Healthy soil and sustainable growing

["Tradingpost" <tradingpost@lobo.net>]

Published on Sunday, November 15, 2009 by GRAIN
The New Farm Owners
Corporate Investors Lead the Rush for Control over Overseas Farmland
http://www.grain.org/
by GRAIN

With all the talk about "food security," and distorted media statements like 
"South Korea leases half of Madagascar's land,"1 it may not be evident to a 
lot of people that the lead actors in today's global land grab for overseas 
food production are not countries or governments but corporations. So much 
attention has been focused on the involvement of states, like Saudi Arabia, 
China or South Korea. But the reality is that while governments are 
facilitating the deals, private companies are the ones getting control of the 
land. And their interests are simply not the same as those of governments.

"This is going to be a private initiative."

- Amin Abaza, Egypt's Minister of Agriculture, explaining Egyptian farmland 
acquisitions in other African nations, on World Food Day 2009

Take one example. In August 2009, the government of Mauritius, through the 
Ministry of Foreign Affairs, got a long-term lease for 20,000 ha of good 
farmland in Mozambique to produce rice for the Mauritian market. This is 
outsourced food production, no question. But it is not the government of 
Mauritius, on behalf of the Mauritian people, that is going to farm that land 
and ship the rice back home. Instead, the Mauritian Minister of Agro Industry 
immediately sub-leased the land to two corporations, one from Singapore 
(which is anxious to develop the market for its proprietary hybrid rice seeds 
in Africa) and one from Swaziland (which specialises in cattle production, 
but is also involved in biofuels in southern Africa).2 This is typical. And 
it means that we should not be blinded by the involvement of states. Because 
at the end of the day, what the corporations want will be decisive. And they 
have a war chest of legal, financial and political tools to assist them.

 "What started as a government drive to secure cheap food resource has now 
become a viable business model and many Gulf companies are venturing into 
agricultural investments to diversify their portfolios."

- Sarmad Khan, "Farmland investment fund is seeking more than Dh1bn", The 
National, Dubai, 12 September 2009

Moreover, there's a tendency to assume that private-sector involvement in the 
global land grab amounts to traditional agribusiness or plantation companies, 
like Unilever or Dole, simply expanding the contract farming model of 
yesterday. In fact, the high-power finance industry, with little to no 
experience in farming, has emerged as a crucial corporate player. So much so 
that the very phrase "investing in agriculture", today's mantra of 
development bureaucrats, should not be understood as automatically meaning 
public funds. It is more and more becoming the business of ... big business.

The role of finance capital

GRAIN has tried to look more closely at who the private sector investors 
currently taking over farmlands around the world for offshore food production 
really are. From what we have gathered, the role of finance capital -- 
investment funds and companies -- is truly significant. We have therefore 
constructed a table to share this picture. The table outlines over 120 
investment structures, most of them newly created, which are busy acquiring 
farmland overseas in the aftermath of the financial crisis.3 Their 
engagement, whether materialised or targeted, rises into the tens of billions 
of dollars. The table is not exhaustive, however. It provides only a sample 
of the kinds of firms or instruments involved, and the levels of investment 
they are aiming for.

Private investors are not turning to agriculture to solve world hunger or 
eliminate rural poverty. They want profit, pure and simple. And the world has 
changed in ways that now make it possible to make big money from farmland. 
From the investors' perspective, global food needs are guaranteed to grow, 
keeping food prices up and providing a solid basis for returns on investment 
for those who control the necessary resource base. And that resource base, 
particularly land and water, is under stress as never before. In the 
aftermath of the financial crisis, so-called alternative investments, such as 
infrastructure or farmland, are all the rage. Farmland itself is touted as 
providing a hedge against inflation. And because its value doesn't go up and 
down in sync with other assets like gold or currencies, it allows investors 
to successfully diversify their portfolios.

"We are not farmers. We are a large company that uses state-of-the-art 
technology to produce high-quality soybean. The same way you have shoemakers 
and computer manufacturers, we produce agricultural commodities." Laurence 
Beltrão Gomes of SLC Agrícola, the largest farm company in Brazil

But it's not just about land, it's about production. Investors are convinced 
that they can go into Africa, Asia, Latin America and the former Soviet bloc 
to consolidate holdings, inject a mix of technology, capital and management 
skills, lay down the infrastructures and transform below-potential farms into 
large-scale agribusiness operations. In many cases, the goal is to generate 
revenue streams both from the harvests and from the land itself, whose value 
they expect to go up. It is a totally corporate version of the Green 
Revolution, and their ambitions are big. "My boss wants to create the first 
Exxon Mobil of the farming sector," said Joseph Carvin of Altima Partners' 
One World Agriculture Fund to a gathering of global farmland investors in New 
York in June 2009. No wonder, then, that governments, the World Bank and the 
UN want to be associated with this. But it is not their show.

>From rich to richer

"I'm convinced that farmland is going to be one of the best investments of 
our time. Eventually, of course, food prices will get high enough that the 
market probably will be flooded with supply through development of new land 
or technology or both, and the bull market will end. But that's a long ways 
away yet."

- George Soros, June 2009

Today's emerging new farm owners are private equity fund managers, 
specialised farmland fund operators, hedge funds, pension funds, big banks 
and the like. The pace and extent of their appetite is remarkable - but 
unsurprising, given the scramble to recover from the financial crisis. 
Consolidated data are lacking, but we can see that billions of dollars are 
going into farmland acquisitions for a growing number of "get rich quick" 
schemes. And some of those dollars are hard-earned retirement savings of 
teachers, civil servants and factory workers from countries such as the US or 
the UK. This means that a lot of ordinary citizens have a financial stake in 
this trend, too, whether they are aware of it or not.

It also means that a new, powerful lobby of corporate interests is coming 
together, which wants favourable conditions to facilitate and protect their 
farmland investments. They want to tear down burdensome land laws that 
prevent foreign ownership, remove host-country restrictions on food exports 
and get around any regulations on genetically modified organisms. For this, 
we can be sure that they will be working with their home governments, and 
various development banks, to push their agendas around the globe through 
free trade agreements, bilateral investment treaties and donor 
conditionalities.

 "When asked whether a transfer of foreign, 'superior', agricultural 
technology would be welcome compensation for the acquisition of Philippine 
lands, the farmers from Negros Occidental responded with a general weariness 
and unequivocal retort that they were satisfied with their own knowledge and 
practices of sustainable, diverse and subsistence-based farming. Their 
experience of high-yielding variety crops, and the chemical-intensive 
technologies heralded by the Green Revolution, led them to the conclusion 
that they were better off converting to diverse, organic farming, with the 
support of farmer-scientist or member organisations such as MASIPAG and PDG 
Inc."

- Theodora Tsentas, "Foreign state-led land acquisitions and neocolonialism: 
A qualitative case study of foreign agricultural development in the 
Philippines", September 2009

Indeed, the global land grab is happening within the larger context of 
governments, both in the North and the South, anxiously supporting the 
expansion of their own transnational food and agribusiness corporations as 
the primary answer to the food crisis. The deals and programmes being 
promoted today all point to a restructuring and expansion of the industrial 
food system, based on capital-intensive large-scale monocultures for export 
markets. While that may sound "old hat", several things are new and 
different. For one, the infrastructure needs for this model will be dealt 
with. (The Green Revolution never did that.) New forms of financing, as our 
table makes plain, are also at the base of it. Thirdly, the growing 
protagonism of corporations and tycoons from the South is also becoming more 
important. US and European transnationals like Cargill, Tyson, Danone and 
Nestlé, which once ruled the roost, are now being flanked by emerging 
conglomerates such as COFCO, Olam, Savola, Almarai and JBS.4 A recent report 
from the UN Conference on Trade and Development pointed out that a solid 40% 
of all mergers and acquisitions in the field of agricultural production last 
year were South-South.5 To put it bluntly, tomorrow's food industry in Africa 
will be largely driven by Brazilian, ethnic Chinese and Arab Gulf capital.

Exporting food insecurity

Given the heavy role of the private sector in today's land grabs, it is clear 
that these firms are not interested in the kind of agriculture that will 
bring us food sovereignty. And with hunger rising faster than population 
growth, it will not likely do much for food security, either. One farmers' 
leader from Synérgie Paysanne in Benin sees these land grabs as fundamentally 
"exporting food insecurity". For they are about answering some people's needs 
- for maize or money - by taking food production resources away from others. 
He is right, of course. In most cases, these investors are themselves not 
very experienced in running farms. And they are bound, as the Coordinator of 
MASIPAG in the Philippines sees it, to come in, deplete the soils of 
biological life and nutrients through intensive farming, pull out after a 
number of years and leave the local communities with "a desert".

 "Entire communities have been dispossessed of their lands for the benefit of 
foreign investors. (...) Land must remain a community heritage in Africa."

- N'Diogou Fall, ROPPA (West African Network of Producers and Peasant 
Organisations), June 2009

The talk about channelling this sudden surge of dollars and dirhams into an 
agenda for resolving the global food crisis could be seen as quirky if it 
were not downright dangerous. From the United Nations headquarters in New 
York to the corridors of European capitals, everyone is talking about making 
these deals "win-win". All we need to do, the thinking goes, is agree on a 
few parameters to moralise and discipline these land grab deals, so that they 
actually serve local communities, without scaring investors off. The World 
Bank even wants to create a global certification scheme and audit bureau for 
what could become "sustainable land grabbing", along the lines of what's been 
tried with oil palm, forestry or other extractive industries.

Before jumping on the bandwagon of "win-win", it would be wise to ask "With 
whom? Who are the investors? What are their interests?" It is hard to believe 
that, with so much money on the line, with so much accumulated social 
experience in dealing with mass land concessions and conversions in the past, 
whether from mining or plantations, and given the central role of the finance 
and agribusiness industries here, these investors would suddenly play fair. 
Just as hard to believe is that governments or international agencies would 
suddenly be able to hold them to account.

 "Some companies are interested in buying agricultural land for sugar cane 
and then selling it on the international markets. It's business, nothing 
more" Sharad Pawar, India's Minister of Agriculture, rejecting claims that 
his government is supporting a new colonisation of African farmland, 28 June 
2009

Making these investments work is simply not the right starting point. 
Supporting small farmers efforts for real food sovereignty is. Those are two 
highly polarised agendas and it would be mistaken to pass off one for the 
other. It is crucial to look more closely at who the investors are and what 
they really want. But it is even more important to put the search for 
solutions to the food crisis on its proper footing.

References

1 - It was not South Korea, but Daewoo Logistics.

2 - See GRAIN, "Mauritius leads land grabs for rice in Mozambique", Oryza 
hibrida, 1 September 2009. http://www.grain.org/hybridrice/?lid=221 
(Available in English, French and Portuguese.)

3 - The table covers three types of entities: specialised funds, most of them 
farmland funds; asset and investment managers; and participating investors. 
We are aware that this is a broad mixture, but it was important for us to 
keep the table simple: http://www.grain.org/m/?id=266

4 - COFCO is based in China, Olam is based in Singapore, Savola is based in 
Saudi Arabia, Almarai is based in Saudi Arabia, and JBS is based in Brazil.

5 - World Investment Report 2009, UNCTAD, Geneva, September 2009, p. xxvii. 
Most foreign direct investment takes place through mergers and acquisitions.
© 2009 GRAIN
GRAIN is a small international non-profit organisation that works to support 
small farmers and social movements in their struggles for 
community-controlled and biodiversity-based food systems. Their support takes 
the form of independent research and analysis, networking at local, regional 
and international levels, and fostering new forms of cooperation and 
alliance-building.