South African maize cartel inflates prices, fuels GM

By Maggie Hennessy

- Last updated on GMT

South African maize cartel inflates prices, fuels GM

Related tags: Maize

A select group of companies continue to commandeer the entire South African maize value chain, fueling continued production of genetically modified grain and squeezing the country’s poorest residents, according to a report from nonprofit organization the African Centre for Biosafety (ACB).

Companies include Tiger Brands, Pioneer Foods and Premier Foods, which were previously responsible for fixing the price of bread and maize meal.

Since 1997, genetically modified (GM) maize has been authorized for cultivation in South Africa and the crop now constitutes the vast majority (86%) of the commercially grown harvest. Although mandatory GMO labeling was established in 2008, it has also been stalled amid industry claims that it’s unclear if the law applies to processed food or only to living modified organisms, such as whole kernels of maize.

The National Chamber of Milling, in a letter to the ACB, said that development of a competitive GM-free maize market has therefore been difficult.

Lobbying groups have “no power to influence pricing of non-GMO ingredients,” ​it said in the letter.

The ACB has called for mechanisms to be put in place to develop small players throughout the maize value chain, along with promotion of non-GMO production methods, decentralized value chains and public maize breeding programs that provide access to seed that can be freely shared and exchanged.

Pioneer & Monsanto committed to helping small-scale commercial farmers

Pioneer Hi-Bred spokesperson Barbra Sehlule Muzata told Milling & Grains the firm had not reviewed the entire report, but said Pioneer has a long history of working locally with small farmers, entrepreneurs and businesses across the value chain”.

She said Pioneer has made specific efforts to help small-scale commercial farmers in recent years with $20 million rand ($1.9m) worth of investments over the past five years to assist smallholder farmers develop in South Africa.

Monsanto’s senior manager for sustainability and international communications Billy Brennan said that while the company had only just been made aware of the ACB report and needed to review it further, it too remained committed to working alongside farmers.

The aim of such partnerships, he said, was to ensure more productive and sustainable agriculture in the country.

A highly concentrated maize chain

It has been improvements in conventional farming and breeding techniques that have resulted in a highly concentrated maize value chain, the ACB said in its report.

Monsanto and Pioneer Hi-Bred control the maize seed market, it said, handling and storage is dominated by three former co-ops, Senwes, NWK and Afgri, maize trade is controlled by Louis Dreyfus and Cargill, two of the four so-called ‘ABCD’ group of international grain traders on the Johannesburg Stock Exchange and the white maize milling sector is dominated by Tiger Brands, Premier Foods and Pioneer Foods.

This then feeds into an “equally concentrated food retail sector, with four major retailers, Shoprite/Checkers, Pick n Pay, Spar, and Woolworths dominating the market,”​ the report said.

High prices hit the poor

Millers and retailers have continued to sell maize at higher prices which has been particularly significant on the poor, the ACB claimed.

From April 2007 to April 2013, the average cost of a 5 kg bag of maize meal increased by 43.7% in rural areas of South Africa, and 51.8% in urban areas, the report showed.

Gareth Jones, a researcher at ACB, said: “It appears as if South Africa’s major millers and retailers are making healthy profits from our staple food and certainly not passing falling maize prices onto consumers.”​ 

Wheat and maize price fixing

Pioneer Foods was previously fined 1 billion rand ($96.7 million) in 2010 for its role in the so-called maize cartel—along with Tiger Brands and Premier. An investigation by the Competition Commission in 2009 revealed that the companies agreed, through numerous meetings between 1999 and 2007, to fix the price of wheat and white maize products, creating uniform price lists for wholesale, retail and general trade customers. Tiger was fined 98 million rand ($9.69 million) after appealing for leniency in exchange for cooperation. Premier was granted conditional immunity for its cooperation.

Premier Foods and Tiger brands have not responded to requests for comment regarding the cartel or ACB’s latest report.

Pioneer Foods spokeswoman Lulu Khumalo said the company is in a “closed period”​ and limited in terms of what we can say on public platforms​and therefore could not comment on anything relating to the maize cartel.

 

Related topics: Milling & Grains

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