A recent headline in the Financial Times declared “Shortfalls spark record ADM grain shipments”. The article beneath explained that Archer Daniels Midland, the Illinois-based agricultural trading giant, had shipped record tonnages of grain during the last quarter of 2010 contributing to a net profit for the company in those three months of £472m.
It put into perspective our recent sale of the final few lorry loads of feed wheat from last harvest at £200/t ex-farm. We considered we’d done well to catch what must have been close to the top of the market for a small proportion of our crop. Although we were acutely aware our average sale price was considerably lower, it would have been nice to have had access to a larger critical mass on which to profit. But that’s the province of the big operators.
And big operators are the ones who ultimately set the prices for what we business minnows buy and sell. Most are multinationals and have UK and worldwide subsidiaries that claim to operate and trade independently. But why invest around the globe in search of profits if that were entirely true?
Let’s consider a few and how powerful the scale of their businesses makes them. ADM, for instance, recorded total world sales in 2009 (the most recent figures available) of £47bn. Cargill, probably the biggest agricultural trader in the world with an annual turnover greater than some countries, claimed sales of £69bn in 2009.Walmart, the world’s biggest retailer (of a variety of goods as well as food but by implication a huge buyer from farmers) turned in sales of £260bn last year making £15.5bn profit. Our own leading food retailer, Tesco, achieved a more modest £62.5bn and annual profits totalling £3.4bn.Companies closer to farming and subject to the same sort of profitability swings as their customers, tend to be a bit smaller. Even so, John Deere, for instance, recorded world sales of £15bn with a profit of just £563m. While Bayer CropScience sold £5.6bn worth of agrochemicals worldwide out of a Group turnover of £27bn.
Meanwhile, you will be pleased to know the banks that guard your money are still OK despite the problems of recent years. HSBC has assets of £1.56 trillion and made profits of £6bn in 2008 – disappointing compared with the £12.34bn they made the year before. Barclays has assets of £1.94 trillion and made £12bn profit in 2009.That’s just a sample of some of the firms with whom farmers trade. Although even that short list includes conglomerates we deal with every day, my point is that these huge concerns dwarf most of those with whom we do business, and through such profits and mergers are getting bigger all the time. They can make decisions in their corporate boardrooms that affect the lives of millions of small firms. And although the multinationals claim they compete with one another, the fact that there are so few of them serving each sector must mean competition is limited.
Farmers can co-operate to try to mitigate these monopolies, of course. But even negotiating together we are tiny by comparison. And yet, if we farmers try to increase our scale, there is a public outcry. Critics want farms to stay small and traditional.
Don’t get me wrong, I’m not advocating every dairy farm becomes a Nocton – not that even one will now. But if consumers insist on outdated and scientifically questionable production systems they must be prepared to pay what it costs, either through tills or taxes.
David Richardson farms about 400ha (1000 acres) of arable land near Norwich in Norfolk in partnership with his wife, Lorna. His son, Rob, is farm manager.