AGRIBUSINESS CONSOLIDATION

Introduction Over the past decade, fewer and fewer agribusiness firms are controlling more and more of our food markets. For example, only one or two firms controls the dairy market in Zimbabwe---Diaryboard and Lyons maid, beef packing------Colcom. While grocery store shelves appear to provide abundant choice s, most of these products are marketed by a small and decreasing number of firms. Gigantic multinational corporations are consolidating their control over food/ agribusiness system, including the organic sector. This trend raises concerns about how this power is exercised, as most of these corporations are accountable to the shareholders, not to the communities in which they operate. The Dynamics of Consolidation The food system can be thought of as a long chain, with food passing through a number of steps or links in the chain on the way from farmers to consumers, such s food storage and processing. There are three processes by which this is occurring: Horizontal integration Vertical integration Global expansion

Horizontal Integration This refers to consolidation of ownership and control within one stage of the food system, such as processing, for one particular commodity. Horizontal consolidation gives the few firms involved a lot of power. It allows these few firms to influence the prices that they pay agricultural producers and the prices that are charged to consumers. It also provides them with increased political power that they use to influence politicians around food and agricultural policy decisions. The concentration ratio (CR4) developed by Dr. William Hefferman and his colleagues in 1999 suggests that when firms control 405 of the market, it is no longer competitive. This means that the largest firms will have a disproportionate influence on not just the price of a commodity, but also the quantity, quality and location of production

Vertical Integration In addition to seeing to fewer firms control more of a given market, there has also been a trend towards firms controlling more of the process; from field to table, in given markets. This form of consolidation is called vertical integration. Vertical integration involves linking firms at more than one stage of the food chain such as upstream suppliers or downstream buyers. For example, a seed manufacturer might be able to buy a chemical firm that supplies fertilizer used in the process of producing the seed and be able to use some research and development investments in both processes. The advantage in vertical integration is having an assured supply in case of a tight market. The disadvantage, however, is that there are high levels of leverage-if economic developments depress one industry, this may ripple through the value chain, compoundi ng the problem. Global Expansion This is an attempt by agri-business firms to increase their market share worldwide. This is most apparent on the retail end of the food chain, as some analysts have predicted there may soon be only few global food retailers. A massive wave of mergers has been occurring in this industry recently, spurred by the recent entry of Wal-mart into food retailing and its expansion to other continents. Effects of Consolidation in Agribusiness Among the problems with consolidation in the agribusiness industry are agricultural dumping, loss of family farms, increased corporate influence over public policy, and environmental erosion. 1. Agricultural dumping: the process whereby an agricultural company in one country exports its product to another country at a price that is lower than what it actually cost to produce the product is known as agricultural dumping. A high level of consolidation is one contributing factor to dumping. When few agribusiness firms buy goods from thousands of farmers, they are able to drive down the prices they pay to producers. Since the agribusiness firm then controls the processing of the good, it is able to sell the product abroad very cheaply because of the low price it paid to the farmers.

2. Loss of family farms: high levels of agribusiness consolidation hurt family farming in two ways: i. First, the seed industry is highly consolidated, which means that seed prices are often very high. ii. There are thousands of farmers who produce a given crop or animal product, but there are only a few agri-business firms who buy those crops and animal

products. this gives agri-business firms incredible power in setting the prices they will pay to farmers. Farmers are often paid extremely low prices for their goods. Farmers are getting squeezed from both sides: paying high prices for their inputs, such as seeds and fertilizer and receiving low prices for the goods that they produce. 3. Corporate influence: an increased level of agribusiness consolidation also means that agribusiness corporations have incredible influence over agricultural policy decisions. Through donations and lobbying, agribusiness firms make sure that government policies will not restrain their ability to make profits. 4. Environmental Impacts: there are serious environmental impacts of agribusiness consolidation. Consolidation contributes to soil and water contamination due to increased dependence on pesticides and other chemicals, soil erosion from producing only one crop, as well as loss of biodiversity. For those who care about environmental sustainability, consolidation is a serious issue. Conclusion. Heightened levels of consolidation within the agri-business industry have negative impacts on small farmers and consumers worldwide. Consolidation also increases the influence of a small number of profit-driven corporations in the policy-making process. A decentralization of power within the agricultural system is an important step in ensuring the livelihoods of small farmers worldwide and promoting an agricultural system where everyone has a right to food.