Debunking the myths—the MNC monopoly

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Do MNCs control the food supply chain? With every passing month, we read news like the Bayers and the Monsantos of the world merging, or cooperatives like FrieslandCampina going bold with acquisitions.

Debunking Myths—The MNCs’ food monopoly

The Digital Agriculture and Smart Farming trend continues to thrive in this age of technology transformation and disruption. With every passing month, we read news like the Bayers and the Monsantos of the world merging, or cooperatives like FrieslandCampina going bold with acquisitions. While consolidation of some parts of the food chain is certainly happening, such news tends to paint an inaccurate picture of food being a global, highly consolidated business. Misconstrued perceptions lead to different myths and, food being controlled by multinational giants, is one such myth.

Perception though, is not always reality. Food, unlike many other industries, is a very local and extremely fragmented business. Food production involves stakeholders sitting in plush offices at multi-billion dollar conglomerates, down to local operating small landholders. Consolidation isn’t consistent across all segments and in all geographies of the agricultural industry. In fact, while grain trading represents only a relatively limited part of the whole value chain, it’s interesting to watch four giant transnational companies dominate this global grain trade. The four companies account to an indicative and staggering 75% to 90% of the global grain trade. It is this extraordinary concentration of money and power that is a structural flaw in the system. Large players automatically extract as much value possible, but transfer as much of the cost and risk onto the weakest links—the farmers and laborers —in this food chain. Currently, the Fairtrade movement is working on resolving this problem. France has taken a legal stance wherein French law prohibits food waste by supermarkets. The rationale behind is that, this will have a positive effect on the economic position of the farmers.

The fragmentation of the agricultural industry stems from constraints resulting from food security. Control over one’s land and food security is enough for any government to get finicky over allowing MNCs to exert control over their food chains. In developing countries, agriculture is still the primary driver of the economy, and agriculture results in jobs for several hundred thousand people. Governments constantly need to balance the move to disenfranchise such a large segment, and not in the process, risk political turmoil. Land ownership is a sovereign function, and corporates cannot win this battle any time soon. With anti-monopoly regulations, with registration rules of the land, and with strict monitoring of water and types of crops grown in an area, food production is unlikely to be a consolidated industry in the near future.

And herein lies the greatest opportunity we have—the digitalization orchestration to create value! To learn more on this topic of Digital Agriculture, read our whitepaper or visit me in our Hub at Utrecht!

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