Sponsored by:

Power in Agriculture:

Challenges for Rural

Leadership

Alan Renwick, MofakKarul Islam and Steven Thomson

Rural Policy Centre

Scottish Agricultural College

Edinburgh

The Oxford Farming Conference Research 2012

Power in Agriculture

In partnership with:

Research Undertaken by:

Background

• The perception of a shift in global power

eastwards • The opening up of agricultural markets

through a gradual process of trade liberalisation and de-regulation

• Increasing globalisation of agricultural trade, with increased levels of concentration in agricultural market places

• The heavy reliance on use of natural resources, including non-renewables means factors, such as climate change and depletion of mineral reserves will be important.

Power

• What is Power?

• We chose to consider

– Economic

– Political

– Power over Natural Resources

The Sarkozy

‘power digit’

‘Power is the ability of an actor to compel, persuade, or control the

behaviour of other actors through the deliberate and politically motivated

use of economic assets’ Frost (2009)

Economic Power in Agriculture

• Size of agricultural sector

– Self-sufficiency

• Power in terms of Trade

– Exports and Imports

• Agri-business power

– Transnational Corporations (TNCs)

Agricultural Trade

• Very concentrated – top 20 exporting and importing countries

account for 78% of global exports and 70% of global imports.

• Trade patterns reflect factors including proximity and historic relationships – reflection of past power relationships

• New and evolving trade patterns emerging – Multi and Regional/Bi lateral Trade

Agreements and other – particularly noticeable is the rising

importance of a number of the BRICS countries

14.7% Mexico

10.6% Canada

58.2% Japan

$2,163m

% of countries exports

34.7% Mexico

20.3% Canada

15% Japan

$2,059m

49.1% Japan

4.6% China

25.8% USA

$1,777m

44% Japan

24% S. Korea

13% USA

$3,648m

% of countries exports

$827m

12.2% Russian

Federation

1.9% Saudi Arabia

6.6% Egypt

% of countries exports

4.2% Chile

74.7% EU27

4.4% Hong Kong $305m

31.5% Russia

16% EU27

7.7% Iran

7.1% Egypt

$3,497M

% of countries exports

% of countries exports

12.9% Japan

13% Egypt

6.6% EU27

6.6% Philippines

$3,971m 11.3% USA

8.5% EU27

11.1% Algeria

8.6% Iran

$2,799m

7.1% Morocco 7.2%

Algeria

5.8% Egypt

$2,121

m

13.2% Indonesia

8.9% Japan

10.2% Iran

$2,590m

% of countries exports

12.6% Japan

9.2% Nigeria

8.4% Mexico

$8,485m 13.4% USA

9.6% EU27 6.4%

Japan

$5,584m

13.5% Morocco 27.1%

Algeria 5.6% Egypt

$ 4,862m

23.3% Indonesia

10.9% Japan

8.3% Malaysia

7.8% S. Korea

$3,740m

• State intervention in agriculture and trade has been diminishing.

• TNCs have become increasingly dominant in all aspects of the agricultural supply chain.

• Statistics tell the story: – 4 companies account for 75-90% of the global

grain trade – 10 companies are responsible for >40% of the

global retail market – 7 companies control virtually all fertiliser supply – 5 companies share 68% of the world’s

agrochemical market – 3 companies control almost 50% of the

proprietary seeds market

Corporate Power

Other Transnational Corporations are available

Seed Industry

• Animation of agglomeration in seed industry

Supply Chain Consumers

Shoppers

Supermarket Buyers

Retail Outlets

Supermarket Businesses

Processors

Merchants

Farmers

Wholesalers

Agents/Agronomists, etc

POWER

POWER

Supply retailers

Traditional thinking regarding power in the agricultural supply chain Input supply and commodity purchasing increasingly linked

Agro-Chemical, feed, equipment

manufacturers etc

Supply Chain

Farmers

Consumers

Traders

Millers

Bakers

Retailers

POWER

Consumers

Shoppers

Supermarket Buyers

Retail Outlets

Supermarket Businesses

Processors

Merchants

Farmers

Wholesalers

Agro-Chemical, feed,

equipment manufacturers etc

POWER

POWER

Agents/Agronomists, etc

Supply retailers

Political Power

• Agriculture liberalisation agenda set by few key international institutions

– World Trade Organisation

– World Bank

– IMF

• Economic power closely linked to political power in these institutions

• Increasingly wider trade concerns dominating agriculture

Resource Competition

70% of water

abstractions

are for agriculture

Potash & Phosphates

key fertiliser inputs

Farming <2% of

energy

demand....

but energy

is vital!!

Land

accounts for

28% CO2e

Finite amounts of

farmland – under

increasing

pressures

Distribution

EU27 US Brazil Russia China Australasia Africa

Agricultural Area 4 4 3 3 5 5 3

Arable 4 5 3 4 4 5 3

Water 3 4 5 4 4 2 2

Potash 2 1 2 5 2 0 1

Phosphate 0 3 2 2 5 2 3

Oil 2 3 2 5 3 1 2

Gas 1 3 3 5 3 1 2

Conclusions

• Current power in world agriculture remains in North America and Europe

• However, Europe’s exports have declined as reforms taken place – but still fortress Europe

• Emerging (emerged) economies have less corporate and political power

A key challenge

Exploiting global

power whilst

protecting domestic

producers and

consumers

Resource Implications

• Globally there will be increased competition for resources.

• In the shorter term, further improvements in resource use efficiency (water, fertiliser and energy) are needed to sustain current levels of production.

• As traditional resources become more scarce, alternative practices will need to be developed and adopted.

The Power Index

Dimension EU27 US Brazil Russia China Australasia Japan UK

Agricultural Trade 4.5 5.0 2.0 3.0 3.0 2.5 2.5 3.0

Corporate 5.0 5.0 1.0 1.0 2.0 2.0 3.0 3.0

Political 5.0 5.0 1.0 3.0 2.0 1.0 4.0 4.0

Natural Resource 3.5 4.0 3.3 3.5 4.5 3.3 1.5 2.0

Mineral and Fuels 1.3 2.5 2.3 4.3 3.3 1.0 0.0 1.0

Total 19.3 21.5 9.5 14.8 14.8 9.8 11.0 13.0

Challenges for Rural leaders

• How to counter the power of TNCs in the supply chain?

– Getting more of the value back to the farmer

– Co-operation

– Alternative routes to market

• How to deal with challenges in terms of resources?

– Sustainable Intensification: Innovation will play a key part

Responses

• Power in Research

– the Science Base (Spelman)

• Farmer owned businesses compared with TNC’s

– TNC’s only responsibility is to shareholder (Australian speaker)

– Return of value to farmers – Fonterra

– Therefore co-operation is key

• Competition

– Prices (Farming Today)