Sunday, December 04, 2022

The Food Profiteers

 The world's biggest food companies have paid out nearly £15bn to shareholders as spiralling prices leave desperate families around the world in both poor and developed countries struggling to afford to eat. 

Nestlé, Unilever, Associated British Foods, Mondelez and Archer-Daniels-Midland Company (ADM) have raked in £20bn in profits in the space of a year while all raising average food prices. Four of the five multinationals have also signalled that consumers should expect further price rises.

These profits would be enough to fill the £9.8bn funding gap twice over that is currently facing the United Nations’ World Food Programme (WFP) – which aims to provide food for 160 million people facing poverty by the end of the year. The WFP said it costs 44% more for it to buy food than it did in 2020.

Frédéric Mousseau, an economist who has worked for international relief agencies including Oxfam and Action Against Hunger, asks: “How can we accept that a handful of corporations record such huge profits while you have billions of people who are already struggling to survive?”

Mousseau, now a policy director at the Oakland Institute think tank,  goes on to point out that “The shareholders who own these companies expect growth every year and a return on their investment. Maybe that makes sense for companies selling phones or TVs, but food is not a commodity – it’s what everyone of us depends on to survive, and these corporations’ need for ever-growing profits poses existential questions for humanity.” 

 Even in the UK, there has been a 40% increase in the number of people turning to food banks since April, according to the Trussell Trust. Food prices in the UK have increased by an average of 16% in the past year, with the costs of some staples – such as bread and milk – rising by a third. The prices of vegetable oil and pasta have soared by more than 60%, the highest increases among the lowest-cost groceries. 

The UK’s biggest producer of vegetable oil, Edible Oils Limited, is jointly owned by Archer-Daniels-Midland and a UK subsidiary of Mitsubishi Corporation. The former has seen its profits rise by 48% this year and paid out the equivalent of £1.5bn to its shareholders in dividends and share buybacks in the first half of this year alone.

The UK’s highest-grossing food company, Associated British Foods (ABF), has also paid out £500m to shareholders.ABF’s chief executive George G Weston, 

who will receive £2.2m in remuneration this year, told investors at the firm’s annual results presentation: “Revenues benefiting from price increases and operating profit was solid. We’ve had to recover a huge amount of input cost from customers that don’t like giving you price rises and we’ve done that job really well – but it’s not finished.”

Nestlé reported half-year profits of £4.5bn, an 11% fall from the same period last year. But the firm has paid out £8.5bn to shareholders in the form of share buybacks this year, while raising prices by up to 7.5% on its products, which include baby formula.

Unilever, a British-Dutch multinational that also produces household cleaning and personal care products, has made £4.3bn in profits this year – a 4% increase on last year. The company told investors it has raised its prices by 12% to cover increased costs. At the same time, it has paid out £1.3bn to shareholders.

Mondelez, which owns Cadbury, has reported a 10% rise in profits this year – bringing in £6.9bn. The company has handed £2.8bn to shareholders in the form of share buybacks and dividends, while raising its prices by 11% in the last quarter. 

“These corporations are very adept at rhetoric that doesn’t have a lot of substance,” Philip Howard, a professor at the department of community sustainability at Michigan State University, explained.  “They talk about balance but if there’s a choice between increasing their power and doing the right thing, increasing power is going to win every time. That’s what the shareholders demand.”

Although supply chain disruptions caused by the pandemic, the war in Ukraine, rising fuel costs, and the impact of heatwaves on crop yields have all contributed to increased costs for producing and processing food many food experts argue “excessive commodity speculation” rather than shortages remains largely to blame for spiralling costs.

Olivier De Schutter, UN Special Rapporteur on Extreme Poverty and Human Rights, said: “Continuing to rely on a handful of food commodities and countries for global food supplies, combined with predatory financiers betting on food, is a recipe for disaster..."

Jennifer Clapp, Canada Research Chair in Global Food Security and Sustainability at the University of Waterloo, said: “Evidence suggests financial speculators are jumping into commodity investments and gambling on rising food prices, and this is pushing the world’s poorest people deeper into hunger. Governments have failed to curb excessive speculation...”

Nestlé and Unilever among food giants paying out billions to shareholders | openDemocracy

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