Does the end of high food prices mark the end of the global land rush?

Published on, by Pascal Liu, FAO, Jan 18, 2017.

The surge in commodity prices in 2007-2008 was one of the main causes of what has sometimes been described as the “global land rush” – a wave of large-scale land acquisitions in developing countries by foreign investors. Non-governmental organisations and the media were quick to denounce these deals as “land grabbing”, which were blamed for ignoring the rights and interests of the people who make their living from a land that is legitimately theirs.  

High food prices made the returns on investing in developing country farmland become attractive for agribusiness companies and financial investors seeking to diversify away from poorly performing equity and bond markets. They also spurred countries heavily dependent on food imports to invest in countries with under-utilised land to produce food for consumption back home. The peak oil prices and biofuel policies that had helped trigger the food price spike also led to an investment surge in feedstock crops for biofuel.

Almost a decade after the 2007-2008 price spike, today’s situation looks very different. Global agricultural production has risen strongly in recent years, especially for cereals, partly as a result of the investment boom. This output rise, combined with lower demand growth, has pushed real prices much below their peak levels of 2008.

The OECD and FAO project that real agricultural commodity prices will resume their long-term declining trend in the medium term, as production growth, driven by on-trend productivity growth and lower input prices, slightly outpaces slowing demand increases. At the same time, falling oil prices and the reform of biofuel policies in major industrial countries have greatly reduced the incentives for investing in feedstock crops … //

… Even if food prices may be on a long-term declining trend, it is unlikely that “land grabbing” will disappear. “Land grabbing” is bad for local people, agricultural development and even the investor.

It should be combated decisively, in particular by the governments of the countries where it occurs, as it often reflects weak local governance. But it should not hide the truth that higher agricultural investment in developing countries is good for them and the whole world. Acquiring land is one way of investing in agriculture, but there are many other models. Investments that involve local farmers without transferring land rights are more likely to succeed … //

… (full text).


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