“Food production is too important to leave to the market alone”

Around the 1960s, many dairy farmers often had only 20 cows and some other livestock. Today, as a member of the CDA parliament, I often visit farmers. I’ve visited a few hundred. Most dairy farmers have at least 100 cows.

Especially in the last decade, free market thinking has become a reality. A short time ago, various products in the EU were still limited by a quota. Countries were simply not allowed to produce more than the quota allowed. In 2015, for example, the milk quota disappeared, which was strongly opposed at the time. Henk Geurts, chairman of the Dutch Dairy Farmers Union, warned as early as 2012 that uncontrolled growth would lead to overproduction and low prices. In the end, that’s exactly what happened next.

Although the abolition of the milk quota was indeed disastrous, in 2017 the European Commission took the incomprehensible decision to abolish the sugar quota as well. Argument: sugar was still the only protected market. Here, too, it was the arable farming itself that protested against the abolition of the sugar quota. Because what they feared happened. A sugar surplus already led to lower prices in 2018. Incidentally, this affected not only farmers in Europe, but also farmers in sub-Saharan Africa, according to Rabobank research.

Growth or a niche product

The only way to keep up with the world market race is for farmers to either continue to grow strongly, as we have seen in recent decades, or to generate other incomes in addition to their existing agriculture. Some switch to the production of a niche product. However, not everyone can do it, because then it is no longer a ‘niche product’ and the price drops.

Now I am originally an entrepreneur myself, and I see the benefits of the market economy. However, we cannot leave everything to the market. The ‘long live the free market’ mentality is still deep in our DNA, even in my party. At a CDA meeting in Schagen, I was questioned by an elderly man who said he had been a member of the CDA since its foundation. He thought it a shame that the CDA is throwing away agriculture, the sector that has ensured that the Netherlands is the second agricultural exporter in the world. We should be proud of this sector, he concluded.

Many people in the room nodded in agreement. My answer raised many eyebrows: ‘How can we be proud of a sector that breaks an export record, which exported agricultural products worth more than €100 billion for the first time last year, while more than 30% of farmers live below the low income threshold of €26,300 sitting ? Is it healthy that a young dairy farmer sometimes has to apply for 4-5 million euros, have to work 60 hours a week and then, if milk prices are not too low and feed prices not too high, have an average income left? to keep?’

To break the status quo

Many people are unaware of these often harrowing stories that give many farmers sleepless nights. Of course I am proud of the agricultural sector. I stress the importance of a vital sector, but this is precisely why we must break the status quo and not go along with the easy one-liners that unfortunately dominate the agricultural debate.

We have become too fixated on gross domestic product and export figures. It often reminds me of Robert Kennedy’s statement, “GDP measures everything except what is of value.” Due to increased globalization, it is becoming increasingly difficult for individual farmers worldwide to remain independent.

We see a decrease in the number of farms in the Netherlands, while the size of the farms measured in livestock and area is increasing. We also see globally that larger multinational companies are getting more and more of a hold on the food market. At present, only 1% of the large farms own 65% of the agricultural land. Just four major investors control 70% of world trade in agricultural commodities.

This enormous power with only a select few creates very perverse incentives. For example, it was not only the war in Ukraine and the resulting uncertainty that pushed up grain prices. This was primarily due to the fact that just four companies control 70-90% of the global grain trade. In addition, there is speculation about grain prices.

Food shortages are dangerous

Usually ‘scarcity’ is an important mechanism of market forces. Scarcity makes us work even harder, innovate, compete and make money. With products like televisions or cars, scarcity is not life-threatening, at most annoying, but it is necessary to continue to innovate. When it comes to food, scarcity immediately means hunger. It is undesirable, immoral and sometimes even dangerous that an ever-smaller group of commercial institutions and companies have enormous influence over the scarcity of the food market. Because speculation in food prices does not only cause hunger. There is a direct relationship to unrest and war and therefore to our security.

At the moment we are understandably focusing on Eastern Europe (Ukraine) but my prediction is that the biggest threat to our security will come from Africa. Think of the large refugee flows and the rise of terrorism as a result of hunger and social unrest. Because the African agricultural sector is already struggling, while climate change makes the challenges even greater. The scarce agricultural land in Africa is being bought up en masse by China. The Asian superpower needs land to ensure its own food production, as only 9% of China’s own territory is suitable for agriculture. In addition, population growth will increase from 1.3 billion Africans now to 2.5 billion in 2050.

Lack of good infrastructure

But how is it possible that the African continent has so much misery? That Egypt, the ancient granary, is now the largest importer of both Russian and Ukrainian grain? After decolonization, many African countries are at the mercy of wars, corrupt governments and coups that give way to the next corrupt government. Due to the sometimes century-long instability in these regions, almost no investment has been made in the agricultural sector.

The lack of a good infrastructure means that many farmers in Africa have focused on producing goods for export, such as coffee or tobacco. This production for export occurs at the expense of the production of food for own consumption, which makes these countries very dependent on grain from, for example, Russia or Ukraine.

It is not entirely unjustified that many African countries point an accusing finger at their old colonial rulers. This old wound also means that some countries, such as Mali recently, prefer aid from China and Russia to, say, France.

Cheap food is killing the African farmer. But there is another reason why the African continent is so dependent on food imports. The abolition of the sugar quota affected both the European farmer and the African farmer. We have also seen this with dairy since the milk quota disappeared. There was more production and the overproduction of milk was exported to Africa as milk powder, with negative effects for the African dairy farmer.

Use subsidies more effectively

The essay will be published in bookstores next week.

Now, I’m not saying that we should stop subsidizing agriculture altogether. In fact, if we want to leave it less to the market, subsidies are inevitable. But we need to better identify the negative effects and how we can use subsidies more effectively. Now the Ministry of Agriculture, Nature and Food Quality provides subsidies with negative effects in other countries, while the Ministry of Development Cooperation tries to reverse those effects with other subsidies.

We once thought that with large sums of money, food and other resources we would help Africa. But we now see that there is hardly any difference between countries that received support in this way and countries that did not. It mainly made these countries more dependent. It is not a lack of food, because there is enough of it globally, it is the upward price effect caused by speculation that largely determines whether hunger breaks out in the dependent countries, resulting in refugee flows towards Europe. If we really want to work on a safer African continent, these countries must become more resilient and the food chains must therefore be shorter, so that the impact on the global world market is minimal.

It is undesirable that a select few have so much power over global food production. This makes us geopolitically very vulnerable. We have recently seen how great dependence between continents due to long production chains and just-in-time concepts makes us very vulnerable. Look at Phillips, which made its own fans 30 years ago. Philips is now dependent on 621 small suppliers spread over three continents. We therefore also see this interdependence in the manufacturing industry in our food system. Now is the time to stop the one-liners and start having this fundamental debate.

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