Natural resources squeezed
The huge increase in demand for food must be met from a rapidly depleting resource base, squeezed by biofuel production, carbon sequestration and forest conservation, timber production, and non-food crops. As a result, the share of land devoted to food production has peaked (see Figure 4).
At the same time, the amount of arable land per head is decreasing, having almost halved since 1960.27 Nobody really knows how much land remains, but it isn’t much.28 Very often, land that may be termed idle or marginal in fact plays a critical role in the livelihoods of marginalized people such as pastoralists, indigenous peoples and women.
Increase in demand is not likely to be met by the expansion of production area. Nevertheless, whatever land there is will surely be prized. The vast majority looks to be in sub-Saharan Africa and Latin America.29
Water, the lifeblood of agriculture, is already scarcer than land. Nearly three billion people live in areas where demand outstrips supply.30 In 2000, half a billion people lived in countries chronically short of water; by 2050 the number will have risen to more than four billion.31 By 2030, demand for water is expected to have increased by 30 per cent.32
Agriculture accounts for 70 per cent of global fresh water use,33 and is both a driver and increasingly a victim of water scarcity. Climate change will only exacerbate an already acute problem, particularly in already stressed regions. Shrinking glaciers will reduce flows in crucial rivers – for example, the Ganges, Yellow, Indus, and Mekong Rivers all depend on the Himalayas. Rises in sea level will salinate fresh water, while floods will contaminate clean water.
The Middle East offers a taste of what may be to come. Aquifers are rapidly becoming exhausted and the area under irrigation is in decline. Saudi Arabia has experienced precipitous falls of over two-thirds in wheat production since 2007, and on current trends will become entirely dependent on imports by next year.34 Middle Eastern states are among the biggest land investors in Africa,35 driven not by a lack of land but a lack of water.
Many governments and elites in developing countries are offering up large swathes of land amid clouds of corruption at rock bottom prices. Companies and investors are cashing in, while food-insecure governments are rushing to secure supply. The scramble began with the 2008 food price crisis, and continues unabated: in 2009, Africa saw 22 years’ worth of land investment in 12 months (see Figure 5).36
Research from the International Land Coalition, Oxfam Novib and partners identifies over 1,200 land deals reportedly under negotiation or completed, covering 80m hectares,37 since 2000 – the vast majority of them after 2007. Over 60 per cent of the land targeted was in Africa.38
Of course, investment can be a good thing. But price rises like the one we saw in 2008 spark a frenzy among investors, with many acting speculatively or in fear of losing out. And why not? The land is usually dirt cheap, apparently idle and, anyway, investing in land is a one-way bet these days: the price will only go up as it becomes more and more scarce. Investors have been acquiring land in much larger quantities than they could possibly use, leading the World Bank to wonder if the purpose is to lock in the highly favourable terms currently on offer and avoid future competition.39 The most comprehensive research to date suggests that 80 per cent of projects reported in the media are undeveloped, and only 20 per cent had begun actual farming.40
Box 1: A new breed of land investor
Where there is scarcity, there is opportunity. And financial investors are quick to turn opportunity into profit. Numerous hedge funds, private equity funds, sovereign wealth funds and institutional investors are now buying up farmland in developing countries. One is Emergent Asset Management, currently enjoying the arbitrage opportunity presented by ‘very, very inexpensive’ land values in sub-Saharan Africa.41
Emergent points out that Zambian land, though some of the most expensive in sub-Saharan Africa, is still one-eighth the price of similar land in Argentina or Brazil, and less than a twentieth of that in Germany. Emergent assumes that land will generate strong returns as prices rise – in part because of increasing demand for land from the food powers of Brazil and China.42
One of Emergent’s stated strategies is to identify poorly managed or failing farms and buy them up at distressed prices, then turn them around in order to boost returns. Rapidly appreciating land prices provide a ‘backstop’ should this risky strategy fail.
Agricultural investment is desperately needed. And Emergent argues that it is not simply building up land banks – it also invests to increase productivity and brings in new techniques and technologies, as well as making ‘social investments’ in schools, hospitals and housing. But the risk remains that some investors will be interested only in the easy return on land, rather than the trickier business of growing food.