Why Corporations are Snapping Up Huge Chunks of Farmland in the Developing World

[Orwellian_Ghost]

Why Corporations, Emerging Powers and Petro-States Are Snapping Up Huge Chunks of Farmland in the Developing World

By Scott Thill, AlterNet. Posted August 11, 2009.


Stop me if you think you've heard this one before:

Investment banks, sovereign wealth funds and other barely regulated financial entities in search of fat paydays go on buying binges structurally adjusted to maximize their earnings reports and employee bonuses, while simultaneously screwing their business associates and everyone else in the process. It's all done in near-total secrecy, and by the time everyone finds out about it, they're already in the poorhouse.

That's more or less the playbook for the derivatives and credit-default swaps gold rush that ruined the global economy, which cratered in 2007 and has yet to recuperate.

The bubble money has now moved on from housing and turned to the commodities markets, especially global food production. Given what that money did to the housing market, things don't look good for local communities whose land is being bought up by governments, sovereign wealth and hedge funds, and other investors on the hunt for real value in a hyperreal economy.

Entrenched and developing economic powers -- the U.K., China, South Korea, India and more -- have launched land rushes to outsource production of everything from staples like rice, wheat, corn and sugar to finance bubbles like biofuels. That includes oil-wealthy Gulf States, which recently feasted on commodities speculation that exploded oil prices in 2008.

The hard numbers are alarming: According to the Guardian, in the last six months over 20 million hectares (around 50 million acres) of arable land, mostly in Africa and Southeast Asia, have been sold or negotiated for sale or lease. That's about half the size of all arable land in Europe, or the size of entire U.S. states North Dakota or Oklahoma.

...

http://www.alternet.org/environment/141734/why_corporations%2C_emerging_powers_and_petro-states_are_snapping_up_huge_chunks_of_farmland_in_the_developing_world/

[HamdenRice]

1. How can direct foreign investment in food production be compared to financial derivatives?

Putting aside the issue of whether direct foreign investment is a net negative or positive, isn't it a little fatuous to compare risky financial engineering (like derivatives and credit default swaps) with direct foreign investment in agriculture? I thought the problem with financial engineering, as Paul Krugman has frequently pointed out, is that it produces absolutely nothing and creates system risk in the financial system. How is that the same as investing in land and producing food?

There are many valid reasons to criticize foreign acquisition of land and agricultural resources, but Scott Thill's comparing it to financial sophistry is pretty stupid.

[angstlessk]

2. for the same reason the good folks bought up tankers full of fuel and did NOT make delivery

until their future prices hit their goal...they can control production of food to match their futures prices...takes out a great deal of the risk in betting on the future price of a commodity!

[HamdenRice]

3. That still different. That was speculation in commodities markets. The OP is about direct investment

In particular, it focuses on "sovereign funds". That means government investment funds. This is worrying to many Africans -- as the recent kerfuffle with Hillary showed.

In other words, the governments of China, India and some oil producing countries are buying up land in order to grow food for their home populations. That means actually producing stuff, not speculating in already produced commodities, nor speculating in commodity futures and derivatives.