007 article in the highly respected medical journal The Lancet recommended that people in the industrial world eat 10 percent less meat as a way to reduce greenhouse gas emissions as well as improve human health: "The unprecedented serious challenge posed by climate change necessitates radical responses... For the world's higher-income populations, greenhouse-gas emissions from meat-eating warrant the same scrutiny as do those from driving and flying."³²