A race for power currently playing out in the global grain markets risks creating an oligarchy in the grain trade, commentators have warned. Recent acquisitions, which have consolidated power in the hands of a few major players, may result in adverse effects for farmers and consumers.

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American food processing giant Archer Daniels Midland has put in a bid for Australia's last remaining independent grain handler GrainCorp. The bid, which was made on Monday 22^nd October, follows major acquisitions by Swiss commodity trader Glencore and Japanese general trading company Marubeni.

Part of a recent series of acquisitions, ADM’s bid has sparked fears that, as concerns over food security grow and developing countries in particular look to but grain crops, a few oligarchs could engineer food price rises and depress farm-gate prices, which would inhibit access to food. Although world leaders, most recently the Indian government, have begun to acknowledge 'the right to food,' developments in the world food system risk threatening these tentative progressive steps.

This year has seen droughts in the United States, Black Sea and other major grain producing areas, as well as record rainfall in the UK and Ireland which affected production. The combination of extreme weather events led to rallies in the grain markets, causing prices of maize and wheat to rocket. This sparked concern that another food crisis could ensue and gave rise to calls for intervention from a number of anti-poverty organisations and the UN.  

In the summer, officials from a number of UN programmes, including Jose Graziano da Silva, head of the UN Food and Agriculture Organisation, called for swift action to address volatile food prices. However, although some moves were made to monitor and mitigate the worst spikes in the grain markets, nothing has been done to address the issue of consolidation, which government officials in a number of Asia’s major importing countries have warned could lead to their importers paying over the odds for essential foodstuffs.

The 'grain majors' already account t for around 75 percent of the global grain trade. Continued mergers risk creating monopolies, commentators in South Korea and Indonesia have warned. Both countries are net importers of grain.

ADM is not alone in its pursuit of GrainCorp. The last surviving independent is a desirable aquisition; Australia is the World’s second biggest world exporter of wheat, and demand for wheat is set to increase dramatically in the coming years. Much of GrainCorp’s current trade is with China, where its wheat is used to make noodles, and with maltsters and brewers. The acquisition by ADM would enable the US-based multinational to access lucrative growing markets in Asia.  

Although grain industry groups have claimed the consolidation being observed would allow companies to increase their range and suggested increased geographic diversity could help alleviate the effects of volatility, grain importing countries have dismissed this. They maintain that, ultimately, buyers and consumers will be placed at the mercy of fewer and more powerful players, who will be in a position to dictate prices.  

Lee Gaus, vice president of International Futures Group told news agency Reuters, "There are efficiencies that are gained when you have this kind of consolidation. But, on the other hand, there's a danger in a situation where you have more and more controlled by fewer and fewer. Ultimately this hurts the consumer. I don't know any time that you can concentrate so much leverage in so few hands that it doesn't eventually impact the consumer."

This situation will also affect farmers, who in many cases will be left without alternative buyers for their crops, meaning the large companies can artificially depress prices.

Organisations from anti-poverty group Oxfam, to Australia’s opposition National party have warned against the effects of allowing another multinational to buy up independent businesses in the country.

Jodie Thorpe, policy adviser, Oxfam objected to industry claims that ‘large, diverse’ corporate entities are desirable and necessary for stability. She said, "Grain traders use their privileged market position and access to information to profit from the high and volatile prices. The bigger these companies get, the more difficult it is for smaller firms to compete, reinforcing this enormous power. The losers are some of the world's poorest people who spend up to three quarters of their income on food."

Increased control of aspects of the food system by a small number of major players has caused problems in the past; Yara’s position in the European fertiliser market has led to repeated calls for an inquiry from farming groups and politicians. The position of seed giants in US agriculture in particular has also sparked concern; in 2009 Monsanto, which owns patents on the majority of arable crop seeds grown in the US, was investigated for anti-competitive practices in 2009 by the U.S. Justice Department over the situation in the soybean market.

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