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How the G20 ministers said ‘agriculture’ but meant ‘trade and commodities’

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Under the presidency of France, the G20 called a meeting of its member countries’ agriculture ministers to consider the food production and food price problems. They have releaed a “ministerial declaration”. This declaration is being called a “renewed commitment” to tackling hunger by part of the financial media, or is being called “weak” and a mere restating of positions by the more critical, or is being called an empty document full of vague promises and no reform by some activists.

Sandatu Kalug, 58, a lifetime rice farmer in Maguindanao Province lost his entire paddy crop to heavy flooding in June 2011. Photo: David Swanson/IRIN

In fact, it is a strong statement alright. It supports the current model of agri-business, of international investment in arable land, it supports the operations of the global agriculture commodity markets and trading systems, and it ensures that the flows of finance and capital between the world’s financial markets and the commodity markets will continue with less restrictions rather than more control.

All this is done in the name of small farmers and poor consumers. They have talked about a new global agriculture market information system (Amis) so that governments can share better data about the state of food stocks and global production. This is nonsense – it is the bankers, food traders, commodity funds, retail food industry and foodgrain exporters who will use this new knowledge and data. They imply that the Food and Agriculture Organisation (FAO) will run the Amis and they will exploit the new data. Private sector players, such as the large grain traders for whom knowledge of stocks and harvests represent a key competitive advantage, are simply ‘urged’ to participate – they will, at a profit which further loots the urban and rural poor.

There are five main objectives the G20 ministers made commitments to. However, like earlier inter-governmental statements over the last few years concerning agricultural production and access to food, it’s always safer I find to consider what is being meant here.

If we look at the five objectives and take the first:
“i. improve agricultural production and productivity both in the short and long term in order to respond to a growing demand for agricultural commodities”

There is a growing demand for “agricultural commodities”. So investment and research and trade arrangements and enabling policy are to be deployed to help fulfil this kind of demand?

“ii. increase market information and transparency in order to better anchor expectations from governments and economic operators”

Do governments and “economic operators” (what are these? food traders? commodity funds? integrated retailers?) have the same kinds of expectations? Is better “market information and transparency” to benefit only government and “operators” or do food producers and consumers also require them?

To make best use of the land, the Jumma tribes of Bangladesh's CHT practise a form of ‘shifting cultivation’, growing food in small parts of their territory, before moving on to another area and allowing the land to recover. Photo: IRIN/Courtesy of Christian Erni/IWGIA

“iii. strengthen international policy coordination in order to enhance confidence in international markets and to prevent and respond to food market crises more efficiently”

Confidence in international markets may be a concern for governments and economic operators, but in what way are they essential for food producers and consumers, who have since late 2007 suffered through price spikes amplified by these same international markets? The implication here is that responses to “food market crises” can be provided by – among other measures such as policy direction – these markets, which I find troublesome especially given the evidence since 2007.

“iv. improve and develop risk management tools for governments, firms and farmers in order to build capacity to manage and mitigate the risks associated with food price volatility, in particular in the poorest countries”

What are these risk management tools? Are they commodity hedge funds? Are they trading agreement? Are they bilateral agreements and FTAs? Are they commodities exchanges? Who will wield these tools? In poor and the poorest countries farmers have little or no capacity to manage and mitigate existing risk – they surely cannot bear the additional risks brought about by price volatility, but in what way will these tools help and function?

“v. improve the functioning of agricultural commodities’ derivatives markets.”

To what end? Agricultural commodities derivatives markets tie up crop production and food-in-stock, but for whom do they do this? If the functioning of these markets is to be “improved”, who will benefit from this improvement? Will it be the smallholder farmer and if so in what way? How many farmers of the South are directly connected to the agricultural commodities derivatives markets as beneficiaries? Are consumer coops connected?

These are some questions that come to mind when reading these five objectives. I see that Sarkozy has stated, “”We all know that agricultural production is insufficient to meet demand”. This may be so, for certain crops in certain regions, but against the background of these five objectives, I have to question: demand from whom or what and to what end?

[See ‘The priorities of the agriculture G20’, Nicolas Sarkozy’s address at the G20 and you can get the G20 ministerial declaration here]

A vegetable seller waits for customers at the Wakulima market in Nairobi, Kenya. Photo: Siegfried Modola/IRIN

Here are a few sentences from paras 18 and 19 of the ‘ministerial declaration’:

“18. We commit to creating an enabling environment to encourage and increase public and private investment in agriculture. In particular, we stress the need to support public-private partnership on investments, based on a value-chain approach, for services (such as access to financial services, agricultural education and extension services), and for infrastructure and equipment for production (such as irrigation), for agroprocessing, for access to markets (such as transport, storage, communication) and for reducing pre and post-harvest losses.”

“19. We encourage countries, international organizations and the private sector to increase investment in developing countries agriculture, and in activities strongly linked to agricultural productivity growth, food security and generation of income in rural areas, such as agricultural institutions, extension services, cooperatives, research, roads, ports, cold chain, power, storage, irrigation systems, information and communication technology, climate change mitigation and adaptation. We also encourage them to enhance public-private partnerships in this field, in particular to improve market and value-chain operators’ cooperation and procurement from smallholders.”

This is a direct and unambiguous call for greater industrialisation of agriculture, for the strengthening of the tools of globalisation that have given rise to the agri commodity markets and products like derivatives, for the intensification of corporate R&D in agbiotech and with the support of national agricultural reseach systems in various countries – and at the likely cost of traditional knowledge and ecological approaches to cultivation. This sounds to me like an unambiguous statement of support for the food trading and food retail industries and their vast ‘verticals’ (as they call the integrative links these days), and finally for the systems of finance and banking that undergird the globalisation of food.

The food industry in India and its logic

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Tractor on a road to the city, Kanpur district, Uttar Pradesh

Tractor on a road to the city, Kanpur district, Uttar Pradesh

The Economic & Political Weekly (EPW) 09 October 2010 issue carries a commentary I wrote as a backgrounder to the price rise of food staples. Here is part of the commentary:

On multiple fronts, the union government is proceeding to forge new compacts with the private sector food industry, whether global, regional or national. There is a new set of investors whose claims in the emerging food industry are being staked, and which are being encouraged by state governments eager to display their foreign direct investment (FDI)-friendliness. These are investors, promoters, asset management professionals who have learnt the patterns of the 2007-08 commodities (food included) boom and who are now well equipped to take positions, both financial and real, in the emerging food industry.

An indication of the size and scale of the national market for food (production, collection, processing, distribution, retail) being envisaged can be gauged from a “discussion paper” circulated by the Department of Industrial Policy and Promotion (DIPP) in July 2010. The paper, “Foreign Direct Investment (FDI) in Multi-brand Retail Trading”, has been circulated to “generate informed discussion on the subject” which will “enable the Government to take an appropriate policy decision at the appropriate time”. As this article shows, these decisions have already been taken and investment in the direction revealed by the paper has been rolling out for months.

Supported by the Ministry of Agriculture, the top echelons of India’s national agricultural research system and dedicated agricultural trade and investment bodies, the union government has tackled the arguments against FDI in retail by describing the “limitations” of current conditions in the Indian retail sector. That there has been a lack of investment in the logistics of the retail chain, leading to “an inefficient market mechanism”. The point is made that India is the second largest producer of fruit and vegetables in the world (about 180 million tonnes or mt) but has “very limited integrated cold-chain infrastructure” with only 5,386 stand-alone cold storages which together have a capacity of 23.6 mt. It points out that post-harvest losses of farm produce – especially fruits, vegetables and other perishables – have been estimated to be over Rs 1,00,000 crore per annum, 57% of which is due to “avoidable wastage and the rest due to avoidable costs of storage and commissions”.

A couple working in their paddy field, North Goa

A couple working in their paddy field, North Goa

From 2009, the Ministry of Agriculture’s approach to its subject has shifted perceptibly – from its stated protection of the interests of the farming household and the rural and urban consumer – towards the food industry. Employing the reasons listed above, all of which contain some reflection of actual conditions, the massive apparatus of the ministry and its appurtenant research system is now ushering in private participation and control of areas that were hitherto in the public domain. When read with the rapid movement of finance between the money markets and the commodity markets, with the extension of infrastructure and property conglomerates into the processed food “value chain” domain, and with new alliances between agricultural research institutes and market entrepreneurs, the outlook for India’s small and marginal farming households is bleak.

The concentration of funds, food handling and transport systems and growing corporate control from farm to fork can clearly be seen in an address by the Union Agriculture Minister, Sharad Pawar, at the Indian Council of Agricultural Research (ICAR) – Industry Meet on 28-29 July 2010. The meet focused on four theme areas: seed and planting material; diagnostics, vaccines and biotechnological products; farm implements and machinery; and post-harvest engineering and value addition.

Pawar said that the ministry recognises the role of the private sector in critical areas of agricultural research and human resource development. The conventional approach of public sector agricultural R&D has been to take responsibility for priority setting, resource mobilisation, research, development and dissemination. He then explained that agricultural extension, which has been neglected for several years now, is “no longer appropriate”. It is here that the impact of the Indo-US Agricultural Knowledge Initiative, now in its fifth year, can be recognised. The alternative, Pawar advised, is public-private partnerships through which public sector institutes (such as those in the ICAR network) can “leverage valuable private resources, expertise, or marketing networks that they otherwise lack”.

Coconut trees along a bund between field and stream, North Goa

Coconut trees along a bund between field and stream, North Goa

This is the undisguised merchant reasoning behind the creation of “Business Planning and Development units” in five ICAR institutes (Indian Agricultural Research Institute, Indian Veterinary Research Institute, Central Institute for Research on Cotton Technology, National Institute of Research on Jute and Allied Fibre Technology, Central Institute of Fisheries Technology). These units will tackle intellectual property management, commercialisation of research, find investors and begin businesses. India’s national agricultural research system, therefore, has decided to now become a broker of its own output (publicly funded) and a speculator seeking profits from the country’s agricultural and food price crises.

If the Ministry of Agriculture has its way, rural India will be a patchwork not of villages and hamlets but of “intelligent agrologistic networks combining consolidation centres, agroparks (agroproduction and processing park) and rural transformation centres”, which is how the MTMs and their typical built-up footprints have been described by one enthusiastic bank. The techno-industrial idiom cannot conceal the union government’s intention to encourage a dangerous new dimension to urbanisation, by provisioning infrastructure to support an internal trade in agricultural products, and doing so by allocating a greater share of scarce funds to support favoured business and trading constituents rather than to the rural constituents who need it most, the smallholder farmer and local agro-ecosystems.

Supported by the vast and powerful machinery of the Ministry of Agriculture, emboldened by the global trading successes of commodity cartels which learned their tactics in the Multi Commodity Exchange of India (Mumbai), the National Commodity and Derivatives Exchange (Mumbai), and the National Multi Commodity Exchange of India (Ahmedabad), the new entrepreneurs in India’s agribusiness sector are promoting MTMs as potentially attracting “leading foreign retail chains to anchor and plan their supply chain at and through the agrofood parks” and exploiting the MTMs’ “township model approach to attract Indian MNCs and foreign food processing companies”.