Sunday, May 31, 2009

Outsourcing food production

Following in the footsteps of manufacturing in the 1980s and information technology in the 1990s, in the latest and most controversial examples of outsourcing, some of the major food importing nations are acquiring (buy or lease) vast tracts of poor countries' farmland in order to meet their foodgrain requirements. Supporters argue that such foreign investment are beneficial to the host countries, as they provide new seeds, techniques and money for agriculture, whereas opponents accuse it of neo-colonialism, wherein poor farmers will be pushed off land they have farmed for generations.

China, South Korea and the rich Middle Eastern countries are the largest investors in these farmlands, most of them in Africa. The International Food Policy Research Institute (IFPRI), estimates that between 15m and 20m hectares of farmland (fifth of all the farmland of the European Union) in poor countries, valued at between $20-30 bn, have been subject to transactions or talks involving foreigners since 2006. Unlike the colonial era farming ventures that sought to grow cash crops like coffee, tea, sugar or bananas, the current ones mostly focus on staples or biofuels — wheat, maize, rice, jatropha. Unlike the previous era when foreign farming investment was mostly private, the present transactions are between host governments and foreign regimes or companies closely tied to them, such as sovereign-wealth funds.

The sharp increase in food prices from 2007 and the middle of 2008 (The Economist index of food prices rose 78%) and the protectionist reaction among many major global grain producers, has given a fillip to this trend of procuring lands for growing foodgrains. The Arab countries, facing acute water shortage, see the African hinterlands, with their water resources, as ideal for meeting their food needs.

This wave of outsourcing is surely going to be one of the most controversial ones. Opponents point to the irony of Sudan, which is the recipient of the largest food-aid operation in the world, emerging as one of the largest hosts for such foreign investments in land and permitting the export of upto 70% of the crop. These deals have already aroused political opposition in countries like Madagascar, Zambia, and Cambodia. Such deals are accused of usurping the customary rights of local farmers over the government lands, strip hereders off the grazing pastures for their cattle, and deprive local population off water resources.

Update 1
Times has this nicely written article about the scramble for agricultural land in Africa, which atleast some people prefer to call agro-imperialism. Imagine famine ridden Ethiopia becoming the rice bowl of Saudi Arabia in a case of comparative advantage striking back!

Update 2
Ruchi Soya Industries, one of India's leading edible oil processors has signed a memorandum of understanding with the Ethiopian Government for cultivation of soyabean and setting up a processing unit on 61775 acres in Ganmbella and Benishangul Gumaz States on a lease basis for 25 years. It has an option to increase the area under cultivation to 123,550 acres.

Update 3 (22/12/2010)

NYT has this report on the great African land grab which is driving many Africans off their lands.

Update 4 (29/4/2012)

A compilation of all external land purchases in Africa reveals that 5% of all the continent's agricultural land have been purchased by outsiders. The report identifies 1008 deals since 2000 involving 76.33 m hectares of land – or roughly the size of Kenya. See the land compilation here.

1 comment:

Yusuf said...

Thank you very much for the information