LEI Wageningen UR has been commissioned by Oxfam Novib to carry out a study into the role of multinationals (in the grain sector) within the framework of the high food prices. While riots broke out around the world due to the high prices, the three largest companies (Cargill, ADM and Bunge) made record profits. The study confirms that these three companies are set to make huge profits in these times of high prices and great demand for their products. However, in the event of a fall in prices the demand for products will decline and profits will shrink. As these companies are so large and operate globally, they can respond quickly and flexibly to supply, demand and price developments. As they operate in different sectors (such as artificial fertiliser), it is possible for them to make a loss in one sector but still make a profit in another sector. These multinationals are growing still further and their power and influence in the market is increasing. They are expected to continue to make huge profits in the future.
In Africa, where many of the poorest consumers in the world are to be found, the influence of these multinationals in the grain sector is very limited as the transaction costs and risks in Africa are too high. If the risks were to be reduced, that would be good news for African farmers and entrepreneurs; but it could also lead to the increased influence of multinationals in the grain sector.
Report 2009-031 Riding the wave: high prices, big business?; The role of multinationals in the international grain markets