What forms can land grabbing take
13 Dec 2011
Land grabbing can be broken down into three general types: food-driven investments, biofuel production and mere agricultural speculation.
Two kinds of actors are operating in this field which accounts for roughly one third of land grabs worldwide (world bank report). State-owned investment funds, often from the Gulf region, invest in agricultural lands overseas to respond to national food security issues. These so-called sovereign wealth funds (find out more below) have initiated a number of land grabs, especially in Sub-Saharan Africa.
Agribusinesses are the foot soldiers of land investments, they are commissioned by investors to execute the work on site but increasingly become active out of self-initiative acquiring agricultural land themselves. The agricultural sector is especially attractive for these businesses because it allows for a diversification of their portfolios which is at the same time risk-reducing. Agribusinesses can not only invest in agricultural land and production but also in processing and distribution and are thus able to extend their control of the food chain.
Rising oil prices and interest in renewable energy sources have caused a significant rise in biofuel production over the past ten years. Subsidies for biofuel production have made biofuels more attractive than food production causing land being diverted away from food production towards biofuels. This directly influences food supply and thus plays an important part in the distortion of food prices. Because biofuel production has the twofold effect to increase demand of land for both biofuel and food production, it can be seen as a main incentive for land grabbing.
As the financial markets collapsed in the face of the 2008 financial crisis, fund managers and investors began to shift from pure financial assets like real estate to agricultural land or soft commodities such as energy and food crops. Deemed more profitable and less risky, the reasons behind this shift is two-fold:
• Increasingly high food prices leading to increasing land rents; attractive for investors due to cheap land easily available in many developing countries.
• Rising incentives for agricultural production caused by an increasing global demand for food and an ongoing exhaustion of resources like water and land suitable for agricultural production.
Especially hedge funds and private equity funds have since purchased or leased land on the speculative terms listed above. Find out more below about how different investment vehicles work (The actors).
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