Since 2001, over 200 million ha of farmland have been purchased or leased. This trend is being closely watched and denounced in its excesses, not only by NGOs, but also by international institutions and a number of governments, as it raises the strategic challenge of global food security. Farmland in Eastern Europe is attracting an increasing number of foreign investors, whereas China is about to reinforce its land and cereal acquisition strategy in Africa...
We recommend reading the article by Jean-Philippe Payet1
, Strategic Intelligence Consultant and expert in investment attraction strategies for Le Cercle les Echos, which provides an enlightening overview on this trend of land acquisition in France and worldwide, and its impact on global food security.
Whereas French farmland attracts very few foreign investors, other countries such as Hungary have implemented new laws aimed at preventing land acquisition by foreign investors in order to preserve national food sovereignty. In Africa, land acquisition has jeopardized food security for already vulnerable populations.
Nevertheless, the distinction needs to be made between legitimate investments in farmland and pure and simple land grabbing. Indeed, a large number of areas in the world are in urgent need of agricultural investments.
Close supervision, stricter regulations, more transparency in farmland investments, and the use of appropriate tools, such as reliable follow-up indicators, are crucial for ensuring ethical land acquisition.' J-P Payet explains. In this sense, J-P Payet considers that momagri’s OSE indicator ‘could be an interesting tool in the future.’
momagri Editorial Board
Once a year, BNP Paribas Wealth Management - Agrifrance publishes its annual survey on farmland investments. According to its latest survey, farmland investments (mainly vineyards and forest land) are continuing their upward trend in France: +14 % in 2012, compared to 6 - 7 % in previous years. Farmland investments have never been such an attractive option, and prospects are excellent.
This trend, which is verified on a global scale, raises a number of concerns.
Since the food crisis of 2007-2008, when prices skyrocketed, global farmland investments have become the object of intense, and sometimes fierce, debates. In its report ‘Can the growing interest in global farmland provide fair benefits in the long term?’ (published in September 2010), the World Bank reckoned that large-scale land acquisition transactions concerned approx. 56 million ha of farmland in 2009 (of which 70% in Africa), as opposed to 4 million in 2008.
Based on these figures, and others – which are very often impossible to check - , there is a growing concern about so-called ‘land grabs’ which could jeopardize the food sovereignty of already vulnerable populations. At the heart of this controversy, which the International Land Coalition refers to as ‘commercial pressure on land’, is the argument of the ‘win-win’ situation often advanced by investors and recipient states, but which in reality seems to disadvantage peasants, particularly in Africa.
Does land grabbing exist in France and elsewhere?
Although recently the French public opinion was stirred by the news of land acquisition by foreign investors (mainly Asiatic), foreign investments remain scarce in France. In fact, these investments represent less than 1% of total transactions, both in terms of value and land acreage. Furthermore, foreign investors essentially invest in real estate, rather than farmland, vineyards and forest land.
With the few exceptions of acquisitions by foreign investors of a couple of prestigious vineyards such as those of the Chateau Gevrey-Chambertin and the Château de Bellefont-Belcier (a Saint-Emilion Grand Cru wine), the reality of foreign investments is a lot more prosaic: British investors represent 50% of foreign farmland investments in France, and 32% of investors are from the Benelux. We are still far from the yellow peril…
In Canada, the debate is more intense. A report issued in April 2012 by the Centre for Interuniversity Research and Analysis on Organizations (CIRANO), at the request of the Minister of Agriculture (at the time Pierre Corbeil), was made public at the beginning of 2013. The authors of this sixty-page long report reviewed the different issues raised by ‘land grabbing in Quebec by financial corporations’, but came to the conclusion that it appears highly unlikely this trend will develop further. This opinion is not shared by the (new) Minister of Agriculture François Gendron: ‘The government of the Parti Québécois
will implement all necessary measures against speculation and land grabbing. Better safe than sorry. After all, this is about securing the food sovereignty of the people of Quebec.’
In Hungary, long considered an Eldorado for farmland investments, a number of amendments to the Constitution were voted by the Parliament on 17 December 2012, introducing a ban against the acquisition of Hungarian farmland by foreign investors and laws for protecting forestry and hydraulic resources.
Australia has announced the creation of a national registry listing all Australian farmland owned by foreign Investors. According to the report published in 2012 by the Rural Development Research Agency, half of the groups in the sector of wheat, dairy, sugar and meat production are now in the hands of foreign investors following a wave of large scale land acquisitions in the last few years.
In Madagascar, the scandal of the Daewoo land deal led to the fall of President Ravalomanana. The Korean group had secured a contract to lease over one million ha of farmland.
More recently, in January 2013, during the 43rd World Economic Forum in Davos, this issue was addressed with regards to the question of food security. Already, during previous forums, there was a growing awareness of the new realities of the agricultural market and the negative consequences of price volatility on food security. The question of food security was one of the topics of debate during the 2013 Forum. A number of participants, such as Mrs Barbara Stocking (the president of Oxfam UK), denounced global land acquisitions in poor countries and the opacity and violence in the way these land deals were made.
The challenge is all the more important as food security is not only a vital prerequisite for development and a moral principle, but also a guarantee of social and political stability, and an essential factor of dignity, peace and security. A challenge that is further accentuated by the impact of climatic change on agriculture, and the growing scarcity of water.
This context has generated a conflict between opposing interests. On the one hand, private investors, whose interests are (generally) based on financial considerations, and even speculation, and whose main objective is to protect their money against inflation in the hope that prices on the agricultural market will be going up in the medium term. Two concrete examples of this are: the British-owned Land Corp (which has acquired a thousand hectares in Ukraine) and the Swedish-owned Black Earth Farming (which has acquired land in southern Russia).
And on the other hand, states preoccupied with food security and national food sovereignty which is threatened by this 'off-shore agriculture', particularly in the two main areas of the planet where there is a shortage of grain crops: the Pacific coast (Japan, China, India) and south-eastern Mediterranean countries (Northern Africa and the Near East). In Egypt, for example, land is being leased to foreign investors, whereas in Uganda land is being sold to these foreign investors…
In its report ‘Our world, our food’, Oxfam voiced its concern that 60% of foreign farmland investments, between 2000 and 2010, were made in developing countries where hunger is rife. And yet, two thirds of these investors are planning to export the crops that are grown on this land.
Hence the necessity of a commitment on the part of authorities worldwide… But a commitment to what end? As Ward Anseeuw (Cirad and University of Pretoria) points out: ‘The distinction needs to be made between legitimate investments in farmland and pure and simple land grabbing. Indeed, a large number of areas in the world are in urgent need of agricultural investments.’
The real issue in this case is speculation. An ever growing number of tools are becoming available to speculators for trading on the market for raw materials, and more precisely agricultural commodities. A number of investment products are now tied to the price of raw materials and can be bought and sold through BNP Paribas, the Crédit Agricole and Barclay’s. Wheat, maize, coffee and soy have become an investment, in the same way as gold.
These investment products are being blamed for the rising price of agricultural commodities. But investment bankers know that it is hard to determine to what extent speculation influences the price of agricultural commodities...
International institutions, such as the United Nations Food and Agriculture Organization (FAO), the World Bank, the United Nations Conference on Trade and Development (CNUCED), and the OECD have all acknowledged the negative consequences of these large scale land acquisitions. However their role (true to the political dogma of economic development) is limited by the postulate that direct investments of foreign money contribute to economic development, which in turn benefits the majority of the population. Therefore, their efforts are focused on establishing new rules which governments and companies will be free to apply on a voluntary basis for guiding and supervising land acquisition.
If the need for public supervision is no longer contested, reliable indicators need to be implemented in order to provide a proper follow-up. In this sense, the OSE indicator (Optimum Food Security and Economic Efficiency), developed by momagri could be an interesting tool in the future. OSE is aimed at assessing the optimal level of openness to foreign investment and independence of a country, on a regional and international scale, in order to maintain food security at the highest possible level.
In line with this approach, the Land Matrix Partnership (CDE, Cirad, GIGA, GIZ, and ILC) which was launched during the annual World Bank Conference on Land and Poverty (in April 2012 in Washington), issued an annual report and launched a website on the critical issue of farmland acquisition.
So far, it seems a consensus may have been reached: one that makes the distinction between land acquisition transactions that comply with established criteria, and as such may be deemed as 'investments', and those transactions that do not comply with established criteria, and which will go on being stigmatized and qualified as ‘land grabbing’. However, so far these initiatives have mainly been implemented by international institutions. The question is: will private businesses play by the rules of the game?