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Should the distribution of seeds for crucial crops be left in the hands of so few, especially in developing economies?
Ed Stoddard is Reuters senior correspondent, commodities, Southern Africa.
Mike Schussler, one of South Africa’s most respected economists, gave a presentation last week on food inflation that will be of interest to readers of this blog.
Looking at domestic price pressures on food, he gave the following eye-popping statistic: for South African grain growers, seed prices have been rising on average at almost 18 percent per year since 1999, almost triple the average consumer inflation rate over the same period of time.
Seed prices have been rising rapidly because there are so few distributors and the takeover of local firm Pannar Seed by U.S. multinational Pioneer Hi-Bred – which is in the throes of litigation but could be settled soon – will leave the country with a seed duopoly, according to Schussler, who is the director of economists.co.za.
That duopoly would be comprised of Pioneer and Monsanto, another American multinational, and between them they would account for about 90 percent of the local seed market.
In short, “seed inflation” is hardly about to be contained at a time when a scorching U.S. drought is driving maize prices to fresh peaks. Even if these red-hot prices eventually cool, Schussler sees little prospect of domestic maize falling back to earth because input costs will remain high.
This has big implications for the hungry in South Africa and the region. Maize is the staple of the region, which is one of the few on the planet where most of the stuff is grown for human rather than animal consumption, though it also feeds a lot of livestock as well.
South Africans at the lower end of the income scale typically spend around 40 percent of their income on food and so their standards of living and even their health are directly impacted by these events. And as the regional breadbasket, its food price pressures are bound to spread to other southern African countries.
It does raise the question: should the distribution of seeds for crucial crops be left in the hands of so few, especially in developing economies?
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