|
Why consumers should care about the agri-food industry
The Economic Impacts section of this website details how ordinary citizens end up supporting the food industry through distorted tax and subsidy policies. These subsidies and favorable trade agreements allow food companies to offer shoppers an unprecedented menu, including produce from around the world and a seemingly endless supply of subtly differentiated product lines -- more choices than most consumers can handle!
But while this bountiful selection may make the subsidies seem worthwhile, there are many other reasons why consumers should worry about the direction of the food system under oligopoly power. Corporate concentration has coincided with a dramatic increase in food-borne illness, as companies cut corners on food safety to maximize their profits.
Corporate influence on the regulatory process has weakened inspection procedures and other safeguards. And corporate preferences for industrial agriculture and high-tech solutions to the problems it spawns leave consumers vulnerable to the unknown consequences of pesticide residues and growth hormones in their food, unlabelled genetically-modified products, irradiated meats, and even antibiotic resistance brought on by the indiscriminate use of powerful drugs to fight disease in animal feedlot operations.
Industrialization and consolidation of the food system is also directly linked to the increased consumption of fatty, overly processed foods that cause diabetes, heart disease and obesity. The cost of these public health time-bombs -- like the costs of food industry subsidies -- are not borne by the companies responsible for these trends. They are instead passed on to the public, in the form of higher health insurance premiums, higher health care costs, and greater public expenditures on diseases directly related to unhealthy outputs from the food industry.
Investors, too, have cause for concern. As the 2003 accounting fraud at the US subsidiary of Dutch supermarket chain Royal Ahold made clear, food companies are not immune to the corporate governance scandals that have rocked American corporations since the collapse of Enron in 2001. Share values can also be affected by prosecution of food industry giants for violations of anti-trust laws, as was the case with Archer Daniels Midland's price-fixing on animal feed additives in the mid-1990s.
The insurance industry may soon wake up to the potential liability issues associated with the effects of genetically-modified foods on public health and the environment. There are also class-action lawsuits brewing against food companies related to food safety, obesity and anti-competitive pricing in livestock markets -- all reminiscent of successful challenges to the marketing practices of tobacco companies.
In other words, investors who now enjoy the benefits of owning shares in profitable food companies may soon find that the oligopolistic market share and questionable business and accounting practices of their companies warrant closer attention.
|
