Quest for food security breeds neo-colonialists

The Times (London) | March 5, 2009

Carl Mortished: World business briefing

In Venezuela, the national guard has taken over control of the country's rice mills. Hugo Chávez, Venezuela's President, accused rice producers of evading government price controls and the President has suggested that the owners, which include the American agribusiness firm, Cargill, would be compensated with “paper”.

Agribusiness is the latest target for the Venezuelan leader's bombast but President Chávez must be feeling a bit miffed. He has been upstaged: when banks are nationalised in the heart of the City of London and their bosses threatened with confiscation of their personal property, the seizure of a few rice mills by a South American autocrat looks feeble.

In isolation, it looks trifling but we should look again at what governments are doing in agriculture. The rice shortage in Venezuela, threats of government intervention in farms in Argentina and a land grab by sovereign wealth funds in the Gulf tells us more about the future than Sir Fred Goodwin's pension.

The Argentine Government has been at loggerheads with its farmers over export taxes and low domestic grain prices. The Government accuses farmers of hoarding food and over the weekend, Cristina Fernandez, the Argentine President, threatened to intervene in the economy. A new state-controlled agency would intervene, buying up grain and cattle in an attempt to control prices in a country that is world No 2 in corn and No 3 in soya bean.

The black comedy of the banks has persuaded us to forget about food security. Food price inflation gripped the markets early last year and has surged again at the beginning of this year. For most of the world food continues to be a worry.

The cost of food has not returned to the low levels that preceded the doubling and tripling of wheat and rice prices over 2007 and 2008. Credit is costly for farmers and after last year's massive harvest that brought down prices, planting has been weak. Anxiety about the future has spurred those countries with cash to make big investments in the soil.

In January, a Saudi group, Hail Agricultural Development Company (Hadco), said that it would invest $45 million (£32 million) in northern Sudan, leasing about 10,000 hectares on which it would grow wheat and corn for export to Saudi Arabia. Hadco used to produce wheat in Saudi Arabia but the enormous cost of irrigation was self-defeating and the Saudi Government is encouraging its enterprise to go forth and buy land wherever it can get it to feed hungry Saudis at home.

Saudi enterprises are scouting the world; there have been missions to Brazil and Pakistan. The Bin Laden group is mulling over a plan to grow rice in Indonesia. In hot pursuit are the United Arab Emirates, Kuwait and Qatar. Sheikh Khalifa bin Zayed Al Nahyan, the President of the UAE, recently visited Kazakhstan in search of farmland and the Abu Dhabi fund for Development has bought vast tracts of Sudanese land for cultivation.

Libya has invested in farmland in Ukraine while Cambodia is hoping to do multibillion-dollar deals with Kuwait and Qatar. The Sudanese Government is marketing some 800,000 hectares and it is gaining a huge response in the Gulf states, which import 60 per cent of their food and would like to reduce their vulnerability to food price spikes.

There are deals to be done. As Hun Sen, the Cambodian Prime Minister, noted: “Those countries have oil but no rice. I think the Gulf can become our rice market.”

There is an assumption of equality in the transaction — the trade of rice for oil — but history suggests that the harvesting of resources by those with capital in foreign countries which lack capital is a risky business.

The director-general of the UN's Food and Agricultural Organisation suggested that the drive to buy up farmland in poor countries would create a “neo-colonial agricultural system”.

In an investment late last year in Madagascar, a country where 600,000 depend on food aid, Daewoo, the Korean conglomerate, is leasing 1.3 million hectares of land to produce 4 million tonnes of corn for export. In Sudan, where the UN's World Food Programme is feeding millions of people, the irony of the Saudi farms is particularly bleak.

But perhaps the UN's hand-wringing is just sentimental. Deals will be done and the rush to buy land has begun in Europe, too. Funds are moving into Central and Eastern Europe, Ukraine and Russia. According to Bidwells, the agribusiness consultancy, good quality arable land in Romania can be acquired at a fifth of its price in the UK. Institutions are beginning to show interest and adventurous farmers from Scotland, Ireland, Denmark and Italy, countries where land is expensive, are venturing east. It's a trickle of emigration but this time the emigrants bring capital as well as skills, more like Victorian planters than the barefoot peasants that once fled Europe to America.

The shoe is on the other foot and today's question is how the landed poor can best trade their resource.

The Saudis know about neo-colonialism. If they are now engaged in their own colonial venture, it is only because they seized control of an American venture half a century ago. But these Arabian plantations are not like the Victorian plantations. They are defensive, a response to soaring prices, the fear of climate change and drought.

The people of the Middle East are trying to buy a lifeline, knowing full well that oil is pointless when there is nothing to eat. They know about hoarding, boycotts and cartels and if push comes to shove, would you rather own a litre of petrol or a sack of rice?
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