The Economist article on farmland buys

INTERNATIONAL: "Buying farmland abroad: Outsourcing's third wave; Rich food importers are acquiring vast tracts of poor countries' farmland. Is this beneficial foreign investment or neocolonialism?" The Economist, 23 May 2009.

EDITORIAL: "Land deals in Africa and Asia: Cornering foreign fields; The Chinese and Arabs are buying poor countries' farms on a colossal scale. Be wary of the results," The Economist, 23 May 2009.

This is the one that triggered the recent column, which uses material that I currently brief.

Great map on target countries: all Gap except obvious producers from New Core (Russia, Ukraine, Turkey, China (Goldman Sachs investment in poultry and pigs) and Brazil. Lots of Arab money going into Africa, along with Chinese.

The irony: Saudi Arabia grows and removes from Ethiopia, while the international aid community sends in roughly the same amount--dollar-wise.

Land grab or tech transfer? Depends on the perspective.

Not a new concept, says the piece. Remember "banana republics"?

The difference now is the huge scale, like Egypt, Korea and UAE buying up huge chunks of Sudan--roughly one-fifth of the Arab world's so-called breadbasket.

Then there's China's sending farmers to work those lands. One estimate says 1m alone in Chinese farm laborers in Africa now.

What has been bought up since 2006 is roughly the equivalent of France's entire farmland, totally in the range of $30B, or roughly 10 times emergency ag aid to developing countries recently announced by the World Bank.

The third wave argument says manufacturing in the 1980s, IT in the 1990s, and now food in the 00s.

Private land deals not new. The scope of government buying here is, with sellers being host governments who "nominally" own the land in many instances (that sounds nefarious, does it not?).

Water shortages are behind much of the land-grabbing, naturally. If you have the water and the land, you don't need to grab so much, which is why the Saudis lead the pack.

The danger here: poor countries are not really selling land but water rights--and damn cheaply.

So you have Sudan letting investors remove 70% of the crop, even though Sudan is the biggest food aid recipient in the world.

Again, the big target is Africa, but global climate change says Africa will be a far harder place to grow food in the future, even with genetic improvements.

The scope of deals is so large, there are sometimes immediate political repercussions: Madagascar's president had planned to sell roughly half the island's arable land to a Korean concern (Daewoo Logistics), but the deal led to the collapse of his government.

The proposed improvement: a code of conduct that commits investors to improve local ag--very Development-in-a-Box‚Ñ¢ in philosophy.

Comments

[Steven J.]

The idea of an undeveloped 3rd world country with dictatorship rule defending the property rights of a foreign land owner has been enough to keep investment away in the past.

Something is going on here. Security and stability for these governments has not improved, but the land investments by foreigners flow in.

Will be watching for the other shoe to drop.

[William R. Cumming]

Prescient article and post. This issue will be huge throughout this century and probably worthy of most sophisticated analysis possible. Hope the INTEL community and AG are following this issue giving it very high priorty. By the way since AG is the largest user of energy in US that factor alone worthy of analysis and discussion. AG is also slowing down globalization in many ways, with the US the leader in subsidizing those who do NOT need a subsidy.

[Steven J.]

I should of read Economist article first, but I get it now.It's food security (Duh!) with underlying influence from energy costs and water supplies (as Tom has noted).

Watch for Renewable Fuels to be trashed in the mean time.U.S. ethanol and biodiesel mandates create demand for 25 million (net) new acres of corn and soybean production annually.

In 08' we saw 30 year high's for prices on both crops, which has caused U.S. Farmers in 09' to plant the most corn acres since 1946.

The anti Biofuel crowd blamed Renewables as the cause for high prices, but it was really high energy prices.$200/ crude = $8.25 corn and $22 soybeans.$70/ crude = $3.00 corn and $8 soybeans. (spec money now out of these markets too)

Regardless, with renewables part of most developed countries energy portfolio, I suspect the risk for high grain prices creates food insecurity that is causing the land grab.

Personally, I'd rather own my $3,500 per acre Wisconsin farm land and know my deed will be enforced by the laws of this land.