The Institute for Agriculture and Trade Policy promotes resilient family farms, rural communities and ecosystems around the world through research and education, science and technology, and advocacy.
Founded in 1986, IATP is rooted in the family farm movement. With offices in Minneapolis and Geneva, IATP works on making domestic and global agricultural policy more sustainable for everyone.
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About Think Forward
Think Forward is a blog written by staff of the Institute for Agriculture and Trade Policy covering sustainability as it intersects with food, rural development, international trade, the environment and public health.
October 07, 2010
IATP at Tianjin climate talks: Carbon markets not reliable
IATP co-hosted a side event at the United Nations Framework Convention on Climate Change (UNFCCC) climate negotiations in Tianjin, China earlier this week. Below are the remarks of IATP President Jim Harkness. Other speakers at the side event included Nick Berning and Karen Ornstein of Friends of the Earth along with a Bolivian UNFCCC delegate on how carbon markets are being treated in the negotiations.
September 28, 2010
NAFTA dumping on Mexican farmers
One of the most dramatic effects of deregulated trade has been an increase in agriculture dumping. In agriculture, dumping takes place when an agribusiness firm exports a crop—say, corn—at a price that is below what it costs the farmer to produce it. Dumping gives agribusiness an advantage in the importing country's market—and often puts that country's farmers out of business, making that country more dependent on imports for its food supply. Trade rules at the World Trade Organization (WTO) and regional trade agreements like the North American Free Trade Agreement (NAFTA) limit what countries can do to protect their farmers from dumping, including policy tools like tariffs or certain types of subsidies.
A few years ago, IATP published a report looking at dumping by U.S.-based agribusiness on world markets for five major crops: corn, soybeans, wheat, rice and cotton. We found a sharp increase in dumping following the enactment of the WTO's Agreement on Agriculture and the 1996 Farm Bill—which stripped away the last remnants of supply-management programs and encouraged U.S. farmers to over-produce.
Earlier this year, Tim Wise at the Tufts University's Global Development and Environment Institute released a new report looking even deeper into the damaging effects of dumping. In this case, the effects of dumping eight U.S.-produced agricultural products on Mexican agriculture after the passage of NAFTA. The numbers are astounding. Prices paid to Mexican farmers were depressed nearly $1 billion a year from 1997–2005 due to dumping. You can find more details at GDAE's website.
Or, check out the video interview we did with Tim at a major meeting of Mexican farm groups last month.
September 23, 2010
Time to put food reserves on the table
Agriculture prices have always experienced their ups and downs. But in recent years, those ups and downs have become more sharp and extreme. And the result has been deadly to many of those around the world facing hunger.
Tomorrow the UN Food and Agriculture Organization will hold a special meeting to examine extreme volatility in global grain prices. The meeting was brought on by the recent spike in the price of wheat and concerns that the the world will once again experience escalating food prices - similar to what happened in 2007-2008.
Historically, one of the key tools that communities and governments have used to temper the inevitable swings in agriculture supply has been reserves. Food reserves set aside food in times of plenty and release food in times of scarcity.
Unfortunately, a several decade push toward market deregulation has discouraged the use of reserves. But the recent extreme highs and lows in agriculture prices have spurred a resurgent of interest - not only at the international level, but at the regional and local level too. In our press release today, we call on the FAO to consider the establishment of food reserves. And we issued a new report by Sophia Murphy on how the international trade rules treat food reserves.
September 10, 2010
World Bank on land grabs: Proceed with care
A much anticipated World Bank report was released a few days ago on a controversial but important issue: foreign direct investment in land, particularly in poorer countries. Dubbed "land grabs" by the critics, a surge in investor interest in buying or leasing land abroad was one of the unexpected but dramatic responses to the surge in food prices in 2007-08. For a while, newspapers were full of stories of big but vague deals between foreign companies and governments of land in some of the world's poorest countries (as well as some not so poor countries). In the most publicized case, in Madagascar, it was a bid for nearly half the country's arable land in 2008 by a South Korean firm, Daewoo, that tipped a country already rife with political dissent into demonstrations that overthrew the government. We have commented on the phenomenon from time to time, and Alexandra Spieldoch and I wrote a chapter on the issue for a book published by the Wilson Center in D.C.
It won't be hard to find fault with the World Bank report. It's a highly politicized issue, and the World Bank has a long and controversial history of financing investment in natural resource extraction in projects that fail to meet appropriate social and environmental standards. Too often, the WB fails to meet its internal standards. The audience of NGOs, in any case, is likely to be skeptical at best.
Without jumping into that controversy here, I think it's worth underlining some of what the report has to offer. First, as the authors say themselves, this is an issue where there has been considerably more talk than action. The report estimates that only 20 percent of the proposed ventures have actually started production, for example. Other data, though some of it only goes up to 2006 and therefore predates the big explosion of interest, suggests that a significant share of the investment is actually domestic. That is, while it's clear that a lot of land has started to change hands, it seems not all of it—in some countries not more than 10 percent of it—is being signed over to foreigner entities.
Second, the report does not pull punches as to the (many) areas of concern that the investments give rise to. For example, the report says:
Many of these same countries face chronic food shortages, are regular recipients of food aid from the World Food Program and have suffered from historically poor governance.
Third, the report makes a few points that need attention, with or without large-scale land deals. First, there is a significant gap between the actual and potential output of much of the world's existing farmland, especially in sub-Saharan Africa. This gap should be narrowed. Second, land rights need urgent attention and regulation in many local, national and international contexts, whether it be the struggles of indigenous peoples the world over, of women confronted with patriarchal customary laws, or of the landless, such as Brazil's landless workers (MST), forcibly occupying abandoned land in the name of their right to survive. Large-scale investments by foreign governments and companies bring attention to a much broader set of struggles for justice related to land. The World Bank report makes the point that, looking ahead, land is only going to get more valuable. In that process, the poor (and otherwise marginalized) will be dispossessed unless direct measures are taken.
There's plenty more to say on this topic, and on the report itself. For now, I think it's worth welcoming this contribution to the debate, not least for shining a carefully documented and thoughtful light on what has been and all too opaque and alarming trend.
September 03, 2010
Speculation and the new price commodity crisis: separating the wheat from the chaff
This blog by IATP's Steve Suppan originally appeared on the Triple Crisis blog.
Wheat prices had been climbing prior to the August 5 announcement of a Russian wheat export ban. Kansas Board of Trade wheat futures contracts had gone from $4.92 a bushel on June 10 to spike at $7.95 a bushel on August 5, prompting a reporter to ask, “How could a Russian drought in the age of instant information escape the world’s notice until the country’s wheat crop was devastated?” This excellent question does not yet have a clear answer.
The wheat price crisis has led the press and even policymakers to focus almost exclusively on the traditional supply-demand fundamentals that ostensibly set prices. It’s as if the press were relieved to point to that old standby, weather, as the culprit for a 50 percent increase in wheat futures prices in a few weeks. For a change from the last three years, excessive speculation in commodities by financial institutions would not be accused of driving price volatility. Furthermore, according to the U.S. Department of Agriculture, unlike 2007-2008, global grain stocks were high enough to supply countries that could afford them. Maybe the specter of speculators increasing hunger might be eluded.
But maybe not. The Financial Times reported on August 4 that Glencore, the largest global commodities trader, had requested the Russian export ban, which was granted the following day. The ban enabled Glencore and other traders to break and “re-price” their relatively lower-price forward and futures contracts. Glencore and other major traders stand to make a killing in the new wheat price environment. So market power, usually a subject for political economy rather than orthodox economics, had a role in moving the fundamentals of price discovery and price transmission.
Glencore and other traders operate under the protection of Swiss banking secrecy laws, safe from the European Commission’s proposed revision of its Market Abuse Directive, about which we have commented. Meanwhile the U.S. Commodity Futures Trading Commission (CFTC) is deliberating how to regulate wheat and other commodity contracts. On August 5, the CFTC’s Agricultural Markets Advisory Committee (AMAC) met to discuss the now three-year old market failure when futures and cash prices for wheat failed to converge as futures contracts (generally 90 days for agricultural commodities) expired. Price convergence is what allows futures prices to be interpreted as reliable price benchmarks for forward contracting of commodities, both by commodity sellers and buyers. The pressure on the Chicago Mercantile Exchange (CME) and other U.S. wheat trading exchanges to solve the price convergence problem was made more acute with the release in June 2009 of a U.S. Senate investigation into wheat prices. The investigation concluded that commodity index fund investors had driven prices by exceeding contract position limits unenforced by the Bush administration CFTC.
CME and other exchange officials had told the CFTC at an AMAC meeting in October 2009 they would redesign the wheat contract to eliminate the price convergence problem, which they attributed to changes in transportation and storage costs and in delivery points (e.g. from Chicago to Toledo, Ohio), rather than to excessive financial speculation in commodities. At the August 5 AMAC meeting, the clearly impatient CFTC Chairman Gary Gensler pressed CME as to when the redesigned contract would finally be ready for review. Six-to-eight weeks was the answer.
The CFTC has a lot on its regulatory plate. Just to implement the Over the Counter (off-exchange, unregulated transactions) trade provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act, on July 21 the CFTC announced a schedule for 30 new rules. Among the rules will be one on agricultural “swaps” (OTC contracts) that directly affects wheat futures trading.
Because OTC trades are not reported to the CFTC, e.g. by such firms as Goldman Sachs and Morgan Stanley, until well after their market influence has waned, OTC traders do not contribute price information to fulfill the Commodity Exchange Act requirement of price discovery. Regulated exchanges must report their trade data daily to the CFTC for its weekly Commitment of Traders report, a fundamental regulatory tool for estimating trade trends, including market manipulation. Nevertheless, OTC traders take advantage of exchange-traded price information. For this reason and others, former CFTC commissioner Michael Greenberger testified to the CFTC in 2009 that agricultural swaps are per se violations even of the deregulatory Commodity Futures Modernization Act. If OTC wheat trading collapses as the result of a new rule on agricultural swaps, wheat and other agricultural commodity price volatility caused by so-called dark markets will greatly diminish.
But the CFTC faces a tough fight to implement the Dodd Frank legislation, not only because of the massive Wall Street lobby against enforced regulation, but because of continued efforts to deny that financial speculation played a role in price volatility and to argue therefore that Bush administration rules suffice. The latest denialist gambit, by the Organization for Economic Cooperation and Development, to dismiss excessive financial speculation as a major commodity price driver in 2007-2008 has recently been demolished by a Better Markets Inc. study.
However, no amount of prudential regulation, however well-drafted, closely monitored and stringently enforced, will manage the longer term prospect of climate change induced agricultural supply volatility. True, relatively small infrastructure investments could protect the hundreds of thousands of tonnes of wheat that are rotting outside Indian warehouses or the 40 percent of African agricultural production that rots in the fields for want of basic post-harvest storage facilities and roads for domestic markets. But the biggest Greenhouse Gas emitting countries, financial institutions and even some NGOs are counting on carbon emissions markets to induce investments in low carbon technology. The International Emissions Trading Organization opposes limits on OTC trading, ostensibly to make the market “efficient” by increasing its liquidity. Of course, IETA members (many of the same firms that have speculated on agricultural commodities) want their chance to make a carbon killing too.
August 06, 2010
Climate, agriculture and immigration
Two of the biggest hot button issues in Congress this year have been climate change and immigration. Now, new research published in the Proceedings of the National Academy of Sciences indicates that the two issues are linked.
Researchers from Princeton University conservatively estimated the future impact of climate change on the yields of Mexican-grown corn and wheat. They looked at migration data in Mexico from 1995-2005 (the ten years following the passage of the North American Free Trade Agreement). After accounting for a number of variables, they concluded that a 10 percent reduction in crop yields would lead to an additional 2 percent of the Mexican population emigrating. Depending on how fast or slow climate change occurs, the result could be between 1.4 and 6.7 million Mexicans emigrating to the U.S. by 2080 as a result of declines in agricultural productivity.
While this research focuses on Mexico, there is little question that migration driven by a decline in crop yields is a big issue in many other parts of the world, including much of Africa, India, Bangladesh, and Latin America, according to the researchers.
The debate in Congress over climate change was dominated by the costs of implementing various strategies to reduce greenhouse gases. Less discussed were the costs of inaction. Perhaps this is why Congress failed to act.
June 14, 2010
The new climate debt
As combined economic entities, members of the International Emissions Trading Association (IETA) exceed the size of most governments. So, when IETA made a new financing proposal just prior to last week's UN global climate talks in Bonn, attention was paid.
IETA's 170 transnational financial, law, energy and manufacturing firms are aggressively pushing for a global system for trading carbon emission credits and their financial derivatives. Their latest proposal, “green sectoral bonds,” are being sold as the only option for developing countries to access financing for projects that reduce greenhouse gas emissions.
Like conventional bonds, the green sectoral bonds would allow developing countries to borrow money from private investors to meet greenhouse gas reduction targets—the principle to be paid back with interest over time. The proposal represents a major shift in climate finance discussions.
As IATP's Steve Suppan writes in a new analysis of the IETA proposal, “If implemented, the proposal would transform climate finance from a public fiduciary duty primarily funded by developed countries to a new source of developing country debt to private creditors and of profits for IETA members.”
While it would seem that a proposal that deepens the debt of developing countries already battling an economic crisis would be dead on arrival, IETA argues that developed countries are facing their own budget shortfalls and simply don't have the resources for additional climate aid. Unfortunately, the longer global climate talks stumble, the more attractive IETA's proposal may become.
You can read Steve's full analysis of the IETA proposal here.
June 09, 2010
Food reserves: Reports from Africa and Asia
At the food reserves meeting that IATP co-organized in Brussels, Belgium along with Collectif Stratégies Alimentaires and Oxfam Solidarity, I was particularly interested in reports from Africa and Asia. Speakers from the East African Farmers Federation (EAFF), the permanent Interstate Committee for drought control in the Sahel (CILSS) and West African Peasant Farmers Network (ROPPA) emphasized that before discussing food reserves, Africa needs broader investment in the agricultural sector to adapt to climate change and achieve food security.
In terms of establishing food reserve programs, it seems there are some initiatives already underway. One such example is the East African Grain Council initiative, which is working to establish warehouses and warehouse receipt systems. The East African Commission also intends to establish a regional mechanism for the management of food reserves by 2012, which would include an information management system to track food stocks. In East and West Africa, there is the World Food Program Purchase for Progress initiative (P4P), which facilitates the local procurement of food. The Club du Sahel is working toward the establishment of regional food reserves with minimal contribution from participating countries. Farmer organizations and cooperative societies can play an important role in their respective areas by constructing and managing food storage facilities. They are in a position to assist in the reduction of post-harvest losses and to serve as information hubs.
Southeast Asia has its own programs underway. The Association of Southeast Asian Nations (ASEAN) already has an emergency rice reserve system that was established in 1979 and then amended in 1997. There is also the East Asia Emergency Rice Reserve (EAERR), which operates as part of ASEAN+3 (China, South Korea and Japan). It seems that neither of the programs was effective in responding to the most recent rice price crisis. Today, governments are working toward an ASEAN+3 Emergency Rice Reserve (APTERR) to better respond to shocks and food scarcity in the future. The Asian Farmers Association’s (AFA) position is that in order for a rice reserve mechanism to be effective, it must:
1. be easily accessible to address emergencies and related needs;
2. have safeguards so that it is not used to dump surplus rice;
3. not undermine incentives for local rice production;
4. have clear modalities (modes and triggers for access, price and/or volume shortages and mechanics of distribution of rice stocks from the reserves);
5. be subject to regular participative review and assessment.
AsiaDHRRA, a Philippines-based NGO, is working with small-scale producers to establish community reserves based on local traditions and Indigenous culture. Their programs support food preservation techniques, local rice banks and community nurseries, prioritizing the needs of women farmers, facilitating access and ownership of land by small-scale farmers and building public consciousness.
I walked away from the meeting wanting to know much more about regional, national and community reserves programs that already exist or those that are in formation. Clearly, each region is approaching this discussion differently and varied approaches are needed even as we discuss the need for a globally coordinated system to support reserves.
June 08, 2010
Food reserves: Deepening the debate in Europe
I am back in the office after an exciting meeting on food reserves that IATP co-organized in Brussels, Belgium along with Collectif Stratégies Alimentaires and Oxfam Solidarity. A food reserve, simply described, is when food is set aside in times of plenty to be used in times of scarcity. This meeting was a follow-up to another discussion on reserves in Washington, D.C. that IATP organized in late 2009, as well as a global sign-on letter urging governments to review the potential of food security reserves to address hunger and agriculture market instability.
In Brussels, we continued the dialogue with farmers, academics, development agencies, government officials and UN agency representatives. Some basic points that I appreciated from the discussion:
While there is much to sort out, it is clear that the international community is moving on this issue. France and Brazil have already set up working groups to discuss joint measures for food reserves as a means to curb volatility. Brazil, Russia, India and China have also announced an initiative to review reserves more closely.
Managing risk and volatility will be one of the thematic areas of the next UN Committee on Food Security session in October 2010. IATP, along with others, is working to ensure that farmers’ voices are central to these multilateral debates and that governments remain true to their obligations to ensure the Right to Food.
May 20, 2010
The evolving relationship of NGOs and the UN
IATP's Sophia Murphy attended an invite-only meeting outside of Dublin earlier this week organized by the UN High-Level Task Force for the Global Food Security Crisis.
Home today from Dublin. I ducked in and out around the ash cloud—some 30 of the 150 or so expected participants at the Dublin meeting didn't make it when the airport shut down. A pity. It was a good meeting—serious, purposeful, good humored; a good mix of UN and NGOs, with a sprinkling of government officials. We were there to discuss the update to the Common Framework for Action in response to the Global Food Crisis (IATP's comments here). The discussions were all off-the-record, but here are a few thoughts on what happened.
First, it is encouraging that the framework is being updated. The original wasn't bad—a bit patchy, some jarring assertions (to my eye) and a lot of good ideas. It was done in a rush, and that showed; though actually things done in a rush are not necessarily worse that things lingered over, especially when you involve some 20 or so UN agencies plus the World Bank (which is technically UN) and the WTO (which is explicitly, though controversially, outside the UN system). Anyway, well done to the High-Level Task Force team for pushing through with an update.
Second, the first go round involved no NGOs or civil society voices. This round has. Not that the document is consensus based, or even for NGO ownership. The Dublin meeting was a consultation, not the creation of any formal partnership. The document is intended for sign-off by the heads of all the agencies involved, and thereby to guide agency work related to food security. NGOs can walk away and bash at the CFA take II all they like, but it was a serious consultation, with time and enormous effort put into both acknowledging the written submissions (which came from some 51 NGOs and CSOs) and thinking how best to allow participation from the audience.
Third, I used to work in NGO relations for the UN, with an office called the Non-Governmental Liaison Service. I have attended many of UN meetings, both on the UN side (helping UN agencies understand how NGOs work, and trying to get them to pay more attention to what NGOs could contribute) and on the NGO side, before and after my stint at the UN. I think things have come a long way since I was really involved in this kind of work in the 1990s. The whole culture has changed. While the UN is run by governments, NGOs represent a very different perspective that is invaluable. NGOs are on the ground, facing different constraints and opportunities. The interaction among the UN officials themselves seemed relaxed and constructive, with few turf lines drawn, and between the UN and NGOs, somehow natural and uncomplicated. It was a very welcome atmosphere. The meeting was co-chaired by Tom Arnold, CEO of the NGO Concern International, and David Nabarro, the UN Secretary General's appointment to head the task force.
The draft still has to be finalized and is expected soon—possibly as early as mid-June. I think it will reflect this consultation and the ideas that were put forward—and will be the better for it. Moreover, I think the UN knows and appreciates that this is so. It was a good way to spend two days.
May 17, 2010
Action on the global food security crisis
IATP's Sophia Murphy is attending an invite-only meeting outside of Dublin this week organized by the UN High-Level Task Force for the Global Food Security Crisis.
Some 150 people have gathered in Malahide, Ireland, just along the coast from Dublin, for a two-day workshop to review the Comprehensive Framework for Action of the UN High-Level Task Force for the Global Food Security Crisis. First put forward in 2008, the High-Level Task Force is completing a review and update that has taken months. The task force has considered written submissions from some 51 NGOs (you can read IATP's submission here) and social movements as well as many meetings of the reference group created by the UN to guide the work.
Today in Malahide, the review will take a further step in a two-day workshop, hosted by the Government of Ireland and the Irish NGO Concern. The draft revised document will be handled by six working groups: food assistance, social protection systems, food production and value chains, better managed ecosystems for food security and nutrition, trade and tax policies in international food markets, and information and monitoring systems. There are four cross-cutting issues that will be considered in all the working groups: the right to food, gender, nutrition and environmental challenges (e.g., climate change). Each working group will have two co-chairs, one from the UN system and one NGO representative. I'll be representing IATP as co-chair of the group on trade, taxation and markets with a representative of the World Trade Organization.
The setting is beautiful, and the UN team has clearly worked very hard to do justice to the comments they received. They are working with Concern to get the most out of the next two days. The mix of organizational politics, institutional cultures and philosophical leanings should make for a lively debate. The trade chapter is particularly marked by clearly different understandings of how trade works and what it should do—the existing draft is not internally coherent, and from an NGO perspective, continues depressingly to rely on the Doha Agenda to do things to address the food crisis that it is patently unfit to do. Let's see if we can improve on things in the next 36 hours.
Food reserves needed to respond to global food crisis
IATP helped organized a letter signed by more than 60 civil society groups calling for the United Nations to consider food reserves as a tool to address global hunger. Below, see the press release we sent out earlier today.
April 07, 2010
Steeling for a fight: U.S. Senate takes on derivatives
For those who think that headlines and newspapers still matter, this front page news appeared in the March 30 issue of the Financial Times: "Steel prices set to soar." The end of 40 years of forward contracting iron ore annually will be replaced by three-month contracts in the cash markets from which multi-billion dollar financial derivatives contracts in steel will emerge. Steel prices are predicted to rise a third and be passed along to consumers. Price volatility in iron ore and steel will increase. The highly concentrated iron ore mining industry will prosper, as will traders in steel derivatives.
What does this headline event have to do with the ongoing U.S. congressional fight over how to regulate over-the-counter (OTC) derivatives contracts currently traded in unregulated "dark markets?" Furthermore, what does the OTC legislation have to do with agriculture and agribusiness?
Next week the U.S. Senate Agriculture Committee will begin to negotiate its version of the OTC derivatives provisions that will form part of the overall financial reform legislation. The Agriculture Committee oversees the Commodity Futures Trading Commission (CFTC) which regulates the trade in commodity derivatives, such as iron ore futures. The banking committee oversees the regulation of financial derivatives, such as stock and interest rate futures. The Senate will take elements from both committees to incorporate in the final financial reform bill that Senate leadership hopes to move to a vote by June.
On March 25, IATP wrote to the agriculture committee as a member of the Commodity Markets Oversight Coalition and to the entire Senate in a sign-on letter led by faith-based and nongovernmental organizations. Both letters asked Senators to authorize the CFTC to set and enforce limits on the number of futures contracts that any one entity can own in all trading venues during a specific trading period. The lack of these contract trading limits, called "aggregate position limits" in the draft legislation, enabled excessive speculation by financial institutions in commodity markets. In 2008, we reported on how more than $300 billion in speculative money drove extreme price volatility in both agricultural and non-agricultural commodities in 2007–2008.
Most of the excessive speculation took place in unregulated OTC trades, which led to a near meltdown of the global financial system in the last half of 2008, avoided only by a multi-trillion dollar taxpaper bailout. In dark markets, nobody knows which traders have enough reserves to pay up when their "bets" go bad. Wall Street lobbyists have written exemptions in the House of Representatives "Wall Street Reform and Consumer Protection Act of 2009," passed on December 11, 2009. These exemptions to restrictions on OTC trading would leave up 60 percent of the $300 trillion U.S. OTC market still unregulated, according to a March 24 speech by CFTC Chairman Gary Gensler.
Many of the corporations represented by the Wall Street lobbyists are agribusiness firms, such as Cargill, Bunge and John Deere, that belong to the Coalition for Derivatives End Users. Like their industrial brethren, they use dark market instruments to hide debt, manage currency and interest rate fluctuations, and, yes, to manage price risks in physical commodities such as steel, which Cargill trades and John Deere uses. Traders on regulated public exchanges give price information to the whole market. Dark market traders give no information to discover prices, as is required by the U.S. Commodity Exchange Act: they only use public information to create unfair competitive advantage.
On March 4, IATP submitted a comment to the CFTC that rebuts the Wall Street arguments to the Senate banking committee as to why trade in dark markets should continue. The comment is in response to a proposed CFTC rule on aggregate position limits for energy futures trades. The proposed rule, to close what is colloquially known as the Enron Loophole, is open for comment until April 26.
The CMOC and faith-based organization sign-on letters to the Senate argue for very strict limits to any exemptions from trading on public markets. Only bona fide users of commodities would be allowed to hedge risks off-exchange, and then only for commodity derivatives trades and for no other financial purpose. Those specifically exempted trades would require higher capital reserve requirements to prevent failure to pay and would be subject to strict daily reporting requirements, unlike the current six month lag of government reports of disaggregated OTC trade data to the Bank of International Settlements. (Six months is an eternity in the world of derivatives trading and cannot aid regulators to monitor trade flows and types.)
If the Senate allows transnational corporations to continue to trade in dark markets, all consumers of commodities and financial products will be exposed to the systemic risk of the "too politically connected banks" through whom the Coalition of Derivatives End Users members trade. Higher prices for consumer products using steel will seem like the good old days compared to the havoc that another global dark market failure could unleash. According to Simone Johnson, former chief economist at the International Monetary Fund, in the absence of tough regulation of the financial and commodity markets, another global financial crisis could hit within a year.
March 31, 2010
Untold costs of the food import boom
As global food trade expands, food companies want uniform food safety standards. For the multinational food company, an ideal world would have a set of global standards. If a food production export facility met those standards, the company could freely export anywhere around the world. But what if the global standards weren't strong enough to ensure safety? What if the cost of food-borne illnesses continued to rise? And what if governments didn't invest enough in regulatory agencies to ensure the standards were actually met?
These issues and more are covered in the latest issue of the Global Food Safety Monitor, edited by IATP's Steve Suppan. The issue looks into the underfunding of U.S. food safety agencies, failures in implementing the USDA's food safety programs and attempts to certify the safety of poultry imported from China.
"If Cargill is investing an average of $100 million a year and cannot control E.coli in its U.S. plants, what is the likelihood that the Obama administration's proposed budget for federal food safety programs [...] will reduce the incidence of E.coli and other pathogens?" writes Suppan. Find out more in the latest Global Food Safety Monitor.
March 22, 2010
Five actions steps on bottled water
IATP's Shiney Varghese gives us five things we can do as individuals and in our communities to reduce bottled water use.
1. If you are concerned about the quality of your local water:
2. If you have continued concern or if your building is old with the possibility of contamination:
3. Stop buying bottled water:
4. Write a letter to the local businesses and other places you visit, urging them to stop selling and/or serving bottled water:
5. Join a campaign to help spread the idea! Examples include:
Bottling water, boxing in communities...
The release of the new video, ‘The story of bottled water,” on this World Water Day (2010) got me thinking. It has now been more than 10 years since I came across what was perhaps the first landmark study on the bottled water industry. It concluded that bottled water is not necessarily safer than tap water, pointing out that bottled water regulations are inadequate to assure consumers of either purity or safety. The Natural Resources Defence Council, authors of the 1999 study, petitioned FDA to "Establish [..] rules as stringent as those applicable to city tap water.” Despite the threat to consumer health that this report highlighted, bottled water sales skyrocketed in the intervening decade.
Since 2000, IATP has been promoting the human right to water through multiple venues, including a focus on the United Nations. Right to water, as we define it, is the right of people and ecosystems to have access to safe water to remain healthy. Effectively, we insist that every person has a right to access water in quantity and quality necessary to meet their basic needs—water for cooking, drinking, washing, sanitation and for meeting basic livelihood needs.
In practical terms, what does the right to water mean?
• Ensuring that water supply systems are democratically governed; it means that not only those living in legal residential areas but also those in informal settlements are entitled to water services.
• Ensuring that rural residents, and those who are not covered by piped water-supply systems, do not find their water sources are being diverted, polluted, contaminated or depleted without being considered a stakeholder.
In order to address the water needs of the poor around the world, a right to water campaign needs to address not only the domestic water needs, but also the water needs of the ecosystems that sustain a large majority of the water poor. Thus, we define the right to water rather broadly as pertaining not only to current populations, but future generations as well.
The connection between this work and the proliferation of bottled water use around the world was made starkly clear to me in mid-2002, while on a visit to my home state Kerala, in India. A little over 10 years ago, Coca-Cola arrived in the Plachimada village, promising employment and local economic growth while building a 40-acre bottling plant: Hindustan Coca-Cola Beverages, the bottling arm of Coca-Cola, began operations in March 2000. The factory was located between two housing colonies of poor landless laborers belonging to lower castes and indigenous groups. Their water woes began soon after the opening of the facility: water from the plant was dumped outside without any treatment, affecting their water quality. It was not long before farmers in the surrounding areas were affected by water depletion and other environmental problems including land and water pollution.
At the time, the Statesman reported on the situation of Shahidul Hameed, a small farmer in the region. Before the factory started operations, his “little patch of land in the green, picturesque rolling hills of Palakkad yielded 50 sacks of rice and 1,500 coconuts a year. It provided work for dozens of labourers.” By the summer of 2003, Hameed “could manage only five sacks of rice and just 200 coconuts. His irrigation wells have run dry, thanks to Coke drawing up to 1.5 million litres of water daily through its deep wells to bottle Coke, Fanta, Sprite and the drink the locals call without irony, “Thumbs Up.” But the cruelest twist is that while the plant bottles mineral water, local people—who can never afford it—are now being forced to walk up to 10 kilometres twice a day for a pot of drinking water. […] The disruption in life because of depletion of groundwater and contamination by pollutants has forced villagers to picket the factory for the past 470 odd days,” the Statesman reported. The vigil started on earth day in 2002!
Plachimada is about 120 miles from my home. On my second visit to Plachimada, I decided to take an overnight journey by train and to spend a couple of days in the village, where local people had been sitting on a dharna (vigil) for over two years: demanding that Coca-Cola shut down the plant, compensate them and leave the region. Several organizations from and around the region had come together under the name Plachimada Struggle Solidarity Committee in support of the Coca-Cola Virudha Janakeeya Samara Samithy (Anti Coca-Cola Peoples Struggle Committee)—the backbone of the struggle.
Mailamma, one of the Adivasi leaders of the campaign whom I had met during my previous visit, took me to the well in her courtyard. Monsoons were already here; unlike the previous time when the water was no longer at the bottom of her well. In fact, we could draw some water using a make-shift bucket in less than a few minutes. It was crystal clear, but it still had a horrible bitter taste. I had to spit it out.
According to tests conducted by various groups, the water contained too much dissolved salts to drink, cook with or even wash in. Fortunately their fight against Coke over the previous two years had yielded some minimal results: The government had ordered the company to stop drawing water, and subsequently the company had suspended its operations. Moreover, villagers were being supplied with water twice a day. To the right, you can see a picture of “waiting pots” with Mailamma in the background pointing to the pots. Another photo below shows a water supply tanker parked in front of the bottling plant.
But they have not been as lucky when it comes to water for other livelihood needs. The villages around the Coca-Cola factory have many large farmers with relatively big land holdings (varying between 10 to 35 acres). These have been the primary source of employment for the majority of landless advasis and low-caste people, who account for close to 40 percent of the population. In addition, most people keep goats, chicken and other small animals as a source of livelihood. The bottling plant’s operations have affected the livelihoods of the farmers, of the laborers who work in these farms, and those who keep small animals.
In a landmark decision on August 9, 2006, the state government of Kerala imposed a ban on the production and sale of colas (both Coca-Cola and Pepsi) in the southern Indian state. Ten days later the Adivasi Samrakshna Sanghom leaders Velur Swaminathan and Mailamma called off the vigil that had lasted 52 months and had brought national and international attention to the small village.
Less than a year later Mailamma passed away. The bottling plant has been shut down for good but the campaign for justice continues. Plachimada Struggle Solidarity Committee and Adivasi Samrakshna Sanghom have been continuing their demand for compensation for the losses suffered as well as for the damages the bottling plant has caused in the area as a result of its reckless operations.
In June 2009, the government constituted an expert committee to study the nature and extent of losses suffered by the people of Plachimada as a result of the operation of the Coca-Cola plant there. It’s as if the call issued by the community earlier this year, on the third anniversary of Mailamma’s death (“A Call to struggle.. for water.. for life”), is beginning to get some response.
On March 18, 2010, the Petitions Committee of the Kerala Assembly, which looked into the environmental pollution and water shortage caused by the plant, wanted the government to take steps to get compensation from the multi-national giant for the losses suffered by villagers. Today, in a setback to Coca-Cola, the High Level Committee set up by Kerala Government suggested legal steps to realize Rs216.26 crore (approximately $47.5 million USD) as compensation from it for the “multi-sectoral” loss caused by its bottling operations in Plachimada.
It is fitting, even if coincidental, that such a recommendation by the State should be issued on World Water Day!
For more information, see Shiney Varghese's “Five actions steps on bottled water
Colonialism is not dead
Bill Gates and the biotech juggernauts are doing their best to keep Africa dependent on imported technology, just like in the bad old days of colonialism.
In the latest iteration of “the rich world knows best,” it is Bill Gates in the company of the few, huge private biotech firms that have joined the long (sorry) list of those that think they know best how Africa should grow its food. If the history of colonialism and subsequent development practice has taught us anything, it is that all interventions must strengthen resilience, encourage diversity and be locally appropriate. The biotech seed proposal for Africa fails on all three counts.
A February 17 Des Moines Register article implies that the U.S. model of crop production will be exported to African nations by giving biotech seed to African farmers. Exporting a model developed specifically for the U.S. to the 47 countries of sub-Saharan Africa is bad enough; worse, this model is focused largely on high inputs for monoculture corn and has caused enormous problems in the United States. Why would we want to export it?
Biotech corn is designed for monoculture production on large acreages like we have in the United States: African agriculture is overwhelmingly small-scale (on farms of less than one acre) and diverse, allowing for a more diverse diet as well as greater overall output given the dependence on rain-fed agriculture and very limited access to external expensive inputs such as fertilizer. It’s often claimed that biotech seeds will yield larger crops: In fact, there is no evidence that crops from biotechnology seeds produce higher yields than do crops from conventionally bred seeds.
Both Pioneer and Monsanto claim they will make the seeds available royalty-free but nothing is said about providing seeds at cost. Nor is anything said about the biotech industry’s stringent rules prohibiting saved seed. Biotech becomes a vehicle to introduce a need for a slew of expensive, and commonly fossil fuel–based, inputs. African farmers have historically, and for centuries, provided necessary inputs for themselves on-farm.
If Bill Gates is going to be responsible for spending hundreds of millions on agriculture in Africa, we need his foundation to do better. So, what are the alternatives to high-input agriculture in Africa?
The Nigerian National Variety Release Committee is set to release improved corn varieties that address drought, low soil fertility, pests, diseases and parasitic weeds. The International Institute of Tropical Agriculture (IITA) developed these varieties in partnership with other African plant breeding programs in Nigeria. These include 13 open-pollinated varieties with varying maturities and four hybrids with drought tolerance. They do not have the costs or legal hassles associated with genetic engineered varieties and will be suited for small farmers.
Another example is the work of Dr. Pedro Sanchez who spent his career working to develop low-cost and comprehensive soil rejuvenation programs for Eastern and Southern Africa and other food-deficit nations. Dr. Sanchez, the 2002 winner of the World Food Prize, has shown how biodiverse small farms can not only produce more local food but also build soil fertility and rural economies. The International Assessment of Agricultural Knowledge, Science and Technology for Development—now endorsed by over 50 countries—reached similar conclusions.
In the United States, the biotech industry has dictated the terms of the technology, trampling over the interests and concerns of farmers and the public alike. Biotech crops have resulted in fewer farmers growing more agricultural raw materials and less food, exactly the opposite of what is needed in Africa.
We suggest the Gates Foundation support ongoing African research rather than import capital-intensive technology developed to address problems that are far from most Africans’ concerns. The privately patented and tightly controlled model epitomized by biotechnology is all wrong for the estimated 33 million small farms that make up 80 percent of sub-Saharan Africa’s agriculture.
March 19, 2010
Market deregulation and food security
Large financial institutions play a big role in our food system. From providing credit to farmers, to influencing commodity futures markets that ultimately play a role in setting food prices, big financial players deeply influence the food chain. The latest issue of Food Ethics magazine, published out of the United Kingdom, examines how the breakdown of our financial system has affected food security.
The issue includes articles on whether our finance system is set up to value the environment and hunger; the role of big financial speculators in creating volatility in food prices; food companies and tax avoidance; and how finance could best support a sustainable food system.
IATP's Steve Suppan contributes an article on the role of commodity market deregulation in the U.S. and global food prices. Suppan writes about how speculators like Goldman Sachs and Morgan Stanley dominated agricultural futures markets to drive prices up in 2007 and early 2008, and then down as they disinvested from the market.
Food Ethics editor Tom MacMillan writes in his introduction: "The bottom line is that governments need to make the link between food security and financial regulation, to support long-term investment everywhere from the biggest companies to the smallest farmers around the world. Better rules and practices could speed us towards a sustainable food system. Right now, though, our financial institutions have their feet on the brakes."
March 11, 2010
NAFTA and agribusiness concentration
Tomorrow, the U.S. Department of Agriculture and the Department of Justice will host the first ever workshops on competition issues in agriculture in Ankeny, Iowa. A new IATP fact sheet looks at the role of the North American Free Trade Agreement (NAFTA) in accelerating agribusiness concentration. It includes short testimonies from farm groups in Mexico, Canada and the U.S.
“NAFTA opened the door to create one large, and increasingly concentrated, North American market for big agribusiness companies,” said IATP’s Alexandra Spieldoch. “Farmers in all three countries have been squeezed by a handful of companies. As the Justice Department and the USDA assess competition in agriculture, it is imperative that they consider the international impacts of corporate concentration and reforms needed to create fair markets. Competition reform cannot be viewed exclusively as a domestic issue.”
You can read the full fact sheet here.
You can read IATP’s comment to the USDA and Justice Department on the need to address corporate competition in agriculture here:
IATP will be blogging from Iowa later today and tomorrow on the outcomes of the workshop.
March 10, 2010
Gearing up for agribusiness concentration workshops
For those who feel that the excessive market power of agribusiness companies is a big part of what's wrong with our food system: it's on. And it's historic. For the first time, the U.S. Department of Agriculture and the Department of Justice will hold a series of public workshops on market competition in agriculture. The series kicks off on Friday in Ankeny, Iowa. IATP will be there blogging away on all the highlights.
Earlier today, the final agenda and speakers were announced including USDA head Tom Vilsack, Attorney General Eric Holder, some state attorneys general, academics and company representatives like Monsanto. A first round of the agenda included only a few farmers, and fortunately, they've added an extra session to include more farmer voices.
The official goal of the workshop is to "promote dialogue among interested parties and foster learning with respect to the appropriate legal and economic analyses of these issues, as well as to listen to and learn from parties with experience in the agriculture sector."
But many farmers and consumers concerned about the effects of market concentration on our agriculture economy, our health and the environment believe much more is needed than "dialogue." Along those lines, IATP and many others will be at a Thursday night event hosted by Iowa Citizens for Community Improvement titled Unleash Food Democracy: Taking on Corporate Power in our Food Supply. We'll be in Iowa tomorrow, reporting more on the first agribusiness competition workshop.