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June 08, 2008

Many questions as industrial agriculture is proposed for poor countries

by Dave Donelson

Vultures are circling above the scene of recent food riots in Somalia, Kenya, Uganda, and elsewhere in Africa—but that may actually be a positive sign. That's because the vultures, everyone from huge investment funds to ag industry titans like John Deere, Monsanto, and DuPont, are betting big bucks on the one place in the world where’s farming’s potential has barely been scratched—Africa. Whether they will do great good or great harm remains to be seen.

The NY Times reported recently that major money players ... are buying up everything from great swaths of farmland to grain elevators and shipping concerns in order to cash in on the continuing shortages in world food markets. According to the Times, Emergent is raising as much as $750 million to invest in farmland in sub-Saharan Africa. The idea is to industrialize agriculture operations the way family farms were consolidated into corporate behemoths in the U.S. following the Great Depression.

Susan Payne, founder and chief executive of Emergent, was quoted as saying

“…land values are very, very inexpensive, compared to other agriculture-based economies. Its microclimates are enticing, allowing a range of different crops. There’s accessible labor. And there’s good logistics — wide open roads, good truck transport, sea transport.”

What wasn’t said, of course, is that labor is also excruciatingly cheap in most of Sub-Saharan Africa. When researching Heart of Diamonds, my novel set in the Democratic Republic of Congo, I was told by one large-scale farmer that he pays workers about $50 a month—wages considered quite generous in the region where entire families scrape by on incomes of $2 (or less) per day. It’s also worth noting that if he weren’t employing them, his workers would have absolutely no practical source of cash income. Their choices would be to feed themselves on dirt-scrabble crops or migrate to urban areas where their prospects might be even dimmer.

One of the big questions about industrial agriculture in Africa is what will happen to the subsistence farmers whose land is gobbled up by corporations on the other side of the globe? On the one hand, they can be expected to land jobs with the corporate farms or other industries like transportation and food processing that will come along with them and to otherwise benefit from the general economic growth. It should be pointed out that many small farmers in the region don’t own their real estate; often they farm it under permission from their tribe or another larger regional authority. They won’t profit from the sale of the land, but neither will they lose an asset.

On the other hand, the introduction of more modern technology and methods to increase yields and operational efficiency will mean those farms will require fewer workers overall, so there will probably be large-scale workforce displacement as there was in the consolidation phase of America’s agricultural economy. Recognizing the problem, Emergent told the Times it plans to provide clinics and schools for local labor. A facile answer to the problem, perhaps, but at least they recognize that their presence can have negative effects.

There are many, many other questions that deserve answers, too. Who will keep the bulldozers out of the rainforests? Large-scale farms managed by conglomerates thousands of miles away aren’t usually noted for eco-friendly practices unless strictly regulated. Will the ag industry titans grow crops and ship them elsewhere for processing and sale, or build plants and distribution centers closer to the land, providing more jobs and increasing the food supply in the countries of origin?

The biggest question, though, is whether the new presence of investment funds in the market will create a farmland bubble in Africa and elsewhere, driving smaller farmers off the land through ever-increasing prices until a tipping point is reached and they all run away to chase some other investment fad. Sovereign wealth funds and hedge fund money managers aren’t noted for long-term commitments. These are also the folks who brought us real estate-based financial instruments so complicated the people who created them don’t really know how they work. I must confess to a bit of trepidation when I see them messing with the world’s food supply.


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