Putting Globalization and Concentration in the Agri-food Sector into Context



Current Agriculture, Food & Resource Issues

D. Sparling and E. van Duren


public sectors to work in concert to create policy that attracts the best businesses and
industries, both from a private-profit-oriented perspective and from a public policy
perspective. Firms operating in global markets face not only new opportunities, but also
many unknowns and new competitors. Mergers and acquisitions can contribute to cost-
reduction and expand a company’s base of knowledge and ideas. They also bring the
challenge of integration. Policy makers should address questions relating to which
specific sub-sectors will experience the greatest disruptions or opportunities and what
policies can assist firms during transition periods.

Introduction

Globalization and concentration are two different but interrelated processes. It is
increasingly difficult to distinguish activities related to the integration of the global
economy from those involving concentration in certain industries and markets. Both may
cause significant disruption in industries and national economies. Opponents to
globalization and concentration are vehement in their opposition and are garnering
increasing media attention. The agri-food sector has been one of the lightning rods for
opposition. The stories of the losers in the process of globalization and concentration
strike a chord with most observers. How can one ignore the plight of farmers, when the
number of farms in the United States has declined by 1.25 million from 1964 to 1997 and
the farm share of food dollars has decreased from about 40 percent in 1980 to 22.2 percent
in 1998 (Sexton, 2000)?

Mega-mergers like DuPont’s acquisition of Pioneer, Cargill’s acquisition of
Continental Grains or Kraft’s purchase of Nabisco conjure images of a few huge
corporations controlling every aspect of food production and distribution around the
world. Concentration and globalization activities are happening at every level, from seed
production through to the supermarket, and the size, frequency and scope of these
activities all appear to be increasing. To some observers, too much power in the hands of
so few is a recipe for disaster.

Managers, politicians and bureaucrats responsible for charting the course for the
agribusiness sector ignore the implications of the simultaneous trends of globalization and
concentration on the food industry at their peril. Planning strategy in the face of these
significant changes is an activity not isolated to the agri-food sector. Changes in the sector
must be examined in the context of the changes occurring in the global economy.

To deal proactively with concentration and globalization in the Canadian agri-food
sector, it is important that managers understand the reasons for activities related to these
phenomena and the role that such activities play in corporate strategy and government
policy. Both public and private sector managers must ask the question, “How must we
change management activities and government policies to adapt and prepare our industries
for the future?”

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