Significancy of Agribusiness Concentration in Coffee’s Food System

If you are a coffee-lover, you may be interested in what processes a cup of coffee has come through to your hands. Almost all coffee beans are produced by family-managed  farmers in developing countries, such as Brazil, Vietnam, and Colombia, and pass very complicated routs between them and you: local coffee bean dealers in rural villages, exporting firms in producing countries, trading companies in your country, roasting and packing agencies, and your favorite cafes if you have some out. A chain of relevant subjects, such as those above, and correlation between them in food production and distribution are called the food system. As shown in the case of coffee’s food system, some food systems consist of worldwide networks connecting farmers in developing countries and consumers through food firms. In such international networks, as consumers are distanced from farmers in food systems, roles of agribusiness firms between them are significant because the firms need to reflect consumers’ demand for products on farmers’ production plans over boundaries. This system which benefits consumers, in turn, sometimes damages producers’ economies in developing countries, which results from a difference of bargaining power between farmers and firms. For example, in coffee’s food system, almost all intermediate businesses are concentrated on a few large-scale multinational corporations; therefore, some small-scale coffee farmers suffer from unfair contract conditions in trading with them (Tsujimura p.96). In this essay, it is investigated how such concentration of agribusiness has been built on coffee’s food systems, what effects the intensive agribusiness structure causes on the food systems in developing countries, particularly on farmers living there, and what is prospects for the globalized food systems.

Business concentration in agricultural industries frequently appears in food systems of developing countries for three reasons: a tropical climate in low latitude areas, a remaining relation with suzerain countries in the colonial period, and an economic aid of the IMF and the World Bank since 1968. The first reason is a geographic factor in developing countries; these countries’ climate are perfect for tropical farm products such as coffee beans. Major breeds of coffee beans have their biological origin in tropical areas of African countries like Ethiopia and Congo, so cultivation of them basically requires a high-temperature and high-humidity climate. Accordingly, agribusiness of coffee production is only around low latitude areas in which most developing countries are located. The second reason is the colonial history of some developing nations. A primary purpose of establishing colonies for European countries was production of tropical foods just like coffee beans and tea leaves, and international trades of these products was traditionally monopolized by a small number of enterprises; the same custom is left over current food systems of some tropical products (McMichael p.151). Finally, economic supports of the IMF and the World Bank on developing nations in the late 20th century has unexpectedly intensified agribusiness concentration in those countries. A general goal of the support programs was improvement of poor populations’ income in developing countries, most of which engaged in the primary industry; thus, the organizations proceeded technical and financial supports in agricultural industries by means of introduction of high productivity breeds and transition to more profitable cash crops, including coffee beans as a target crop. As a result of this policy, most farmers under the supports switched their farming style from self-sufficient one to commercial one, which also created extended business chances for agribusiness firms (Araghi p.182, Toyoda p.78). These elements in a business concentration process has together helped international trade corporations to grow into a huge scale which covers a whole food system from its top to the end.

Such an intensive agribusiness structure in developing countries works against farmers in price setting process. In fact, they lost their bargaining power in  negotiations for price setting. This is because individual farmers with relatively slight amounts of supplies has no influence against large-scale corporate groups which dominate almost all stages of a food system. This phenomena is illustrated by a case study of coffee’s food system in a rural farming area of Tanzania, namely Mt Kilimanjaro and its surrounding region, by Tsujimura. A whole food system of Kilimanjaro coffee is shown in Fig.1; within Tanzania, a regional food system consists of three subjects: farmers, dealers, and exporters. In this case, all local dealers and exporters are subsidiary companies of multinational trade corporations which put their headquarters on European countries, as shown in Fig.2; consequently, the stage (2) in Fig.1 is a pure inside trade although the trade officially forms a public auction style. As an example for the stage (1), in Lukani village, a main survey field of Tsujimura, local coffee bean dealers are only three groups while 355 houses sells coffee beans individually. This transaction is completely run by the dealers; the price is decided by subtracting whole distribution costs from a selling price at the stage (3).

Figure 1: Global Food System of Kilimanjaro Coffee

Note: Green Box=Tanzania, Yellow Box=Japan (ex.)

Source: Tsujimura p.73

Figure 2: Dealing and Exporting Share of Kilimanjaro Coffee

Subsidiary	Dolmen	Taylor Winch	ACC	Olam
Parent	ED&F Man	Volcafe	Schurter	KC Group
Headquarter	U.K.	Switzerland	U.K.	Singapore
Dealing Share	20.7%	14.8%	14.6%	10.8%
Exporting Share	33.8%	15.9%	8.4%	8.3%

Note: ACC=African Coffee Company. Volcafe was merged into ED&F Man in 2004.

Source: Tsujimura p.93

In addition, the price at the stage (3) itself is unfair for Tanzania’s local farmers. Tsujimura (p.81) continues an international trade price for coffee beans is based on a futures price at the New York Board of Trade (NYBOT) where the price for coffee beans is decided mainly by an expected yield in Brazil and a speculation trend, regardless of any factors in other producing countries. Moreover, this international price fluctuates as shown in Fig.3 because of a synergy between speculation and uncertainty of Brazil’s yield like weather; for instance, if unreasonable weather in Brazil is forecasted before a cropping season, investors will flood into buying, anticipating a rise in a coffee price at the NYBOT, which expands a fluctuation range. Overall, Tanzania’s farmers have to respond to an unreasonable and changeable price which they are not responsible for.

Source: International Coffee Organization

Also, it is pointed out that the food system of Kilimanjaro coffee contributes unjustly small amounts to Tanzania’s national profit in international trading. According to a statistic of 1998’s international trade of Kilimanjaro coffee with Japan, the biggest importer of the coffee, an annual disposable income in Tanzania was only 35.87 million US dollars whereas Japan got more than 1 billion US dollars (Tsujimura p.104). Even though such a disparity of income distribution is inevitable for a difference of economic scales, this gap is still unreasonable, considering that it is said 70% of coffee’s good flavor is accounted for by high quality of beans.

Finally, it is concerned that a current food system of coffee might eliminate some farmers’ incentives to produce a variety of beans with good quality; instead, the world’s coffee market might be filled with a single profitable breed in the future, and then other flavors would get beyond an affordable price for the general public. This expectation sounds even realistic in comparing annual productivity and required minimum price standards of for maintaining business between Brazilian and Tanzanian farmers. An average productivity among whole farmers in Tanzania is 172 kilograms per hectare in a cropping season while that in Brazil almost reaches at 4000; a required minimum NYBOT price for Tanzanian farmers is 150 US cents per pound though Brazilian farmers need only 50 (Tsujimura p.91). These huge gaps are explained by a distinction of their target demand. Beans produced in Tanzania are luxury goods with their original flavors, while ones in Brazil are for daily-use with reasonable quality and prices.

In conclusion, relations between concentration of agribusiness in developing countries and coffee’s food system are analyzed from three points of view: origins, present issues, and prospects for the future. Firstly, current intensive business structure of coffee production in developing nations is turned out to be due to their suitable climate for coffee production, a remaining tradition of the European colonial age, and a shift to commercial farming style triggered by international financial institutions. Then, a case study in Tanzanian coffee’s food system shows an existence of unfair contracts in coffee trading business, where a variety of beans are not appreciated well in their price setting. Consequently, such an unreasonable food system possibly causes a poor diversity in flavors of coffee. This is also your own problem if you are a coffee-lover.

References

Araghi, F.. 2000. Hungry For Profit -The Agribusiness Threat to Farmers, Food, and the Environment-. By Fred Magdoff et al.. Monthly Review Press. P.173-193.

International Coffee Organization. Retrieved July 1st, 2012. http://www.ico.org/

McMichael, P. D.. Hungry For Profit -The Agribusiness Threat to Farmers, Food, and the Environment-. By Fred Magdoff et al.. Monthly Review Press. P.147-172.

Toyoda, T.. 2001. International Development in the Age of Agribusiness -Trade of Agro-Food Products and Multinational Corporations-. Nobunkyo.

Tsujimura, H.. 2009. Economics of Coffee-Bitter Reality of Kilimanjaro-. Ota Press. 

Biased Information and Exaggeration of Dangers of GM Foods

Arguments over genetically modified (GM) foods often appears as a controversial topic in a discussion of the right and wrong of recent technologies. Those who are against the application of genetic engineering to food productions try to prove the existence of dangerous components in GM products with objective evidences, such as opinions of professionals, datas from reasonable experiments, and announcements by environmental activists. However, relying on these sources could be arbitrary in some cases; as a result, people’s attitude towards the new biotechnology would be strongly distorted by biased criticisms against GM foods: for example, professionals’ principles, overestimates of health risks, and choices of information sources with preference. Although opponents insist that their arguments is reasonable and fair, it is examined in this essay that they sometimes exaggerate the dangers of GM crops by treating the bases of their claim in a wrong way.

Opponents of the introduction of GM foods are based on some research results of scientists, which indicates that a GM crop has harmful effects on the physiology of mammals, and which implies that cultivating a GM breed interferes in regional ecosystems. However, most these studies include, more or less, sensational but unreliable aspects, just like Pusztai and Ewen (1999) and Losey et al. (1999). The former research conducted a controlled experiment with two groups of six rats; one of which are fed with conventional potatoes; another with a genetically modified one containing Lectin: a protein which attaches an insect resistance. The result shows the GM potato causes a disorder in rats’ bowels. Even though the research appeared in a famous medical journal in Britain, named the Lancet, it was turned out to be unreasonable in later inspection. On the other hand, the latter study measured an adverse effect of pollen from transgenic Bt maize to Monarch butterflies, larvae of which feed on milkweed growing around the maize. The study was also carried in a authoritative science journal, Science; nevertheless, it lacks validity in its experimental process. Both of these scientists might have had a individual belief that GM crops should be harmful to our health and ecological systems. Although these studies are recognized to be invalid among scientists, they have misguided the general public to unfairly negative images of transgenic crops because only their results was sensationally reported in the news media (Pense, p.139,264).

Opponents also insist that GM foods are still dangerous because they contain recombinant DNA (rDNA) and toxic compounds like cyanide included in transgenic flax. Firstly, all GM crop inevitably have rDNA; however, it is not considered as a material which can damage our health in any countries’ regulation. Secondly, most toxins in those crops are decomposed in processing and cooking, yet there is still a possibility of intaking them accidentally. In order to estimate such a risk, McHughen (p.109) calculate, as an example, an amount of cyanide in genetically modified flax CDC Triffid intaken annually per capita in Britain. The estimated amount is 5.7 microgram, which is clearly at an acceptable level as compared with an amount of cyanide in a cigarette: 138 microgram. More important, McHughen (p.112) continues that every food, whether it is genetically modified or not, contains slight amounts of poisonous substances from cyanide to arsenic; therefore, people’s attention should be payed not to whether foods has toxins, but to whether amounts of toxins in them are permissible. 

Finally, opponents refer to a large number of environmental activist groups that criticize giant biotechnology corporations which invent new transgenic animals and plants day after day, as well as the regulation authorities in their own country whose controls on GM products are not enough strict for the activists. Opponents say activists are much more trustworthy than greedy big companies trying to dominate a crop market with their GM products and also than corrupted regulation panels pursuing personal interests in collusion with a GM food industry. Even if so, depending only on activists for information about GM foods prevent people from fair judgement on the right and wrong of transgenic technology. According to McHughen (p.126), comparison of information sources on GM foods between  Britain and the United States provides with a useful suggestion for an interpretation of public attitude towards transgenic products in both countries. As a result of a public opinion poll, most British citizens trust information from anti-GM activists, while the U.S. citizens put the best trust in home doctors, followed by scientists in universities and governments; just 5% of them trust activists. This fact reflects a certain amount of Britain’s sensitiveness to GM foods in comparison with America’s indifference to them.

In conclusion, opponents’ arguments against genetically modified foods are proved to be invalid, and turned out to be exaggerated by arbitrary points of view. First of all, scientists whom opponents’ claim are based on have guided the general public to unfair views on GM foods. Even though their distorted researches include inexact experiments and lead unreasonable results, those results have corrected unnecessary attention through inappropriate reports. Valuing for data itself can also result in a misunderstanding of transgenic foods. Certainly, every GM crops contains rDNA and toxic compounds; nevertheless, these materials do not necessarily damage our health because some of them are not harmful, and, if so, amounts of them in GM foods are extraordinary small. Finally, biased choices of news sources may cause exaggeration of GM products. In order to maintain a fair and objective viewpoint, it is important to reject prejudice and keep a  distance from one-sided articles.

References

Losey, J. et al.. 1999. Transgenic Pollen Harms Monarch Larvae, Nature, 399:214.

McHughen, A.. 2000. A Consumer’s Guide to GM Food -from green genes to red herrings-. Oxford University Press.

Pence, G. E.. 2002. Designer Food: Mutant Harvest or Breadbasket of the World?. Roman & Littlefield Publishers, Inc.

Pusztai, A. and Ewen, S. WB.. 1999. Effect of diets containing genetically modified potatoes expressing Galanthus nivalis lectin on rat small intestine, the Lancet, 354:9187, p.1353-1354. 

2012. 6. 16

China’s Talent War

TIME Magazine. May 28, 2012. Page 44-48.

Introduction

In terms of the labor market, China and Japan enjoy completely different situations in which for China it is a typical seller’s market for skilled people, but, in contrast, in which for Japan it is a rare case to change jobs so frequently for better pays even among top university graduates. What does this difference cause in recruiting styles of each nation?

Briefing

In China, companies, especially in tech industries, are always looking for talented employees, and it is usual for such workers to stay in one place for less than a few years. According to the article, an ICT firm in Beijing reported the industry-wide annual turnover rate of labor at 35%; in individual company, the figures for some reach at 50%.

Every CEO in China has concerned about a problem of poaching arisen from the shortage of well-experienced businessmen. For employers, it is not acceptable to lose human-resources who has been educated in their own companies. Furthermore, some job swappers leaves their companies, carrying important documents for their new employers.

All company tries to retain proficient workers by means of offering stock options, promotions, and even attracting them with corporate cultures. However, they can not change the structure of the job market, and, after all, throw up their hands.

Opinion

Contrarily, Japan’s job market is not as circulating as China’s; annual turnover rates among industries do not exceed 20% except service sectors; it is the lowest in the energy and water supply industry, followed by finance and insurance, and manufacturing.

Clearly, high rates among service industries are not resulted from poaching, but, rather, retiring probably because of too hard working schedules, too cheap salaries for required performance, too poor working environments, or so. In these business fields, every employer tries to find workers with reasonable skills at the cheapest cost.

Overall, China and Japan has the same feature in recruiting: high turnover rates in the industries where employers strongly need better labors; however, ironically, China needs high-quality ones whereas Japan needs economical ones. 

Carbon Taxes Versus Emissions Trading: A Comparison of Two Greenhouse Gas Policies

     As the world faces a growing threat of the climate change, the role of environmental policies in industrial countries becomes more and more important. How to approach against a prevention or mitigation of effects from the climate change is different from countries; however, every country aims to reduce emissions of a greenhouse gas (GHG), represented by Carbon Dioxide (CO₂), because an increasing concentration of a GHG in the air is the largest contributor to the climate change. Emissions of a GHG is basically delivered by energy consumptions in economic activities from driving a car to refining steel, so a country’s environmental strategies tries to control such activities with regulations and, consequently, promote technological innovations by which its economy can run with less energy. Among a number of methodology in regulations of GHG emissions, carbon taxes and emissions trading are major GHG policies implemented by some industrial countries; the former is introduced by some European countries like Germany; the latter’s famous example is the European Union Emission Trading Scheme. In this essay, these GHG policies are compared and contrasted with following four criteria: efficiency of emissions reductions, policy operation costs, promotion of technical innovations, and equity among policy objects. 

     First of all, concepts and structures of each political methods need to be briefly explained before proceeding to a comparison. Carbon taxes are imposed on consumptions of whatever goods emit a greenhouse gas, for example, gasoline, and its policy structure is similar to other taxation; a fixed tax rate is fully operated by a government and provide it with revenue. On the other hand, emissions trading is oriented to major GHG emitters, such as power plants or automobile companies. Once a government assigns an emissions unit to each of those emitters, a right to pollute can be traded between them, and a price for the unit is decided by a market mechanism.

     From a viewpoint of efficiency of emissions reductions, both carbon taxes and emissions trading are effective, although there are differences in how each policy works. If a country’s government implements a carbon tax policy, a certain percentage is added on fuel prices, based on the carbon content of fuels, and results in saving fuels in both industrial and individual level. Furthermore, tax revenue can be devoted to its own operation or other environmental policies. In emissions trading, GHG emissions reductions can be achieved with a minimum cost because the unit of emitters whose costs to reduce emissions are relatively low will be sold to other emitters for whom emissions reductions are difficult like thermal power plants (Baumert).

     Both policies are also similar in their inevitability of operation costs. In taxation, a new correction system needs to be designed into a suitable form for the fuel distribution; also, it is difficult to estimate an appropriate tax rate which can promote saving fuels without causing serious stagnation. Similarly, emissions trading needs investigations on GHG emissions histories in each major polluters in order to allocate the maximum amount of emissions fairly among them.

     However, when it comes to promotion of technical innovations, carbon taxes are more advantageous than emissions trading in a long-term observation of policies. According to Stiglitz, in carbon taxes, costs for GHG emissions are fixed, which provides people with permanent incentives to improve productivity in use of fuels and accordingly stimulate investments into energy technology. In contrast, the price for a right to pollute is floating in emissions trading because, firstly, it is determined by balance of demand and supply, and secondly speculation makes it less stable. This suggests no matter how much you invest on green technology, once the price get down, you can just buy some emission units to meet a government’s request (Stiglitz, par. 3).

     Contrarily, emissions trading secures equity among policy participants, if assumed that emissions units are fairly allocated, while carbon taxes work differently from taxation objects. In the former system, current emissions of each players are considered, and players can adapt their behaviors corresponding to their ability to reduce emissions: buy or sell. In comparison, the latter system imposes a progressive burden corresponding to contributions of GHG emissions, which means disadvantageous for some business fields like the steel industry.

     Finally, consider these factors comprehensibly and evaluate feasibility of both policies. In terms of efficiency of emissions reductions and operation costs, there is no significant difference between carbon taxes and emissions trading; however, carbon taxes are slightly more favorable because they work not only on industries but also on individuals and create an additional budget for a government. In promotion of innovations, taxes are advantageous as well. Nevertheless, carbon taxes are expected to face a strong opposition by some industries with inevitability of emitting a large amount of greenhouse gases. For example, Australian government had struggled in introducing a carbon tax act until its parliament succeeded to pass it in 2011, because coal and steel industries are strong in the country (Curran & Brindal). 

     In conclusion, this essay analysed two policies related to GHG emissions mitigation: carbon taxes and emissions trading, focusing on four argument points and later putting them together into consideration. As a conclusion, carbon taxes are more effective than emissions trading in three criteria except equity, but it seems a controversial policy in the economy where mineral industries are dominant.

References

Baumert, K. 1998. Carbon Taxes vs. Emissions Trading. Retrieved May 11, 2012. 

     http://www.globalpolicy.org/component/content/article/216/45883.html

Stiglitz J.E. 2010. Overcoming the Copenhagen failure. Retrieved May 11, 2012. 

     http://host.madison.com/ct/news/opinion/column/article_a43e6c32-ef98-5c38-9a64-ae22b5732127.html

Curran, E. and Brindal, R. 2011. Australia’s Carbon Tax Clears Final Hurdle. Retrieved May 11, 2012. 

     http://online.wsj.com/article/SB10001424052970204554204577025153789673004.html