Q&A: Seven Questions on the Globalization of Farmland

Author:Christian Bogmans
Pages:8-10
SUMMARY

A forthcoming IMF working paper, entitled "The Globalization of Farmland: Theoretical and Empirical Evidence," co-authored by Rabah Arezki, Christian Bogmans, and Harris Selod, analyzes the drivers behind the surge in transnational acquisitions of farmland in the aftermath of the Great Recession. The paper finds, for the first time, statistical evidence that land deals were directed at isolated... (see full summary)

 
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Fall 2017
7
A forthcoming IMF working paper, entitled
“The Globalization of Farmland: Theoretical
and Empirical Evidence ,” co-authored by
Rabah Arezki, Christian Bogmans , and
Harris Selod , analyzes the drivers behind
the surge in transnational acquisitions of
farmland in the after math of the Great Recession. The paper
finds, for the fir st time, statistical evidence that land de als were
directed at isolated devel oping countries that until recently
participated little in gl obal agricultural trade and that are in
dire need of agricultural investme nt.
Question 1. Can you explain what globalization
of farmland entails?
It describes a relatively new situation in wh ich farmland
is sold or leased to international investors . In other words,
farmland has b ecome an international commodity. Against
the backdrop of increasing dema nd for food, there has b een
a growing interest by governments, ag ribusinesses, and
investment funds in acqu iring long-term property rights
or leases over large areas of far mland, mostly in developing
countries. The phenomenon rose to prominence in the
aftermath of t he food crisis of 2007–2008, when substantial
increases in food prices r aised farmland value and the opt ion
value of securing la nd for food production.
Question 2. How are large-scale land acquisitions
related to other trends in agriculture?
The increased interest in fa rmland is part of a broader
set of developments that are changing t he nature of the
agricultu ral sector. Not only have multinational companies
and foreign direct invest ment become more importa nt in
promoting sectoral grow th, the role of global value chains
in expanding food supply ha s become more prominent
(Maertens and Swinnen, 2015). In this ongoing process of
agricultu ral globalization, the volume of internationa l trade
in agricult ural commodities increased al most five-fold, from
approximately $200 billion in 1980 to a lmost $1100 billion in
2010, the largest growth recorded by any sec tor.
Question 3. What does the data tell us?
According to the Land Matr ix, an online database of
large-scale land acqu isitions that are verified by non-
governmental organizat ions (NGOs), more than 2100 deals
were negotiated between 2000 a nd 2016, with a cumulat ive
size of almost 59 mil lion hectares in 88 countries
worldwide. This expans e corresponds to an area the size
of the Ukrai ne, which is equal to roughly 15 percent of the
remaining globa l stock of unused and non-forested arable
land. Sub-Saha ran Africa (~900 deals) and east Asia (~600
deals) have been the most importa nt target regions, fol lowed
by Latin America (~350 deals).
Question 4. What explains the concentration
of land deals in Africa and Asia?
Obviously, these continents govern comparatively large a reas
of unused arable land. In e arlier work, my co-authors found
that investors were targeting cou ntries with weak tenure
security for exi sting land users, supposedly because t his
would allow investors to obtain la nd without compensating
existing user s (see Arezki a nd others, 2013). Indeed, in many
countries in Af rica and Asia land ownership rights are mostly
informal, wit h little possibility for existing u sers to take legal
action if their la nd holdings are appropriated by the s tate or
powerfu l investors.
Not surprisingly, many NGOs and polic ymakers have
classified t hese land deals as outr ight land grabs. With
the demand for food increasing bec ause of rising i ncomes
and ballooning popu lations, private investors and
agribusinesses were buy ing land to reap substantia l profits.
Moreover, many governments—such as several Gulf States
and China—have acquired vas t areas of farmla nd abroad
for offshore food production to reduce their dependency
on imports to feed their people. Invest ments that are
motivated by food independence may improve food
security in m iddle- and hig h-income countries at t he
expense of food securit y of low-income areas.
Seven Questions on the Globalization of Farmland
By Christian Bogmans
Q&A
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