Competition Issues in the
Agricultural Sector
Cornelius Dube
CUTS Centre for Competition,
Investment and Economic Regulation
(CUTS CCIER)
Introduction and Outline
• Agriculture sector chosen for detailed research under 7up4
• Many competition concerns in broad agriculture sector
– Stock feeds; dairy; beef; agrochemical; farm implements etc.
• Presentation
– focus on crop produce only
– examines the value chain
» Input supply
» Crop production
» Marketing
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Input Supply Stage
• Focus on seed and fertiliser purchase
– Conduct of suppliers, i.e supply terms and pricing
• Significance: multiplier effects downstream, especially on
production decisions, thus prices and supply
• Implication for policy: Check anticompetitive behaviour,
especially abuse of dominance
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Competition Concerns in Seed Sector
• Concerns about varieties produced under intensive research
technology by MNCs:
– exploitative monopolistic practices
– Excessive pricing, unfair buying conditions e.g. difficult minimum
buying quantities
– Unfair use of power stemming from IPR
– DuPont alleges Monsanto abuses its IPR in genetically modified corn
and soy bean seeds (June 2009)
• Cartelisation (price fixing and market allocation)
– Co-existence of Shortages and abundance
• Outcomes of government induced outcomes
– Price controls and poorly designed subsidy programmes
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Competition Concerns in Fertiliser Sector
• Policy induced and behavioural anticompetitive conduct
• Price controls and poorly designed subsidy regimes
– Shortages in developing countries
» Subsidies on Bangladeshi publicly run urea factories shut out
private players (7up2)
• Monopolised and cartelised production processes
– Record fine for Sasol in SA for abuse of dominance and collusion
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Competition Concerns in
Production/Farming Stage
• Few competition concerns, and only arising from market
power
– Crops dominated by huge firms / associations
» tea for domestic use in Mauritius, Zimbabwean sugarcane
– Companies initiating contract farming/ controlling vertically
integrated processes
» financial institutions in Bangladeshi soybean market
» Discrimination against non-contract farmers
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Competition Concerns in Marketing Stage
• Importance: determines profits
– Reduces profit margins, thereby re-investment and hence future
output
• Harms by reducing quantities available for consumption
• Implication: Prioritise Control
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Marketing Stage: Three perspectives
• Middle men
– Cartels, monopsonistic buying (Nigeria, India,
Bangladesh)
– Loss to commodity exporting countries estimated at over
USD 100 bn (World Bank 1997)
• Processing Firms
– Abuse of monposony (grain purchase in Laos),
– Unfair trading practices (Zambian cotton, Malawian
tobacco)
– Cartelisation (Nepalese sugarcane, Indian basmati)
• Government controlled monopsonies
– Artificially low prices paid to farmers adversely
impacting economic viability and number of producers
(Nigerian palm oil, Mauritian tobacco)
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Role of Competition Authority/Govt. :
Dealing with Issues
• Address behavioural competition issues: cartelisation
and abuse of dominance
» Action: Effective implementation of competition laws
• Removal of policy induced barriers (price control,
subsidy, marketing related policies)
» Action: Advocacy to harmonise govt policies to minimise
anti-competitive effects
• Deal with anti-competitive effect of middlemen
» Action: Alleviate market imperfections / asymmetric
information to benefit farmers
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THANK YOU
For further details email:
cd@cuts.org
C-cier@cuts.org
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