Derek Byerlee

Symposium on Natural Resources

Oct 11th, University of Adelaide

The Land that Feeds Us:

Growing Scarcity and its Implications

Outlook on demand and supply of

cropland

Large-scale investments in land

Is there a global land rush?

Types of investors

Opportunities and risks

Australia—Should it be concerned?

Policy and regulatory options

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OECD Transitional China South Asia SE Asia Brazil sub-Saharan

Africa

Gro

wth

%/

yr)

Decomposition of Agricultural Growth, 1961-2009

TFP

Inputs

Irrigation

Land

Yield

Area

Source: Fuglie, Pers comm

Current cropland use 1,533 M ha

Future demand to 2030

120-240 M ha increase for crops, biofuels by

2030 (World Bank)

Need to also add losses (Lambin and Meyfroidt, 2011)

Urbanization—48 -100 M ha

Degradation—30 – 87 M ha

Substantial demand despite uncertainties

Productivity, biofuels, trade

SUBSTANTIAL BUT EXCEPTIONS

Higher yields of food

staples from GR saved

significant land area

But also:

• Demand effects

• Yield effects

• Still 18-27 M ha saved

• Half of this would have

been from forests

Source: Stevenson, Byerlee et al.,

PNAS, 2012

Intensification on the forest

margins raises returns to

land

• Higher yields provide

incentives to expand

• e.g., oil palm oil in

Indonesia highly profitable

• Intensification must go with

better land and forest

governance

Also role of certification—

Brazil soy

0

100

200

300

400

500

600

700

SS Africa Latin America E. Europe &

CA

E and S Asia MENA Australia Rest of world

Mil

lio

n h

a

Potential additional area

Current area 2005

Brazil,

Argen

Sudan,

Congo, ,

Mozam

Madag,

Zambia

Russia

Australia

Based on land that is not forested

or protected and pop dens < 25/km

Total of 450 M ha (≈ demand (high)

Source: World Bank and IIASA

700 M ha (> 3 times

Brazilian Cerrado) • Medium to high potential

• But only 50 M ha cropped

At least 240 M ha in

low density areas

• Poor infrastructure

half > 6 hrs from a town

• Need for technology

• Issues of land rights

ANNUAL RENT FOR 3 T/HA

OILSEEDS, 2009

COST OF LAND TO

PRODUCE A TON OF WHEAT

Savills rates Australia as a top

destination for potential returns

from investing in farmland

0 200 400 600

Mozambique

Ukraine

Brazil (MG)

Argentina

USA (Iowa)

Rent ($US/ha)

Non-

market

Source: Deininger and Byerlee, 2011 Source: Savills, 2012

0

1,000

2,000

3,000

4,000

5,000

6,000

Flow of FDI in Farming ($US Million)

All low and middle income

countries

Source: UNCTAD, 2009

SS AFRICA—18 M HA SINCE

2005-11 (FLOW)

AUSTRALIA AND USA

(STOCK—2011/12)

Food

25%

Biofuels

43%

Integrate

d

food/fuel

20%

Wood

& fibre

10%

Other

2%

Source: Schoneveld, 2011

USA—Foreign10 M ha (2011)

• Timber, pasture

But

• Domestic TIAA-CREF > $2 b

• Nine states do not allow

corporate ownership

Australia—Foreign 44 M ha

(ABS 2010)

• My estimate ≈ 43 M ha is

pastoral

Type of investor Type of Land Market

Private land

markets

Government-mediated

land concessions

State-owned

• Governments - x

• Sovereign wealth funds x x

• State-owned companies x

Private

• Agribusiness xxx xxx

• Energy xx xx

• Portfolio (managed) xx xx

• Portfolio (rent out) xxx

• Other (timber, speculative) x xx

Latin America

Mostly regional (El Tejar, Los Grobos, Adecoagro, Cresud, SLC,

Brasilagro, Agricola, Cosar, Maggi)

Argentina: Top 30 companies total 2.4 M ha (mostly rented).

Russia, Ukraine, Kazakhstan

―Superfarms‖. Ukraine: Top 40 companies manage 4.5 M ha;

Russia: Top 30 companies 6.7 M ha

SE Asia

Palm oil: 8 of world’s 25 largest agric prod. companies

Africa

Much FDI but very heterogeneous (med. size 40,000 ha)

Average return Risk

(%/yr) SDev

Government bonds 7.2 5.9

S&P 500 (equities) 11.4 17.0

Farmland 11.1 7.6

Urban real estate 9.2 7.1

Ratio of farmland rental price to sales price has fallen from 6% in 1970 to 3% today

A MAJOR OPPORTUNITY

HIGHLY INNOVATIVE

COMPANIES

Capital needs

Transfer of technology

and know-how

Export development

New industries--

biofuels

Employment

generation

Opening of remote

regions

OPPORTUNITY

RISE OF OIL PALM IN SE

ASIA

Value of SE Asian exports of PO >

All agric exports Africa

• Africa imports $3.5 Billion!

Billions at stake

• Big Asian companies investing

in Africa (> $3 M ha)

• 200-300 jobs/1000 ha

• Much potential for

smallholders

Fair deals?

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Expansion of Oil Palm

Latin America

SE Asia

Africa

AGRI-HOLDINGS IN

UKRAINE AVERAGE SIZE 60-80 K HA

Legacy of collective farms

Filling big gaps in:

• Technology

• Capital

• Market logistics

Lack land sales markets

• Very low rental values

Significant inflows of FDI

• Agribusiness companies

• Portfolio investors

Jury is still out

• E.g., Morgan Stanley

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2007 2008 2009 2010 2011

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mb

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Total land area in agri-holdings Number of holdings

RISKS UPLAND RICE INVESTOR IN

LIBERIA, 2009

Lack of land markets—

rights of users

Enclaves with few local

benefits

Negative environmental

impacts (forests)

Risks of highly unequal

agrarian structure

RIAU, INDONESIA, FOREST

COVER, 1982 RIAU, 2007

Source: WWF

(2008)

Source: WWF

(2008)

Background • Huge potential: 34 M ha

arable land; only 4 M. ha cropped

• 1998 law recognizes community rights

Policy to attract investors • New applications for 13 M

ha in 18 months

• Many grants not implemented

• 1.4 M ha overlapping rights

… then backtracking • Identify available land first

Investments overlap community rights

(in red)

Semi-mechanized

farming schemes 1970s+

• Investors from Gulf and

state credit

Converted up to 11 M ha

to large farms

• some farms >200,000 ha

Problems well

documented

• Trampled on rights of local

pastoralists, land conflicts

• Created few jobs

• Soil degradation

-1.25% pa

0.76% pa

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Yie

ld (to

ns p

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a)

Sorghum Sesame

Extremely low yields

AUSTRALIA AS A BEACON

OF FREE TRADE AND INV.

DO WE NEED AN OZ BRAND

ON THE LAND?

Not new

• Much FDI in pastoral areas

• Past investments in crops

Peak Downs in 1940s

Territory Rice, Tipperary,

NADC—failures in 60s, 70s

But cotton in NSW a success

Strong institutions and

regulations in place

Priorities

• Registry of transactions

• Avoid undermining ―Oz

brand‖ on free trade

INSTITUTIONS INVESTMENTS

Recognition and

demarcation of rights

• Low cost registries

Processes for land transfers

• Transparency

Land pricing/taxation

• Recognize income

generating potential

Level the playing field for

smallholders

Spatial analysis of land

availability

Coordination with

infrastructure investments

Strengthen investment

promotion agencies

• Screen projects

• Monitoring

Dispute resolution

Facilitate certification

State of markets Example Risks Policy needs

A Land and other

markets function well

Australia,

Argentina,

Sth Brazil

Few Transparency--registry

of foreign purchases

B Land and other

markets still

emerging

Ukraine,

Cent Brazil

Some Strengthen property

rights and information.

Level the playing field

for family farms

C Lack formal land

markets and rights

Africa,

parts of SE

Asia

Many Formalize property

rights, transparency.

Capacity to negotiate

and monitor investment

Tilt the playing field

toward smallholders

Principles for Responsible Agricultural

Investment (WB, FAO, IFAD)

Voluntary Guidelines on Land and

Natural Resources Tenure (FAO)

Private Sector Roundtables for

Certification

RTRS (Soy), RSPO (Palm Oil), BSI (Sugar) etc +

EU Biofuel standards

A land rush?

Yes—Sharp rise in investor interest (but area < than widely

reported)

Major drivers

Land scarcity with ―available‖ low cost land in some countries

High commodity prices (for now)

Low returns to alternative investments (for now)

What is to be done?

Intensification on existing land + forest governance

Everywhere including Australia--increase transparency and

monitor.

Africa and SE Asia--strengthen property rights of existing users and

work with investors to promote more inclusive outcomes.