by Peter Dawe

Why are the World’s Farmers Revolting?

Asia, Africa, S. America, N. America, and across Europe, farmers are taking to the streets. If you look at each protest, the demands seem to vary, but why are they all happening now, all at once?

Covid and the Ukraine war are the things that have precipitated these protests. These global events caused a series of economic shocks to the global food system. These shocks were felt globally, because the world’s food systems are highly integrated. International trade prices impact the local price of food, even when a country has little international trade in food.

The food system consists of suppliers to farmers (seed, fuel, fertiliser, pesticides etc.) the farmers and their customers ( Grain merchants, abattoirs, supermarkets and processors). In a functioning market, changes in supply and demand would normally impact the profitability of each part of the supply chain. The suppliers and the customers of farmers are typically massive multi-nationals. However, farmers are fragmented and have no individual market power. As a result, they are squeezed between these two behemoths.

Normally, the market leaves just enough value to farmers, that they continue to grow food. However, the turbulence caused by Covid and Ukraine, meant that this narrow margin disappeared, as the suppliers and customers used their market power to ensure THEY maintained their profits. They shifted all the financial consequences to the farmers. As a result the farmers ended up losing fortunes, in many cases going bankrupt, committing suicide and even starving.

To make things worse, most farming works on cycles measured in years, rather than days. So while suppliers and processors can stop trading in a matter of days, farmers are committed to their produce for a year, and in the case of beef several years. Indeed, when farmers could not afford cattle feed, they not only killed their beef early, they also killed their brood heifers. Rebuilding a herd takes many years, assuming the farmer has the resources to fund not sending to market any of their young female stock.

For the most part, governments world-wide, seeking to keep food prices low in the short term, have turned a blind eye to the market abuse of farmers. As a consequence, they have created the worst of all worlds. Every time there is a shortage of a particular food stuff, the merchants make a killing, however when there is a surplus, they shift the problem to the farmers. It is actually in the interest of the merchants to maintain a world shortage of food, as they can control the price and thus their margin. Indeed, by not increasing the price to farmers, they maintain the shortages. (The Chinese government is an exception, maintaining an effective market for farmers throughout)

Many readers would be surprised that the global per capita consumption of meat and dairy has drop over 5% in the last 3 years and is not recovering. (I am reminded of “Let them eat cake”). I.e. Many people have been reduced to living like paupers without regular complex protein.

Sadly, most commentators on agriculture do not understand the above, or maybe consciously divert attention. The usual comments are to say it’s “Red Diesel”, or “Subsidy” or “government failure“ or even “the weather”.

It isn’t. Its Market Failure, the long term consequences are dire and I see no way to fix it.