Grain traders around the world have been enjoying record profits this year as nations battle the global food crisis, according to reports.
Major grain traders have been accused of profiteering and speculation in global food markets, spurring calls for a windfall tax.
According to The Guardian, the world’s top four grain traders (Archer-Daniels-Midland, Bunge, Cargill, and Louis Dreyfus, known collectively as ABCD) have seen record or near-record profits or sales.
Demand for grain is forecasted to outstrip supply until at least 2024.
The climate will likely lead to even higher sales and profits over that period.
The four main companies control between 70% and 90% of the global grain trade.
For the year ending May 31, Cargill reported a 23% jump in revenues to a record $165bn.
Meanwhile, Archer-Daniels-Midland recorded the highest profits in company history during the second quarter of this year.
Bunge also saw sales spike 17% in Q2, while Louis Dreyfus reported an 80% jump in profits for 2021 vs. the previous year on revenues of $1.62bn, a jump of nearly 25%.
According to the UN Food and Agriculture Organization, food prices have spiked over 20% this year.
The soaring prices come as around 345 million people are suffering from acute food insecurity, according to the World Food Program.
That number was 135 million people before the COVID-19 pandemic.
Olivier De Schutter, a co-chair of IPES-Food (the International Panel of Experts on Sustainable Food Systems) and UN special rapporteur on extreme poverty and human rights, told The Guardian: “The fact that global commodity giants are making record profits at a time when hunger is rising is clearly unjust, and is a terrible indictment of our food systems.
“What’s even worse, these companies could have done more to prevent the hunger crisis in the first place.”
The rising price of grain has several causes – including Russia’s invasion of Ukraine.
Ukraine is one of the largest producers of grain, sunflower oil, maize, and fertilizer in the world.
In addition, heatwaves in Europe, North America, and India have impacted production.
Last year’s heatwaves in Canada also hurt wheat crop yields.
“Global grain markets are even more concentrated than energy markets and even less transparent, so there is a huge risk of profiteering” said De Schutter, who added that this year’s food price surge happened amid what was thought to be abundant global grain reserves.
He says the ABCD companies weren’t transparent in revealing how much grain they hold, and there’s no way to force them to release stocks in a timely fashion.
“We need to be looking at the grain giants and asking what they could have done to avert the crisis, and what they could be doing now,” he said.
Moody’s analyst John Rogers says it’s not surprising that supply constraints and a jump in demand led to higher grain prices and, therefore, higher profits.
“I don’t think they are colluding for outsize profits,” he said.
Rogers added that other companies have been taking an increasing share of global grain markets.
“I don’t think they are acting immorally – they’re not intentionally driving up prices,” he said.
Between the Ukraine war and heatwaves, grain producers stand to benefit greatly – as demand for their product surges amid constrained supplies.
“Ultimately, we need to break up the monopolies that have a stranglehold on the food chain,” said De Schutter.
“A handful of companies control global seed and fertilizer markets, animal genetics, the global grain trade, and food retail.
“They are making huge profits at the cost of farmers, consumers, and the environment.”