We do not inherit the earth from our ancestors, we borrow it from our children
(Native American proverb).

Saturday, July 14, 2012

The perfect storm: food

The perfect storm may be just an expression, but for those caught in the midst of the event, it is far more serious than that.

I recently read an article on the Australian wine industry which described just such a problem. Generous government incentives, followed by massive over investment by the largest players, global competition, unfriendly exchange rates, and the regular lag time from investment to return now mean that I can get online and bid for a box of wine from $9. That's $0.75 per bottle, which I am certain is not making them very happy at all, considering the hard work that goes into these ventures.

Recently there have also been many stories of the impact that unsustainably low milk prices are having on dairy farmers, and how many are faced with bankruptcy if they do not sell out to the larger players in the industry, or foreign interests. At the root of this problem is the power of the supermarkets where two firms control over 80% of the domestic market. They cannot claim any foreign competition pressure. This is purely a race to the bottom of the price pile. Many a processing company has had to fight for shelf space, some of whom have significantly larger budgets than the small farming family with no commercial influence. What hope do these producers have?

Just this weekend, I was talking to a new friend who comes from out west, and he tells yet another story of the impact of foreign and corporate interests in our rural sector. With years of drought taking their toll on rural families, and governments attempting to control water resources, many have left their farms, and the most common purchasers of these holdings are yet again the foreign and corporate interests. Their goal is either rationalisation of small holdings into enterprises with economies of scale, AND/OR direct transfer export to overseas markets without value or margin adding. Net result in this scenario is the communities which had developed over centuries now gradually decline until they are a shadow of their former selves.

A sad and romantic sentiment it may be, however the diversity that once came from a dozen smaller family holdings allowed for a greater degree of resilience for city consumers. For when the market for one food commodity was low, other grains or livestock could be substituted relatively quickly, especially when not every farmer produced the same product. Today however the scale of operations in many of these regions, especially in more marginal areas, means the infrastructure is solely geared toward the production of one commodity. If that declines, then the speed at which a wide scale operation can be reconfigured is slow if not impossible. And if it doesn't decline, their buying capacity of water licences, resources and supplies gradually freezes out those smaller operators who remain.

I have not even mentioned the loss of domestic revenue when this process involves foreign interests.

Friends in the city, and those visiting from overseas I have heard repeatedly comment on the cost of food and living in this country. Ironic for such a vast land, that we pay so much for our basics of food and shelter. Shelter I have already dealt with, but our food is a real concern. As we gradually loose the diversity we should theoretically pay less as economies of scale kick in. Yet, diseconomies of scale seem to be increasingly prevalent.

Big is NOT better. Big distorts the market. Big thinks of themselves and shareholders first, not consumers and communities. How much harder do you work to keep 100 customers happy than you do to keep 100,000 happy. (don't take my word for it...) The loss of one is negligable for Big! Yet Big has more money to throw at political parties or candidates, advertising, research, etc. Surely there are more out there who can see the folly of Big!

And so the perfect storm begins. As we produce more and more of less and less; as our human capital on the land is lost; as we generate more income for less food; and as our control of our sovereign resources diminishes, we will increasingly risk yet another perfect storm. This time however it will not be a luxury product such as wine, but a staple. It may not be unobtainable, however the price we pay may just push the limits of what is sustainable.

To be continued...

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