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The Food Revolution

NEOCOLONIAL UN Food and Agriculture Organization (FAO) Director-General Jacques Diouf sees neocolonial elements to agricultural outsourcing.
Photo by AFP

Developing countries are turning over their agricultural land to other nations

Avast change is taking place in the way the world gets its food.

According to analysts, more rich nations are seeking to increase their food security by outsourcing food production to places where it is cheaper and faster to grow food.

“If this is the beginning of a new global trend, then the implications are enormous,” says David Hallam, chief of the trade policy service of the United Nations Food and Agriculture Organization (FAO) in Rome. “The political implications, the ethical implications—it is no surprise that it has captured attention. But there is no hard information about these things. It is even difficult to predict there is actually an upswing.”

Mr. Hallam is leading an FAO team attempting to determine just how big the movement is. “This is much more than conventional foreign direct investment, which is motivated by profit. This is much more motivated by the idea of growing food overseas to bring it back home. This is for food security,” he says.

The phenomenon has been reported in the media as taking place in developing countries around the world, but analysts say the accuracy of the reports and extent of the phenomenon is not known.

According to press reports, the Korean conglomerate Daewoo negotiated for 1.3 million hectares of land in Madagascar—half of the country’s total arable land—to grow foodstuffs, but public outrage killed the deal.

The People’s Republic of China (PRC) reportedly negotiated a lease of 1 million hectares of rice land in the Philippines before political pressure reversed the decision, not least because the Philippines itself is a major rice importer.

Nonetheless, a steady trickle of land purchases and leases is continuing across the world. The PRC, for instance, has moved steadily into Cambodia, Lao People’s Democratic Republic, and Myanmar. Arab countries have moved equally steadily into Africa.

The wheat-growing areas of Kazakhstan, Russian Federation, and Ukraine, abandoned and allowed to go fallow with the collapse of the former Soviet Union, are being put back into production by such companies as Black Earth Farming, a Jersey Islands–domiciled company run by Russians that is now worth $1.2 billion, and the Kernel Group, with 84,500 hectares of land under cultivation in the Ukraine, according to Richard Ferguson, a global agriculture analyst at Nomura in London.

Among the implications are the prospects for the conclusion of the Doha Round of agricultural trade negotiations under the World Trade Organization, which have been stalled for the better part of the decade. This is not to forecast an immediate solution to the long-paralyzed talks. But as corporate giants and sovereign nations find it in their interest to seek tariff cuts to move increasing amounts of foodstuffs around the world, pressure can be expected to grow for a resolution of the impasse.

PLANTING RICE A farmer works in a paddy field in the Montali area of Agartala, India. Countries with large populations or food security concerns are buying land and investing in food production abroad.
Photo by AFP

Growing food overseas for import has been going on for generations. The Romans did it 2,000 years ago, importing foodstuffs across the Mediterranean from North Africa. At the beginning of the 20th century, United Fruit, which made Chiquita Banana famous, was so influential in several Caribbean states that they could force changes in government— and hence, the name “banana republic.”

But recently, there has been a sea change, wrought at least partly by growing populations but driven particularly by the skyrocketing prices of commodities of late 2007 and 2008 when, for instance, rice—perhaps the world’s most important cereal crop—went from $250 per metric ton to nearly $1,100 before slipping off again. This year, however, international rice prices have followed a downward trend, says FAO, due to low import demand. For instance, according to the latest FAO Rice Price Update, the Thai white 100% B rice was quoted $559 per ton in May 2009, compared with $611 last January and $963 in May 2008.

Rice prices, and those of other food stocks, drove importing nations to seek new ways of finding food security. They bought land in countries where it was plentiful, food prices were cheap, and growing seasons were long.

In the PRC and other countries, agricultural land is disappearing at an alarming rate. As economists have been pointing out for well over a decade, the PRC famously has 20% of the world’s population and only 7% of its arable land, with erosion and conversion into urban uses eating into fertile land at a rate of 1% per year over the last 8 years.

There were other concerns as well. The PRC’s then-burgeoning economy meant the country’s 1.3 billion citizens were enriching their diet, requiring more protein and other foods than the once-ubiquitous rice and cabbage.

Saudi Arabia abandoned its hugely expensive bid to grow wheat in the desert after spending more than $86 billion only to discover that it takes twice as much water to grow a hectare of wheat in the Arab kingdom’s torrid desert as it does to grow it in Russia, for instance.

The failed Saudi experiment largely drained the country’s underground aquifers, equal to 6 years of the flow of the Nile River, according to the doctoral dissertation of Elie Elhadaji, a former banker in Saudi Arabia.

Total world agricultural exports have soared upwards. Total grains are expected to hit a record 676.3 million tons in 2008–2009, according to the World Agricultural Outlook Board, with international agricultural sales probably even more interlocked than, say, electronics.

In the last decade, according to the United States Department of Agriculture, global beef exports, crisscrossing the world from US, Brazil, Argentina, and other countries, have grown steadily if not spectacularly from 55.6 billion to 59.3 billion tons. Pork exports have grown from 92.7 billion to 96.7 billion tons, and poultry, from 64.6 billion to 77.0 billion tons.

THAT’S A LOT OF TOFU Loading soybeans at a port in Brazil, where news reports say Japan has leased as much as 100,000 hectares for soybean production.
Photo by Agência Estado

Those steadily increasing figures, and the distinct prospect that they will grow even faster as the world’s rich but land- or climate- poor countries seek food security on the other side of the globe, appear to render moot the buy-local movement to cut greenhouse gases.

In fact, it is already a shaky proposition. Emissions produced by growing food in Africa and other temperate zones where water and sunlight are plentiful are often a fraction of the emissions to produce food in a cold climate where fertilizer, fuel, and heated greenhouses may be necessary.

Green beans from Kenya, for instance, are grown under highly environment-favorable conditions. Kenyan farmers by and large do not use big carbon-producing machines such as diesel tractors. They use cattle manure instead of oil-based fertilizers. Their irrigation systems are simply ditches flooding fields.

The greenhouse gases produced by a ship transporting a tin of beans to the United Kingdom from Kenya, for instance, are less per unit than those produced by driving 10 kilometers to the supermarket.

The organic farmer in the San Francisco Bay area may be doing everything right, but if she moves her heirloom tomatoes to a farmers’ market in her pickup truck every Saturday, she will produce far more carbon per unit of produce than either the airfreight 747 from Kenya or a Burlington Northern train hauling produce 200 miles up the US east coast from fertile farm areas to Boston and Washington.

The sale or lease of farmland to sovereign countries, or companies that represent them, has spurred considerable alarm. A range of NGOs has called attention to the phenomenon, raising concerns over what many call “land grabs” by rich nations taking advantage of poor ones. Jacques Diouf, the director general of FAO, has warned of the risk “of creating a neocolonial pact for the provision of non-value-added raw materials in the producing countries, and unacceptable work conditions for agricultural workers.”

“We are, along with UNCTAD [United Nations Conference on Trade and Development], trying to pin down a little more clearly what is happening as opposed to what is being talked about,” says Mr. Hallam. “Take Sudan, for example—how much land is being handed over, what it is being used for, who is coming in, [and] what are the circumstances surrounding these deals?” FAO, he says, has started a series of case studies in individual countries to attempt to get a handle on the magnitude of outsourcing.

A number of NGOs, such as the Washington, DC-based International Food Policy Research Institute, have been building matrices of what countries are going where to do what. Most of them rely on hearsay. Citing media reports, the institute says the Japanese has leased as much as 100,000 hectares in Brazil for soybean production, and the Republic of Korea has secured 690,000 hectares of land in Sudan to grow wheat.

“One of the clear consequences of the global land grab is that workers, farmers, and local communities will inevitably lose access to land for their food production,” says GRAIN in the Barcelona-based NGO’s quarterly magazine, Seedling, in January. “The very basis on which to build food sovereignty is simply being bartered away. And it is not only the questionable issue of giving foreigners control of domestic farmland but also the restructuring of the farming sector that this process entails. For these lands will be transformed from smallholdings or forests or whatever they may be into large industrial estates connected to far-off markets. Farmers will never be real farmers again, job or no job.”

BALINESE RICE TERRACES The People’s Republic of China and Indonesia have reportedly entered into agricultural outsourcing partnerships.
Photo by AFP

Some of the vast agricultural outsourcing plans are falling prey to global economics. Last August, for instance, according to Jakarta newspapers, officials of Indonesia’s agriculture ministry announced that the Saudi Binladin Group, owned by the Bin Laden family of Saudi Arabia, would invest $4.3 billion in 1.6 million hectares in Papua province, which is covered by primary forest and known as the Merauke Integrated Food and Energy Estate. The project is expected to involve a wide range of investors.

However, falling food prices and the Middle East’s diminishing oil revenues appear to have put paid to the project, at least for now. At the recent World Islamic Economic Forum in Jakarta, government officials said the project has been frozen.

Many others continue, however. The International Food Policy Research Institute says Bahrain has secured 10,000 hectares in the Philippines for a joint agro-fishery project. And the Republic of Korea’s Hyundai Heavy Industries is buying large tracts of farmland in Russia.

Such deals indicate that the search for food across the world, far from home, is going to continue, say analysts. The local food movement may wish for an eggplant grown just down the road. But the chances are increasing that it will be grown on another continent, in a more temperate climate.

Richard Ferguson, a global agriculture analyst at Nomura in London, predicted in a recent investment report, the coming changes in the nature and composition of agriculture. They included the following:

• Russia, with its vast wheat lands, of which the government still owns 30%–40%, could well create an agricultural Gazprom.
• There is no shortage of farmland, he writes, and the ability to increase production is obvious across all regions, although land is truly scalable in Latin America and sub-Saharan Africa.
• Vertical integration may well come to agriculture with giants like Cargill, but more likely with rising companies such as Black Earth Farming, Kernel Group, and others that have come into being and gone public in the last half-decade.
• Farms are about to get a lot bigger, more able to invest in logistics, communication, and information systems, with increasing economies of scale that will drive down costs.
• A two-tier system in which agriculture will be dominated by smallholders over the next decade or so is developing, but many large-scale farming units will emerge, some with formidable operational and financial firepower. •