Domingo Tamupsis works as a harvester on a Guatemalan sugar plantation for a firm that exports bioethanol to fill the fuel tanks of cars in the US. He works 10 to 12 hours a day, six days a week, in a country that is a leading producer of food for global markets.

His settlement in the fertile Pacific coastal area is surrounded by industrial farms, but he earns so little his family cannot afford to eat every day. Some days he survives his shift of hard physical labour on nothing but the mangoes that drop from trees by the roadside.

His wife, Marina, is 23 but so slight she might be mistaken for a girl. She has two daughters, Yeimi, aged six, and Jessica, two. Jessica is the size of the average European one-year-old, her distended stomach a sign of chronic malnutrition. When she smiles, hollow creases form in her cheeks, betraying her semi-permanent state of hunger.

Last year Marina gave birth in the eighth month of pregnancy to a stillborn child. She had been ill and hungry throughout, then felt severe pains one day at breakfast time. When she finally reached the nearest medical help, a hospital 45 minutes away by bus, staff told her the baby was dead. They returned the body to her, but she and Domingo had no cash for the return fare. A doctor gave them the fare, and a friend in town lent money for a coffin. So it was that their third child, Marvin Orlando, a brother for their two little girls, came home to be buried.

Guatemala is a prime example, according to a report by Oxfam, of how the global food system is failing. The organisation predicts that the average price of staple foods will double by 2030. "Spiralling food prices, climate chaos, rising demand on top of a collapsing resource base, and markets rigged against the many in favour of the few" are, the charity warns, taking us into a new era of crisis in which more and more people are going hungry.

Its new research predicts that the international prices of key staples will more than double in the next 20 years, raising "the prospect of a wholesale reversal in human development".

The world's poorest people spend up to 80% of their income on food and will be hit the hardest. The global food system is broken and its power structures must be overhauled, it says.

Developing countries such as Guatemala are on the frontline. Half of all the nation's children under five are malnourished – one the highest rates of malnutrition in the world. Yet the country has food in abundance. It is the fifth largest exporter of sugar, coffee and bananas. Its rural areas are witnessing a palm oil rush as international traders seek to cash in on demand for biofuels created by US and EU mandates and subsidies. But despite being a leading agro-exporter, half of Guatemala's 14 million people live in extreme poverty, on less than $2 a day. And the indicators are getting worse. The money to be made from the food chain here, as in most poor countries, has been captured by elites and transnational corporations, leaving half the population excluded.

No way out

Tamupsis sees no way out of his dilemma. "The money I make is not enough to feed us," he says. "We feed the children first because the girls cry so much when they are hungry, but it's not enough and I think that's why they get ill and don't thrive. I don't know where to get more money: I can't work any harder and I can't steal because they shoot you if you steal."

With a little land he would grow food, but the promised government redistribution of unproductive land, which drew him to the area, never took place.

Aida Pesquera, Oxfam director for Guatemala, says: "The food is here but the main problem is distribution. Land is concentrated in very few hands. The big companies pay very little tax. Labour conditions on plantations are appalling. It's a classic case of how a very productive country with high rates of exclusion, especially among the indigenous population, cannot feed its own people."

The economic policies favoured by the international financial institutions in the last few decades have here, as in so many developing countries, weakened food security.

In the 1980s a structural adjustment programme imposed by the IMF on the debt-laden nation led to the slashing of technical assistance provided by the agriculture ministry to small farmers. Guatemala, which had been self-sufficient in grain, was encouraged to pursue growth through agricultural exports. Local production of staples declined.

Although the government disputes it, Oxfam believes that Cafta, the free trade agreement between the US and Central American states approved in 2005, has undermined farmers further as subsidised US grains have poured in. (Industrialised areas, including the US and the EU, subsidise their farmers to the tune of $252bn a year, making it impossible for small farmers in developing countries to compete.)

So Guatemala is now dependent on imports of staple foods, mostly from the US, and it is at the mercy of increasingly volatile food prices internationally.

The average poor rural family here spends 80% of income on food so when world prices rise sharply, families simply can't eat. When a food price spike occurred in 2008, the price of corn locally was 240% higher than the year before.

The government is now distributing food rations to about 90,000 families. The programme is led by Sandra Torres, who neatly sidestepped the law barring spouses of presidents from standing to succeed; she divorced her husband, the president, Álvaro Colom. However, critics say money for the handout is being diverted from other vital government services and that what is needed is fundamental structural reform.

More than two-thirds of productive land is in the hands of 2% to 3% of the population. Colom's social democratic government drafted legislation to promote rural development, including some land reallocation, but it was blocked by congress after fierce lobbying from agribusinesses.

Land reform is a subject freighted with violence in Guatemala.

Major exporters

In 1950, on being elected president, the leftwing Jacobo Arbenz began a programme of expropriating the unused land of big exporters. A large chunk of territory owned by the American United Fruit Company (UFCO) was included. Arbenz said compensation for the land would be based on valuations calculated from declared taxable profits. UFCO said this was a fraction of what they were really worth. Arbenz was labelled a communist by US president Dwight D Eisenhower, who, with urging from UFCO, authorised the CIA to sponsor a "liberation army". The army invaded in 1954 and led a coup against Arbenz. A return to repressive rule followed, marking the start of decades of civil war and agrarian conflict.

The minster of agriculture today, Juan Alfonso de León García, is not optimistic that serious land reform is achievable . "Agriculture is the engine of our economy, but we have to recognise that Guatemala has a very complicated agricultural structure that is very unequal. We have big owners who have the best land, and the majority have a very small percentage of the fertile land. Food security is a serious problem. We have to talk about land distribution, but it's not easy. In the 1950s we tried to have agricultural reform but that promoted the fall of the government and marked the beginning of armed conflict [over] 36 years."

However, he still hopes some unused land can be acquired for reallocation to smallholders. Meanwhile, his government has increased technical assistance for small farmers to help improve yields.

The theory of the agro-export model of development is that growth stimulated by increased foreign revenues will trickle down to the rest of the population. But most of the profits made from Guatemalan resources have so far gone untaxed. Total tax revenue amounts to less than 12% of GDP (roughly less than half that of rich countries).

As De León García explains: "We have very low rates of taxation, and we cannot even determine whether the agro-exporters pay even that. But it's not just big business that avoids tax here, all taxpayers do."

The global food system in the last two decades has seen a dramatic flight of capital, with transnationals making use of offshore subsidiaries to minimise the tax they pay in the countries where they produce food and where they sell it.

UN trade data, analysed by Christian Aid, shows that Guatemala received an average export price of just 18¢ a kilogram for its bananas in 2006. By the time those bananas got to their destination (the importing countries), the average price was 46¢, suggesting costs were added offshore by transnationals trading with their own subsidiaries in other jurisdictions. Christian Aid estimates that, because of this, more than $50m a year could have been lost by Guatemala in 2006 and 2007.

Low minimum wage

In theory, growth led by agro-exports benefits the rural poor, enabling them to move from subsistence farming to waged labour. But in Guatemala the minimum wage is so low it does not meet most basic needs. The pattern is repeated in many developing countries relying on agricultural exports.

Labour relations in Guatemala are also characterised by extreme repression and violence. This month, Idar Hernández Godoy, one of the secretaries of Sitrabi, the banana workers' union, was shot several times by assailants on a motorbike while on his way to union headquarters in the Atlantic region. His death brought to five the number of banana union leaders killed since 2007.

Trying to organise workers or demand better conditions is likely to bring death threats. Luis Fuentes, Guatemalan representative of the union 3F, which is based in Denmark, describes typical conditions on the plantations, whether banana, sugar or palm, as "inhuman". He, too, has received many death threats. In the sugar sector, unions were effectively dismantled in the 1970s, when leaders were persecuted and killed. All the national producers in Guatemala and the transnational firms working there say they respect labour rights and the environment, and have in place corporate social responsibility policies. However, the Guardian interviewed several current and former plantation workers from the sugar, palm and banana sectors this month. Many were afraid to speak out. A consistent account emerged: many worked with no proper contract; most reported being set impossible targets by middle managers then given warnings or having pay deducted if they failed to meet them.

Many were working, often without protective clothing, with highly toxic agrochemicals, including paraquat, now banned in Europe. Several reported chronic health problems from chemical exposure. Typically they earned 1,500 quetzales ($190) to 1,800 quetzales a month, whereas the National Statistics Institute, a Guatemalan government organisation, calculates that a minimum of 4,100 quetzales a month is needed to feed the average family.

Without exception, the workers said that joining a union was a sackable offence that would lead to blacklisting. Even where top management tried to put in place contracts – usually under pressure from outside buyers – managers in the field, they said, abused workers. When auditors arrived, workers were told what to say and got protective clothing for the day. Allegations also emerged of workers being given or taking stimulant drugs to get through the shifts.

Workers who have access to land grow their own food. Those without can be driven to migrate illegally to the US. In the week of our visit, two US-bound tractor-trailers packed with illegal migrants were stopped by the Mexican border authorities. The 513 men on board were half dead from suffocation. Most were Guatemalan. One told reporters: "We have no choice. There is not enough food for us at home."