Making Poverty by Thomas Lines

Author:Thomas Lines
Language: eng
Format: epub
Publisher: Zed Books
Published: 2013-03-14T16:00:00+00:00

4

Not farming but gambling

Who rolls the dice?

The charity Oxfam quoted this remark about business arrangements by an apple farmer in South Africa:

I talked to my financial manager the other day … and he said, ‘When you deliver your fruit, who do you invoice?’ I said no one and that I wait for the price to be told to me. He said, ‘You’re not farming, you’re gambling.’1

As we have seen, farming for a living is something of a gamble at the best of times, bearing in mind the vagaries of the weather, pests, diseases and prices. Yet under this arrangement, the farmer does not know the price of the produce even when it has been sold. This has become quite a common experience around the world. The farmer might not even be sure whether the presumed buyer will take it, since there is frequently no written contract even if they trade with each other regularly. If the purchasing company is oversupplied or not fully satisfied with the produce, it can simply refuse to take delivery. That can happen even when the farmer is exporting to the other side of the world. These arrangements leave all the risk on the farmer’s side, even though in most cases the company will be much better equipped to handle it.

Large companies operate in all areas of agricultural trade, and at every stage of the supply chain:

• in agricultural production itself, owning and running their own farms or plantations;

• in national and international trade (Cargill and Bunge in the grain trade, for example, or Volcafé and Neumann in coffee);

• in processing agricultural produce into goods for sale (as in roasting coffee beans, making chocolate, refining sugar or preparing ready-made meals for supermarkets to sell);

• and in wholesaling and retailing.

The same company can operate at several of these stages at once. For example, the firms that supply rich countries with tropical fruit, such as bananas and pineapples, usually own plantations and shipping lines as well as trading the fruit and supplying wholesalers and retailers. Most farmers also have to rely on small numbers of corporate suppliers for their inputs such as seeds and fertilizers, as well as such buyers’ markets for their sales. They are therefore vulnerable to price and other pressures on both sides of their business and can easily find they are squeezed between them. But the shape has been changing in recent years as supermarkets have come to dominate food retailing. The supermarkets have acquired great power over the chain, while earlier stages have become less profitable for farmers and corporations alike. This has led to the decline and in some places the complete loss of other marketing channels for farmers’ produce. However, in some markets agro-processing firms (such as coffee roasters), integrated production and trading companies (as in the banana sector) and trading companies (especially in bulk crops like cereals and soya beans) remain important. As a paper by UNCTAD put it,

The growing literature on commodity prices and commodity-dependent countries reveals a ‘disconnect’

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