Punjab, India’s government is considering buying or leasing millions of acres of land in Central and South America, where Punjabi farmers already cultivate tens of thousands of acres. The purpose: to grow crops that will help feed India’s 1.1 billion people.
North of Buenos Aires, Argentina, a Japanese company is growing corn and soybeans for shipment back to Japan. In Africa, a Japanese aid agency works with partners from Brazil and Mozambique to convert part of Guinea’s vast savannah into corn, soybean and cotton production.
A leading Malaysian palm-oil producer is looking at plans for a 300,000-hectare (720,000-acre) palm-oil plantation in Cameroon.
Bahrain currently produces bananas on 2,400 acres in the Philippines. Kuwait is interested in another 2,400 acres there for rice production. Saudi investors are negotiating for an additional 2,400 acres for aquaculture and are already pumping money into a 12,000-acre project to grow basmati rice, corn, bananas and pineapple.
In Mongolia, South Korea has bought more than 800,000 acres to develop “an overseas food base” to procure more food resources.
In Romania, nearly 2.4 million acres of farmland are now foreign-owned – about 12% of the country’s base farmland.
Demand for good agricultural land has exploded around the globe. Before 2008, global farmland expanded on average by fewer than 10 million acres annually, but expansion plans in 2009 totaled more than 100 million acres, according to the World Bank. More than 70% of the demand has been in Africa, where Ethiopia, Mozambique, Sudan and other countries have transferred millions of acres to investors.
After easing last year, the drumbeat of development resumed in 2011, as evidenced by the press reports above.
Details vary from case to case – for example, some deals are by governments and others by groups of foreign investors – but most examples involve richer countries with large populations and limited agricultural resources attempting to improve their food security by controlling land and agricultural production in poorer, less developed nations.
That’s no surprise to Robert Thompson, former director of rural development at the World Bank.
“Nothing will bring a government down faster than hungry people,” says Thompson. “I think the most important crisis occurred in 2008 when a number of exporting countries went to either taxing or banning exports, and food importers like China began to get nervous about food availability.”
He notes that when India halted rice exports in 2008, the Philippines panicked, paying exorbitant prices to lock up any available supplies of rice in the free market. “They decided they would pay any price rather than face shortages.
“If a country can’t supply its food domestically, it wants assurances that supplies will be there through thick and thin and that exporting countries will allow trade to flow,” he says.
Spiking food prices in 2007-2008 and again this year “has generated more concern to get (world) agricultural development higher on the agenda. In the 1960s and 1970s it used to be a priority. In the 1980s 25% of U.S. foreign aid/year was for development. That was down to just 1% a year ago,” Thompson notes.
Not surprisingly, there’s also a good deal of opposition to the sales boom, often characterized by opponents as a “land grab.”
In Romania, the Agricultural Producers Associations League has lobbied against land sales to state-owned foreign investment funds.
Brazil is preparing rules to block foreign governments, state-owned companies and speculators from buying agricultural land, although it intends to allow sales to “genuine” private investors.
Thompson notes that South Korean efforts to buy land in Madagascar were blocked when public pressure forced Madagascar’s government to cancel the deal.
There’s even a website, http://farmlandgrab.org, chronicling press reports on the issue.
In practice, sale results are mixed. Many announced deals have never been implemented, or plans have been scaled back due to everything from changing prices to inadequate infrastructure, technology and institutions. The World Bank determined that as of last September, actual farming had started on only 21% of the announced deals.
In other instances, development efforts have dislocated local farming communities, leading to instability and fueling concerns that the purchases are another form of colonialism.
Still not solving food security fears
At a more basic level, Jay O’Neil, senior ag economist at Kansas State’s international grains program, argues that big investments in foreign farmland don’t do much to solve nations’ food security fears.
“In countries like China, the leaders get up each morning and ask ‘How are we going to guarantee food security for the coming years?’” says O’Neil. “They don’t realize that buying land doesn’t solve the question. It has zero effect on domestic price inflation, and it doesn’t guarantee that the grain will go to whoever owns the land.
“It doesn’t mean governments wouldn’t slap on export controls as Russia did in 2010. Probably when they most need grain is when they would be at the most risk of restrictions,” he says.
Thompson concurs to some extent and says, “They know they don’t have nearly the agricultural resources themselves, so they must do anything they can to increase their food security. With the erosion of confidence in the ability of world markets to assure supplies, they are thinking that if they own the farms, they have a better chance of getting the food out.”
Projects could, however, pay off in better food security if they lead to improved yields and higher production in regions that currently perform well below their potential.
The World Bank analysis argues that the increased demand for agricultural commodities could be met for the next decade by increasing productivity and farmland.
For example, the African countries now drawing the most investor interest achieve 30% or less of the potential on currently cultivated lands, while their savannahs represent a vast area for potential development.
“Basically they’ve got a huge tract like Brazil’s,” says Thompson. “China sees that, too. If China can help them become self-sufficient in food, it takes a lot of pressure off world markets.
China is looking to buy 200,000 hectares of farmland in Russia, Australia, Argentina and other countries, the Des Moines Tribune reported in March. One of their Chinese sources say China has already invested $85 million since 2005. In Venezuela and Zimbabwe, they provide machinery and laborers in return for 20% of the harvest. In Australia they buy local land and in Brazil and Argentina they tend to rent. They also rent in Russia and Mongolia. China has already invested $85 million since 2005, the Register adds. “In Venezuela and Zimbabwe, they provide machinery and laborers in return for 20% of the harvest. In Australia they buy local land and in Brazil and Argentina they tend to rent. They also rent in Russia and Mongolia,” the Des Moines Register reported.
The World Bank’s Thompson adds, “Even in places where they’re not buying land, China is putting a lot into building roads and other infrastructure that can encourage agricultural development.”
For example, China will invest $10 billion in Argentina’s railways, the Wall Street Journal reported in March.