Fiduciary Future | October 28, 2024

How concentrated ownership in the food system increases risk – and what we can do about it 

Arianna Muirow and Andrew Behar
Guest Author

Arianna Muirow

Guest Author

Andrew Behar

Iconic foods like Georgia peaches, Florida oranges, and Ecuadorian chocolate are threatened by increasing weather extremes and shifting climates. As As You Sow has documented the trend in a recent report and an accompanying article, climate change is driving up the cost of food products including olive oil, coffee, rice, and other staples.

But that’s not the full story. When climate change meets Big Ag’s risk mitigation through commodity speculation, we are all at risk.  

Arianna Muirow, a researcher and financial strategist whose PhD focused on the intersection of food systems and finance, agreed to share her expertise on the role that corporate consolidation and commodity future trading plays within this system, and co-authored this article.

Muirow explains that the majority of products in our grocery stores are manufactured by only a handful of companies, often called the “ABCDs of agribusiness.” These include Archer-Daniels-Midland (ADM), Bunge, Cargill, the Chinese firm COFCO, and Louis Dreyfus. They are vertically integrated, meaning they don’t just own the corn or wheat or soy that they produce, they also own the livestock that eat those products, and the meat processing plants. They own the factories that make the fertilizers, pesticides and insecticides that they use, and even the silos where their products are stored. Often, they control the shipping and the ports. In short, they control the market.

Economists consider a concentrated market to occur when the top four major firms control more than 50% of the market share. Up and down the food value chain – in meat, dairy, grain and soy – these companies are in the 60, 70, and 80 percentiles.

The ABCDs also control subsidiary financial firms that engage in speculation on the trade of commodities, or commodity futures. 

Commodity Speculation

Understanding this financial mechanism starts with trade. In our food system, we trade commodities – grain, meat, etc. – around the world. Originally this trade took place as a physical movement of goods through an exchange. The city of Chicago, for example, grew as a hub for the convergence of crops and livestock from across the Midwest before being shipped to urban centers on the East Coast. 

People living in a city don’t want to be congested with crops and livestock, so that got moved out. But they kept the exchange. As the exchange grew, a baker no longer bought wheat grown by a specific farmer. Instead, the baker buys a certain quality of wheat, by the bushel, and the farmer sells the same way, through the exchange. These prices fluctuate, because agriculture is connected to nature. Buyers or sellers might want to lock in a price to ensure they’ll have product or sales. So, they’ll trade a timed contract. They will buy a product now, to get in the future. Even if it isn’t harvested yet.

These timed contracts are traded on the exchange, and buying futures has become an investment opportunity – not with the intention of keeping the product, but to play the market. And the exchange likes that, because investor money brings liquidity to the market – it makes it easier to match buyers and sellers. 

However, the ABCDs and their peers hold deep insight into the commodity markets, with the highest-level access to global information about crop shortages or trade interruptions, and the ability to store or release product as the market price changes. They are making record profits by futures trading. Yet, they are regulated like food manufacturers.

The commodity speculation market is ballooning with institutional portfolios embracing commodity future index funds that have drastically increased the scope and scale of the futures market. Meanwhile, the ABCDs, through their financial subsidiaries, are operating as major sellers of these funds and essentially as their own investment banks.

The relationship between agribusiness and asset management grows ever insular, where today Blackrock, Vanguard, and State Street together own roughly one quarter of the institutional shares in major agribusiness corporations including Tyson, ADM, Walmart, and Kroger.

For agribusiness, trading commodity futures means that if their crop production has a rough year – if there’s a drought, flood, extreme weather, or a pandemic – and they lose money on their product, they still profit on speculation. In fact, in crises or times of market uncertainty – for example, the pandemic supply chain gridlock, or the war in Ukraine – the ABCDs made record profits. In 2021, Cargill reported record breaking profits of more than $5B, up 64%, the most in its 154-year history. Luis Dreyfus reported profits up 80% that same year. In 2022, ADM broke its profit record. Analysis of public companies demonstrates that these profits are disproportionately linked to speculation.

Food futures

Speculative profiteering of our food supply chain will only increase as severe weather events and climate change creates instability in crop yields resulting in danger to our entire food economy. It’s a systemic risk and should be viewed that way. It is also a core mechanism upholding consolidated corporate power in the food system.

There is opportunity for individuals and institutions, consumers and shareholders alike, to flex their market power. Engaging finance as a tool for systems change is underutilized by the food activist community. Financial engagement can be leveraged against the use of commodities as a speculative asset class, particularly as we face a climate crisis.

These companies are not all publicly traded, but for those that are one option is to divert funds. A great example is Adasina Social Capital’s Extractive Agriculture Campaign, which demands an end to extractive agricultural practices. See Adasina’s Extractive Agriculture Issue Brief and consider signing the Extractive Agriculture Investor Statement.

Shareholders in companies that are part of this value chain need to understand that their investments may fluctuate at the whim of these major players. There are opportunities for these shareholders to engage companies involved in market manipulation on governance risk.

It is time to hold regulatory policy makers to account over whose interests are being served, and to make sure the systems for bringing food to market are transparent and optimized. As we head into this election, remember that each of us votes with our dollars as well as at the ballot box.


Arianna Muirow, PhD, is the founder and principal of RE•Leverage Consulting, providing strategic research and engagement to leverage finance for food systems change.

Andrew Behar is the CEO of As You Sow.