Food giants are strangling Britain’s farmers and consumers. What’s the solution? Break them up
Nicholas Shaxson
July 22nd 2024
The UK has a huge problem with monopolies – yet taking conglomerates apart is not as hard as you might think.
When British farmers protested outside the Houses of Parliament earlier this year, they sent 49 scarecrows, after a survey had found that 49% of UK fruit and vegetable farmers said they expected to go bust within a year. The scarecrows stood in for real farmers, who are mostly too afraid to speak out. One farmer told campaigners they had grown 60 tonnes of salad potatoes for a large UK supermarket, only for the supermarket to suddenly cancel the order, leaving the farmer “financially screwed”. The arbitrary power that supermarkets wield instils fear, which the supermarkets leverage to impose take-it-or-leave-it fees and other unfair conditions on farmers.
The problem is our monopolised food system. Think of it as a vast profit machine shaped like an hourglass, with many food producers at the top, millions of consumers at the bottom, and a few dominant firms – such as giant supermarkets or global food traders – clustered at its narrowing neck, siphoning a cut from the passing traffic. This power ripples through global supply chains. Between 70% and 90% of commercial grain trading, for example, is now controlled by five giants, known as ABCCD: ADM, Bunge, Cofco, Cargill and Louis Dreyfus Company. Together, they handle the bread, cereals, meat and other food that lands on our plates.
Bunge now wants to merge with a rival firm, Viterra, to create a single company, giving farmers even less choice as to who they can sell their produce to, and giving the combined firm more power to pay farmers less. Research from the University of Saskatchewan estimates this merger would cut $770m from annual farm incomes in western Canada alone. These two firms, incorporated in the tax havens of Switzerland and Jersey respectively, each operate in about 40 countries. So the annual damage, including to British farmers, would probably be in the billions.
This monopolistic power hurts consumers too. According to research by the economists Jan Eeckhout and Jan de Loecker, average global markups – the prices companies charge for goods above the cost of producing them – have risen from around 21% above costs in 1980, to 61% today. So a pizza that may have cost you £12 if markets had been as un-concentrated as they were 45 years ago, may now cost £16. Think of the £4 difference as a private monopoly tax that nobody voted for. Here, monopoly power is the connecting thread linking supersize corporate profits with consumer pain, in a phenomenon dubbed “greedflation”.
The sums involved are vast. Forthcoming research by Somo, an NGO that studies multinationals, estimates that the top 1% of listed firms enjoyed total markups of nearly US$7tn last year: 15 times the estimated annual tax losses to tax havens. More than 60 new “food billionaires” were created in the pandemic years of 2020 to 2022, according to Oxfam. Beyond food, the scale of the monopoly problem becomes clear. Mergers and acquisitions now average $3.5tn annually, McKinsey reckons: so the market for mergers is worth three to four times the US defence budget. In market after market, the neck of the hourglass is narrowing.
Click here to read the full article at The Guardian.