by Jay Rayner
Ah yes, food. Directing huge amounts of grain into biofuels was always bound to have unintended consequences, and in this case it was the impact on food prices. A whole bunch of studies looked at the question and found that between 12 per cent and 75 per cent of the food price rises in 2006–8 were caused by the biofuels industry, depending on the food commodity, the country being analysed and the type of methodology adopted by the study. Why then does it continue? Because of subsidies and the vested interests of the agricultural lobby. The US government paid a large number of subsidies to make growing corn for ethanol an attractive thing to do. For a while they paid the fuel companies a subsidy of nearly fifty cents for every gallon of biofuel they blended with gasoline. Laws were passed which made using a certain proportion of biofuels mandatory. In short, the whole biofuel industry became one vast market-altering subsidy for US farming.
And bit by bit that model has spread around the world. In the past two years Britain has seen a boom in anaerobic digesters, which produce methane gas to power turbines for the production of electricity. If you have a huge volume of waste material because, say, you run a large dairy and have an excess of cow shit, that’s a clever thing to do. And some anaerobic digesters have been established near dairies and food processing plants which are otherwise producing waste. But increasingly, because of ‘renewable energy’ subsidies, fields across the UK are being planted with corn solely to be thrown into the digester. It is a smaller version of the bizarre US bioethanol industry. We worry about there being too many people in the world with not enough food to eat. And yet, at the same time, we’re growing what could be food and turning it into energy. Calling it bizarre is an insult to the merely odd.
It is a catastrophic and craven failure of global government agriculture policy on a monumental scale.
On a Sunday morning back in Chicago I have brunch with Scott Shellady at the Chicago Yacht Club. It’s regatta day and the place is full of Waspy types wearing white trousers, blue blazers and deck shoes. I feel like Woody Allen in Annie Hall when he goes for Easter lunch with his girlfriend’s Protestant family. At one point the camera cuts back to Allen and he’s dressed as a Hasidic Jew, all felt hat, beard and ringlets. The hyper non-Jewish environment has made the secular, god-less Jew feel like a total frummer. That’s me at the table of the Chicago Yacht Club. I do not own deck shoes. I have never knowingly worn a blazer with brass buttons. Occasionally big shiny yachts float by the picture windows looking out onto the lake and everybody cheers. I frown. How do you cheer a boat? More to the point, why would you? I don’t do boats. I don’t get boats. Nor does Scott. ‘They keep telling me to get a boat, but I don’t want one,’ he says. I tell him to hold fast.
He talks about the 800-acre farm in Iowa that his father Ron bought in 1973, how his old man insisted on working the farm, even while he had a successful career as a trader. ‘I would go to work and try to buy low and sell high, but I wouldn’t feel I had made anything. But he could put seeds in the ground and grow something.’ His father is in the grip of late-stage dementia, Scott tells me, and it’s a terrible thing to see a man who was once so vital brought so low. He is clearly grateful to his father for having bothered to buy the farm. ‘Once he dies if my brother and sister can’t afford to keep the farm then I will do everything I can to keep it because I think land is now gold. For years technology has been ahead of population demand. But I don’t think technology is keeping up. Population is starting to exhaust technology. That makes land the key asset.’
We refill our plates at the buffet; two large men working the all-you-can-eat vibe carefully, trying not to draw attention to themselves. Back at the table I ask Scott what he thinks of biofuels. He looks at me. ‘It’s a pile of shit,’ he says. ‘The US government has decided to use it as a stopgap [for energy supply] while they come up with something better. But it’s just not the answer.’
He says, ‘What would the price of corn be if there wasn’t the market for biofuels?’
I say, ‘Well, it’s taking a third of the corn harvest, so presumably, at least in the first year, it would drop by a third.’
‘Exactly. It would be $4 a bushel instead of $6. Biofuels have caused massive price inflation.’ He picks at his food. ‘It is just not the answer.’ Another shiny white yacht floats by. The room cheers. I flinch.
The plan was to carry on west from Chicago to Minnesota and the headquarters of what, by revenue, is the largest privately owned company in America. Cargill, which is nearly 150 years old, operates in sixty-five countries, and is all over the food supply chain like an itchy rash. It is one of the six companies which, between them, control 70 per cent of the global wheat trade. It makes loans to farmers across the world so they can buy Cargill seed to grow crops which Cargill then buys, processes, transports and sells on. The company is a major manufacturer of livestock feed and foodstuffs, like starches and corn syrup. It trades in palm oil and steel, has a commodity trading arm, runs industrial-scale slaughterhouses and has recently acquired a German chocolate company, a central American poultry purchaser and a whole bunch of other stuff besides. In its 2011 report Cargill declared revenues just shy of $120 billion, up 18 per cent on the year before. If Cargill was a country it would rank fifty-eighth in the world in terms of GDP and have a bigger economy than Kenya, Tunisia and Cyprus combined. It’s huge.
I didn’t have high expectations of being granted access. I was told the company could be closed off to the world; that it was a peculiarly Minnesotan trait. A friend of mine from Minneapolis said that if I did get access I would have to dump the flowery shirts and get a haircut. They weren’t the sort to take kindly to big hairy Englishman in flamboyant tailoring. I persevered. I explained I was trying to engage with the industrial food process; that I wasn’t out to condemn it. I wanted to understand it. Plus in recent years senior executives from Cargill, portrayed by the movie Food Inc as one of the devils of the piece, had been making big public speeches about the future role of their company in tackling the great food security crisis of the twenty-first century. If they meant it, surely they would talk to me?
Indeed they would, they said, just not in Minnesota. The company PR man wanted me to meet Paul Conway, Cargill’s British Vice-Chairman. But I had to meet him in Britain. To be exact I was to meet him in Cobham, Surrey, a place of finely cut lawns and carriage drives and three-car families, where every house must, by law, have a portico and many women are a peculiar shade of self-tan orange. Cargill’s sprawling British HQ sits in manicured grounds at the end of a road called Fairmile Lane. It is a building of glass-walled offices, the frosted panes of which are inscribed with management babble like ‘Collaboration’ or ‘Create’, ‘High Performance’ and ‘Customer Focus’. Conway’s corner office bears the legend ‘Innovation’, which he tells me was not his choice. He wore a pink open-necked shirt – a tie hung on the back of the door, as if for emergencies – and neatly pressed chinos. If he had spoken with a gentle Midwestern drawl I wouldn’t have been surprised. Instead he had the soft round vowels of the English barrister he was many years ago. He had a wholesome, squash-playing glow.
I say I am a little surprised to be allowed in. Conway agrees that Cargill has not always been so open; that up until 2006 the stock answer to questions from the media had been, ‘No comment.’
‘But we’re too big to hide. In the modern media world you can’t hide anything.’ Before I can even broach the subject he comes over all group-therapy member and volunteers that Cargill has been associated in the recent past with controversial incidents of what has been portrayed by campaigners as malpractice. It has been fingered for accelerating deforestation in the Amazon basin because of soya-processing plants it has built there. Their name has been given in court proceedings on behalf of children trafficked into Ivory Coast to work on cocoa plantations in abusive conditions, has seen its palm oil operations accused of playing a role in damaging the dwindling habitats of orang-utans. Conway tells me that all these issues either have been o
r are being addressed. ‘It’s in the nature of the sort of company we are that these things can happen, but we have realized that we have a responsibility to protect the reputations of the companies we supply.’ Big-name brands do not like it when their suppliers are accused of being bit players in child slavery, even if only by default. In the age of social media they can’t just let these things float by. A small campaign can have a huge impact. In a moment of disarming honesty Conway says, ‘We’re a long way short of where a more marketing-focused company would be. There’s a recognition that we need to go and talk.’
So now they are talking to me. In an age when individual states across the US have been debating and even passing into law acts which have been called ‘Big Ag Gag’ bills – legislation which prohibits the photographing or documenting of abuses on farms without the owners’ consent – this really is remarkable. In Utah, for example, the Agricultural Interference Bill, passed in February 2012, in effect makes it a criminal act to distribute photos of a farm without the permission of the farmer.
I ask Conway if he thinks the business would suffer if it didn’t engage with the media. After all, it is a privately owned company. There is less of a requirement for it to do so than might be the case with a publicly quoted company with a vulnerable share price. ‘Not immediately, but we could see that our freedom to operate might be limited in time if we didn’t discuss these things. We’re in sixty-five countries. If you get an overall environment that’s less conducive to trade than you might wish, then that’s bad for business.’
I tell him I am intrigued by Cargill’s recent statements on food security. Its 2011 annual company report runs to thirty-eight pages and most of it is a discussion between leading figures in the field about how to keep the planet fed. I said it felt like some sort of a manifesto. And yet Cargill is an agricultural supply business, not a big, huggy pressure group. In short, does Cargill regard the challenges of the food security crisis as a cracking business opportunity?
Up to this point Conway has mostly been focusing his comments out the window at the damp home counties countryside. Now he looks at me. ‘Absolutely,’ he says. ‘All these things we’ve been investing in for 147 years will be in demand.’
Do you understand why people feel uncomfortable with that?
‘Again, absolutely. Modern food production is an industrial activity but it is marketed to the consumer by using pastoral visions.’
We talk for a while about the recent history of food security issues: about how the years 2000 to 2007 witnessed the greatest period of global economic growth in human history, the way the Chinese came onstream as the biggest importers of soya beans, and then the systemic shocks that caused the price spikes of 2008. Why, I ask, did you start discussing the issue? ‘Two reasons. Firstly we were being asked what was going on and whether we had any recommendations, and secondly because various governments were doing things that could exacerbate the problem.’ Like what? ‘Export bans: forty-eight countries introduced export bans on things like rice and wheat in 2008 that prevented markets from working.’ Cargill, Conway says, believes firmly in free trade; that this is the way to keep the planet fed. It needs to argue the case.
OK. But if it is so keen on the free market why the hell is it in the biofuel business, which is essentially a subsidy for growing corn? ‘We have always had doubts about it, especially the mandates forcing the use of certain amounts of biofuels. But our view has always been that we will participate. All of our biofuel plants are part of another facility, therefore achieving scale economies. There is a role for biofuels.’
Really? The science barely stacks up.
‘Well, no, there is something to what you say. But let the market decide.’
The point, he says, is that the biofuels business has helped raise the price for corn and that, in turn, has resulted in investment. ‘There’s a saying: the best fertilizer is price. Farmers respond to that. If you removed the ethanol business completely you would see a massive reduction in the production of crops.’
Are commodity traders a driver of price? After all, Cargill has its own commodity trading arm, with $5 billion of funds under management. If there wasn’t money to be made there it wouldn’t do it. Conway shakes his head. ‘We are price-takers, not price-makers. Arguing against commodity traders is a bit like saying we don’t need bankers.’ It strikes me he may be making a different point. We do indeed need bankers. Everyone needs somewhere to put their money. That doesn’t mean we want the kind of bankers we’ve been given. Likewise, perhaps the issue is not commodity traders per se. It’s the type of commodity traders we have.
‘Look,’ Conway says, as if attempting to sum up. ‘Our job is to move stuff from areas of surplus to areas of deficit. We will pre-finance soya bean farmers in Brazil. We will buy their harvest and ship it to China. We will build a large processing plant in China to extract the protein and sell that to livestock farmers in China. Our job is to pay the Brazilian farmer a little more than the other guy would, and sell the product to the Chinese farmer for a little less than the other guy would.’ A big company like Cargill, he says, can manage volatility.
This is what he wants me to understand.
Hating commodity traders is easy. It’s fun. It makes you feel better about yourself. Look at them in their silly striped jackets and Friesian cow prints attempting to make money out of the very stuff of life. They are scumbags; ergo I am a paragon of virtue. As Conway says, however, hating them may be missing the point. If a command and control economy of the sort attempted by the Soviet Union didn’t increase yields – and in the long term it didn’t – then we have only the market. It’s worth noting that one of the ways Ethiopia has worked to eliminate devastating grain price fluctuations is by setting up a baby version of the Chicago Board of Trade. There a ‘contract’ isn’t the amount of grain you can get in a train carriage, as it is in Chicago. They don’t have train carriages of that sort. It’s the amount you can carry on the back of an Isuzu pickup truck. Food campaigners in the developed world may be waving placards at commodity traders, but in places like Ethiopia, where the market mechanism can be the difference between life and death, people are staking their very survival on their success.
Similarly we can rail against companies like Cargill, on a point of principle. As Conway put it to me at one point: ‘Big is regarded as bad. Big and American is very bad. Big, American and private is seen as much, much worse.’ There’s a lot not to like. But in a crowded and hungry world, disdain feels like a luxury we can ill afford. Plus railing against the scale of American agriculture is like rolling your eyes at the emerging Chinese middle classes for ramping up their consumption of meat or buying up land in Africa. It’s like shaking your fist at the rain in Wales. It’s pointless. It’s a fact of life. It’s a part of the new global food paradigm.
And the success of a company like Cargill also puts a whacking question mark over one of the most basic assumptions of the belly-obsessed foodie classes. It forces us to ask a simple question:
6.
IS SMALL ALWAYS BEAUTIFUL?
Ernst Schumacher was born in Germany in August 1911, the son of a political economy professor. He studied in Bonn and Berlin before, in 1930, moving to England, where he became a protégé of the great economist John Maynard Keynes. During a long and diverse career he worked as an academic, a leader writer for The Times, and as chief economic adviser to the Coal Board. He travelled the world, served as an economic consultant to Burma, became intrigued by Buddhism and deeply sceptical of Western economic dogma. All of this resulted, in 1973, in the publication of Small Is Beautiful: A Study of Economics as if People Mattered, a book which, as Jonathan Porritt, former director of Friends of the Earth, puts it in his introduction to the 2011 edition, fixed Schumacher as ‘the first of the “holistic thinkers” of the modern Green movement’. It made Ernst a bit of a star.
I was given the book to read a dozen years after its publication, as part of my politics degree. Three hours aft
er picking it up I threw it against the wall. Even now I remember the rising surge of irritation it caused even if, after almost three decades, I can’t immediately remember quite why. It may have had something to do with the tutor who gave it to us and his enthusiasm for the book. He was a little man in a leather blazer and thin tie who called everyone ‘Comrade’. It was the silliest sort of affectation and, worse still, inaccurate. I was pretty sure that, as a nice Jewish boy from north-west London, I was unlikely to be in the vanguard of anybody’s revolution. It was more likely that, while everyone else was manning the barricades, I’d be hanging from the third lamppost on the left.
But a student’s memory is not to be trusted, and certainly not after what I did to mine. In any case in recent years, as green politics has moved from the fringe to the mainstream, Schumacher, already a serious player in the world of economic theory, has become something of a popular guru. It’s not that surprising. The word ‘big’ – as in big business, as in big agriculture, as in big government – has become dirty and unclean. Big is bad. Ergo small is beautiful. What’s not to like?
Re-reading the book, I began to wonder. What was it that made me so book-throwingly bloody cross? In the opening chapters Schumacher proffers an idea which is now a statement of the obvious, but which back then was a remarkable insight: that the earth’s resources, its minerals, its nutrients, its sources of fuel, are not infinite. They are our ‘capital’ much as a business has capital that it builds upon. Equally, because humans have not made all of that capital we place less value upon it and just plough through it like a convention of compulsive eaters at a sweaty pile-it-high Las Vegas buffet, thus robbing future generations of anything to work with. Schumacher’s book was an argument against the burgeoning cult of economic growth at all costs, proposed that society and the world of work be organized on a ‘convivial scale’ that was more human, and said that ‘gigantism’ – his own word – was dehumanizing. All of that makes a lot of sense.