A new rush to invest in agricultural production and the new land grab for Africa: Driver for agricultural development or the birth of a new food imperialism? Maneuvering to assure security of supply in the new global trade economy of "starve thy neighbour"By the end of the 20th century commodity prices were depressed, mainly because of sluggish demand growth in relation to supply. Their value had been on a downward trend in real terms since the 1980's. Since 2002 however, commodity prices have rebounded, driven largely by growing demand in newly industrialising developing countries. If the cycle of growth and industrialization in these emergent economies continues, the current commodity boom may mark the beginning of a changed commodity economy in the twenty-first century characterized by a long-term demand growth for, and consequent resurgent value of, primary commodities in world trade.
(See recent post: "Changing Commodity Economy").The emergent economies driving this demand growth (China, India etc.) and increasingly competing with the developed world for global resources are inevitably maneuvering to secure their current and expanding long term commodity needs. This has led to a general resource "grab", or rush to secure access/rights to commodity resources principally concentrated in the developing world. Commodity rich Africa has inevitably become a major focus of this scramble for resources, and rising commodity demand has driven economic growth in the continent which has outpaced the developed world (though not developing Asia). This indecorous and at times unscrupulous rush to secure a share of Africa's resources however, has inevitably invited comparison to the "scramble for Africa" by western colonial powers at the end of the 19th century.
While the scramble for mineral and oil resources is a widely acknowledged geo-political phenomenon, with recent hikes in agro-commodity prices, there has emerged a new trend: a scramble for food supplies by direct purchase of agricultural land and investment in agricultural production, mostly in the developing world. Recent record food staple prices left big net food importers and big emergent markets like China and Saudi struggling to secure supply as well as provoking the slashing of import tariffs across the developing world - succeeding almost overnight where WTO talks had failed - but also provoking countries across Asia to impose export restrictions or bans on certain food products.
Apparently as a reaction to this environment, a number of countries are clearly maneuvering to secure food supply and price: Under a recently announced policy proposal being considered by Beijing, Chinese companies will be encouraged to buy farmland abroad, particularly in Africa and South America, to help guarantee food security. Saudi Arabia meanwhile, is looking at plans to establish joint ventures in Thailand, the world's largest exporter of rice, which guarantee the product to to Saudi and any surplus to other GCC countries in a bid to improve long-term food security. The UAE have been investing in agricultural land and production in Pakistan over the last year. Etc.
China already runs an agricultural trade deficit, and, while they are investing increasingly in rural development domestically, demand growth outstrips supply growth. Saudi meanwhile, while rich in oil, is unable to produce domestically the food crops it requires and in fact is scaling back what agricultural production it has in order to conserve on diminishing water resources. Faced with the prospect of higher global food commodity prices and increased price volatility, countries then, like China whose growing consumption outstrips growth in supply and oil rich but otherwise resource impoverished middle eastern countries like Saudi are clearly looking to bypass global commodity markets in order to secure directly affordable long term food supplies.
Saudi officials, apparently without appreciating the irony of this, have declared the necessity of purchasing, for example, rice supply, since they cannot be expected to remain at the mercy of price setting major exporters like India. These comments are thrown in an even more interesting light when considered against current proposals by Vietnam for the development of an OPEC style cartel of rice producers. Jiang Wenlai of the China Agricultural Science institute meanwhile was quoted as saying “China must ‘go out’ because our land resources are limited".
What though will these sort of policies mean for developing countries? Jiang Wenlai is quoted as saying "It will be a win-win solution that will benefit both parties by making the maximum use of the advantages of both sides.” It is not especially clear from this in what sense the developing countries China invests in will benefit, and Jiang Wenlai could not be reached for further comment. It is I suppose suggested however, that foreign investment in agricultural development and improved productivity etc. will benefit the target countries. The situation however, is undoubtedly not this simple, what are we witnessing: new investment in agricultural production? Or the emergence of a new food imperialism and "starve thy neighbour" trade economy?
Painful? Undoubtedly, but are high oil prices really such a terrible thing or are they a medicine we have to swallow? Below I briefly list some of the ways in which high oil prices could be good for us. I will go on to explore some of these points and others in brief articles to follow.
