"Oil wells go dry and coal seams run out, but for the first time since the Industrial Revolution began we are investing in energy sources that can last forever." –Lester R. Brown, Plan B 4.0: Mobilizing to Save Civilization.
Chapter 1. Selling Our Future: The Emerging Politics of Food Scarcity
As world food security deteriorates, a dangerous geopolitics of food scarcity is emerging in which individual countries, acting in their narrowly defined self-interest, reinforce the negative trends. This began in late 2007 when wheat-exporting countries such as Russia and Argentina limited or banned exports in an attempt to counter domestic food price rises. Viet Nam banned rice exports for several months for the same reason. Several other minor exporters also banned or restricted exports. While these moves reassured those living in the exporting countries, they created panic in the scores of countries that import grain. 21
At that point, as grain and soybean prices were tripling, governments in grain-importing countries suddenly realized that they could no longer rely on the market for supplies. In response, some countries tried to nail down long-term bilateral trade agreements that would lock up future grain supplies. The Philippines, a leading rice importer, negotiated a three-year deal with Viet Nam for a guaranteed 1.5 million tons of rice each year. A delegation from Yemen, which now imports most of its wheat, traveled to Australia with the hope of negotiating a long-term wheat import deal. Egypt has reached a long-term agreement with Russia for more than 3 million tons of wheat each year. Other importers sought similar arrangements. But in a seller’s market, few were successful. 22
The inability to negotiate long-term trade agreements was accompanied by an entirely new genre of responses among the more affluent food-importing countries as they sought to buy or lease for the long term large blocks of land to farm in other countries. As food supplies tighten, we are witnessing an unprecedented scramble for land that crosses national boundaries. Libya, importing 90 percent of its grain and worried about access to supplies, was one of the first to look abroad for land. After more than a year of negotiations it reached an agreement to farm 100,000 hectares (250,000 acres) of land in the Ukraine to grow wheat for its own people. This land acquisition is typical of the many that have introduced a new chapter in the geopolitics of food. 23
What is so surprising is the sheer number of land acquisition agreements that have been negotiated or are under consideration. The International Food Policy Research Institute (IFPRI) has compiled a list of nearly 50 agreements, based largely on a worldwide review of press reports. Since there is no official point of registry of such transactions, no one knows for sure how many such agreements there are. Nor does anyone know how many there will eventually be. This massive acquisition of land to grow food in other countries is one of the largest geopolitical experiments ever conducted. 24
The role of government in land acquisition varies. In some cases, government-owned corporations are acquiring the land. In others, private entities are the buyers, with the government of the investing country using its diplomatic resources to achieve an agreement favorable to the investors.
The land-buying countries are mostly those whose populations have outrun their own land and water resources. Among them are Saudi Arabia, South Korea, China, Kuwait, Libya, India, Egypt, Jordan, the United Arab Emirates, and Qatar. Saudi Arabia is looking to buy or lease land in at least 11 countries, including Ethiopia, Turkey, Ukraine, Sudan, Kazakhstan, the Philippines, Viet Nam, and Brazil. 25
In contrast, countries selling or leasing their land are often low-income countries and, more often than not, those where chronic hunger and malnutrition are commonplace. Some depend on the World Food Programme (WFP) for part of their food supply. The Financial Times reported in March 2009 that the Saudis celebrated the arrival of the first shipment of rice produced on land they had acquired in Ethiopia, a country where the WFP is currently working to feed 4.6 million people. Another major acquisition site for the Saudis and several other grain-importing countries is the Sudan—ironically the site of the WFP’s largest famine relief effort. 26
Indonesia has agreed to give Saudi investors access to 2 million hectares (4.9 million acres) of land, much of it to grow rice. The Saudi Binladin Group was negotiating to develop 500,000 hectares of land for rice production in Indonesia’s Papua province, but this has apparently been put on hold because of financial constraints. 27
For sheer size of investment, China stands out. The Chinese firm ZTE International has secured rights to 2.8 million hectares (6.9 million acres) in the Democratic Republic of the Congo on which to produce palm oil, which can be used either for cooking or to produce biodiesel fuel—indicating that the competition between food and fuel is also showing up in land acquisitions. This compares with the 1.9 million hectares used by the Congo’s 66 million people to produce corn, their food staple. Like Ethiopia and Sudan, the Congo also depends on a WFP lifeline. China is also negotiating for 2 million hectares in Zambia on which to produce jatropha, an oilseed-bearing perennial. Among the other countries in which China has acquired land or has plans to do so are Australia, Russia, Brazil, Kazakhstan, Myanmar, and Mozambique. 28
South Korea, a leading world corn importer, is a major investor in several countries. With deals signed for some 690,000 hectares (1.7 million acres) in the Sudan for growing wheat, South Korea is one of the leaders in this food security push. For perspective, this land acquisition is nearly three fourths the size of the 930,000 hectares South Korea now uses at home to produce rice, its staple food. The Koreans are also looking at the Russian Far East, where they plan to grow corn and soybeans. 29
One of the little noticed characteristics of land acquisitions is that they are also water acquisitions. Whether the land is rain-fed or irrigated, it represents a claim on the water resources in the host country. Land acquisitions in the Sudan that tap water from the Nile, which is already fully utilized, may simply mean that Egypt will get less water from the river—making it even more dependent on imported grain. 30
These bilateral land acquisitions raise many questions. To begin with, these negotiations and the agreements they lead to lack transparency. Typically only a few high-ranking officials are involved and the terms are confidential. Not only are many stakeholders such as farmers not at the table when the agreements are negotiated, they do not even learn about the deals until after they have been signed. And since there is rarely idle productive land in the countries where the land is being purchased or leased, the agreements suggest that many local farmers will simply be displaced. Their land may be confiscated or it may be bought from them at a price over which they have little say. This helps explain the public hostility that often arises within host countries.
China, for example, signed an agreement with the Philippine government to lease over a million hectares of land on which to produce crops that would be shipped home. Once word leaked out, the public outcry—much of it from Filipino farmers—forced the government to suspend the agreement. A similar situation developed in Madagascar, where South Korea’s Daewoo Logistics had pursued rights to more than 1 million hectares of land, an area half the size of Belgium. This helped stoke the political furor that led to a change in government and cancellation of the agreement. China is also running into on-the-ground opposition over its quest for 2 million hectares in Zambia. 31
This new approach to achieving food security also raises questions about the effects on employment. At least two countries, China and South Korea, are planning in some cases to bring in their own farm workers. Beyond this, is the introduction of large-scale commercial, heavily mechanized farming operations what is needed by the recipient countries, where unemployment is widespread? 32
If food prices are rising in the host country, will the investing country actually be able to remove the grain it has produced on acquired land? Or will it have to hire security forces to ensure that the harvests can be brought home? Aware of this potential problem, the government of Pakistan, which is trying to sell or lease 400,000 hectares, is offering to provide a security force of 100,000 men to protect the land and assets of investors. Who will these security forces be protecting the invested assets from? Will it be hungry Pakistanis? Or perhaps farmers whose land was confiscated to make the massive land sale to the investors? 33
Another disturbing dimension of many land investments is that they are taking place in countries like Indonesia, Brazil, and the Democratic Republic of the Congo where expanding cropland typically means clearing tropical rainforests that sequester large quantities of carbon. This could measurably raise global carbon emissions, increasing the climate threat to world food security.
The Japanese government, IFPRI, and others have suggested the need for an investment code that would govern these land acquisition agreements, a code that would respect the rights of those living in the countries of land acquisition as well as the rights of investors. The World Bank, the U.N. Food and Agriculture Organization, and the African Union are apparently each drafting codes of conduct. 34
Growing world food insecurity is thus ushering in a new geopolitics of food scarcity, one where the competition for land and water resources is crossing national boundaries. Many of the land acquisitions are in hunger-ridden, land-scarce countries, leaving less land to produce food for the people who live there. The risk is that this will increase hunger and political instability, leading to even more failing states.
No country is immune to the effects of tightening world food supplies, not even the United States, the world’s breadbasket. For example, if China turns to the world market for massive quantities of grain, as it recently has done for soybeans, it will necessarily look to the United States, which dominates world grain exports. For U.S. consumers, the prospect of competing for the U.S. grain harvest with 1.3 billion Chinese consumers with fast-rising incomes is a nightmare scenario. 35
In such a situation, it would be tempting for the United States to restrict exports—as it did, for example, with grain and soybeans in the 1970s when domestic food prices soared. But this is not an option with China, which now holds well over $1 trillion in U.S. debt. It is often the leading international buyer at the monthly auctions of U.S. Treasury securities that finance the growing U.S. fiscal deficit. In effect, China has become banker to the United States. Like it or not, U.S. consumers will share their grain with Chinese consumers, regardless of how high food prices rise. 36
21. Financial Times, “In Depth: The Global Food Crisis,” at www.ft.com/foodprices, updated 6 May 2008; USDA, op. cit. note 6.
22. Office of the President, Republic of the Philippines, “RP Assured of 1.5 Million Metric Tons of Rice Supply from Vietnam Annually,” press release (Manila: 26 March 2008); “Yemen to Seek Australian Food Cooperation,” WorldGrain.com, 19 May 2008; “Indonesia Set to Become Major Rice Exporter Next Year,” WorldGrain.com, 1 July 2008; “Bahrain to Own Rice Farms in Thailand,” TradeArabia, online business newswire, 30 May 2008; Javier Blas, “Nations Make Secret Deals Over Grain,” Financial Times, 10 April 2008; Maria Kolesnikova and Alaa Shahine, “Russia, Egypt Agree on Wheat Deals to Boost Shipments,” Bloomberg, 23 June 2009.
23. GRAIN, Seized! The 2008 Land Grab for Food and Financial Security (Barcelona: October 2008); USDA, op. cit. note 6; “Libya Agrees Deal to Grow Wheat in Ukraine,” Reuters, 27 May 2009.
24. Joachim von Braun and Ruth Meinzen-Dick, “Land Grabbing” by Foreign Investors in Developing Countries, Policy Brief No. 13 (Washington, DC: International Food Policy Research Institute, April 2009).
25. GRAIN, op. cit. note 23; von Braun and Meinzen-Dick, op. cit. note 24; “Buying Farmland Abroad: Outsourcing’s Third Wave,” The Economist, 21 May 2009.
26. GRAIN, op. cit. note 23; “Land Deals in Africa and Asia: Cornering Foreign Fields,” The Economist, 21 May 2009; Javier Blas, “Saudis Get First Taste of Foreign Harvest,” Financial Times, 4 March 2009; “Saudi’s Hadco Eyes Sudan, Turkey in Food Security Push,” Reuters, 17 February 2009; U.N. World Food Programme, “Countries,” at www.wfp.org/ countries, viewed 4 June 2009.
27. “Saudis Invest $1.3 Billion in Indonesian Agriculture,” Reuters, 24 March 2009; von Braun and Meinzen-Dick, op. cit. note 24.
28. Von Braun and Meinzen-Dick, op. cit. note 24; USDA, op. cit. note 6; U.N. Population Division, op. cit. note 5; “China ‘May Lease Foreign Fields’,” BBC News, 29 April 2008; Gurbir Singh, “China is Buying Farm Lands Abroad to Ensure Food Supplies at Home,” Business World (New Delhi), 16 May 2008; “China Eyes Russian Farmlands in Food Push,” Russia Today (Moscow), 11 May 2008; GRAIN, op. cit. note 24, p. 3; “Govt to Lease Land for FDI in Agriculture,” Myanmar Times, 11–17 September 2006; U.N. World Food Programme, op. cit. note 26.
29. USDA, op. cit. note 6; GRAIN, op. cit. note 23, pp. 4, 5; “Buying Farmland Abroad,” op. cit. note 25; Javier Blas, “Hyundai Plants Seoul’s Flag on 50,000ha of Russia,” Financial Times, 15 April 2009.
30. Erik Ansink and Arjan Ruijs, “Climate Change and the Stability of Water Allocation Agreements,” Fondazione Ene Enrico Mattei, Working Paper No. 16.2007 (February 2007), pp. 21–23.
31. “Memorandum of Understanding on Construction of Agriculture Technology Transfer Center and Grain Production and Processing Base in the Philippines,” available at www.newsbreak.com.ph/dmdocuments/special%20coverages/China%20Agri/Fuhua%20MOU.pdf, signed 15 January 2007; “China: ‘Going Outward’ for Food Security,” Stratfor, 30 April 2008; Luzi Ann Javier, “China’s Appetite for Filipino Paddies Breeds Farmer Opposition,” Bloomberg, 21 February 2008; Tom Burgis and Javier Blas, “Madagascar Scraps Daewoo Farm Deal,” Financial Times, 18 March 2009; “Zambia’s Opposition Condemns Reported Chinese Biofuels Project,” Earth Times, 2 April 2009.
32. GRAIN, op. cit. note 23, p. 10; “Buying Farmland Abroad,” op. cit. note 25.
33. Amena Bakr, “Pakistan Offers Farmland to Foreign Investors,” Reuters, 20 April 2009.
34. Michiyo Nakamoto and Javier Blas, “G8 Move to Halt ‘Farmland Grabbing’,” Financial Times, 26 May 2009; von Braun and Meinzen-Dick, op. cit. note 24.
35. USDA, op. cit. note 6; U.N. Population Division, op. cit. note 5.
36. “Cereal Offenders,” The Economist, 27 May 2008; “Commodities Boom Recalls 70s Surge; Prices Not There Yet,” Dow Jones Newswires, 27 June 2008; Fred H. Sanderson, “The Great Food Fumble,” Science, vol. 188 (9 May 1975), pp. 503–09; U.S. Department of the Treasury, “Report on Foreign Holdings of U.S. Securities at End-June 2008,” press release (Washington, DC: 30 April 2009); U.S. Department of the Treasury, “Major Foreign Holders of Treasury Securities,” current and historical data tables, at www.treasury.gov/tic, updated 16 January 2009.
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