the new "farmers"
DESCRIPTION
EMERGING AGRI-FOOD ACTORS IN THE CANADIAN AND AUSTRALIAN GRAINS SECTORS Recent macro conditions have made farmland/primary production more attractive to investors and corporate entities! Farm sector restructuring and consolidation has driven the need for outside capital! A range of new models brings new actors and logics into the agricultural space! This is a sector in flux, with a great deal of experimentation/uncertainty in the marriage between agriculture and finance! Must be cautious about some of the hype around ʻfinancializationTRANSCRIPT
EMERGING AGRI-FOOD ACTORS IN THE CANADIAN AND AUSTRALIAN GRAINS SECTORS!
THE NEW 'FARMERS'!
André Magnan!University of Regina, Canada!
CONTEXT!
• Food crises - major price spikes in key food commodities in 2007-8 and 2011!
• Food system financialization!• Increasing interpenetration of finance capital and agri-food sector
(Burch and Lawrence 2009; Isakson 2014)!• Manifested in, among other things, food commodity speculation
(Clapp 2012), private equity takeovers (Burch and Lawrence 2013), and farmland investment (Fairbairn 2014)!
• The global 'land grab' - tens of millions of hectares acquired by sovereign wealth funds, private investors and agribusinesses!
CONTEXT!
• Forecasts of increasing demand for food, fuel, and fibre à capital's increasing interest in ag/farmland!
• Takes many different forms depending on the social and geographical context!
• Canada and Australia are attractive because of:!• Highly industrialized agricultural sectors!• Stable political environments, rule of law, predictable
regulatory systems - low risk investment!• Cheap or 'undervalued' farmland!
Farmland Values!
Canada! Australia! US!
Avg farmland values ($USD/ha)!
$1600 (SK)! $1409 (NSW)! $7487!
Cost of land/ton of wheat production!
$1400! $900 - $1250 (NSW)!
$2400!
Increase in land values!
93% from 2002-2012 (SK)!
352% from 2002 - 2011!
75% (2002-2010)!
Sources: Savills 2012; Farm Credit Canada data!
CONTEXT!
• Neoliberal restructuring of agriculture in each country has led to:!• Fewer, larger, and more highly industrialized farms!• Rising debt: average debt/farm increased 47% from
2001-10 in Canada; by more than 100% from 2000-1 to 2006-7 in Australia!
• Volatile returns!• Agricultural industry seeking capital to fuel further
consolidation in order to achieve 'economies of scale'!• Result has been development of a number of new
'models' of farm structure/organization!
CONTEXT!Farmland/agricultural investment firms!
• Purchase farmland diversified by region, climate and crops/commodity!
• Farm management carried out by the firm, by tenant farmers, or outsourced to a third party!
• Investors include large pension funds, private individuals, sovereign wealth funds!
Corporate farming entreprises!
• Large, integrated farming operations!• Risks managed through geographic and commodity
diversification !• Privately owned or publicly listed corporations backed by
individuals, agribusiness firms, or other investors!
Farmland management firms!
• Manage farmland portfolio on behalf of investors, but don't own land!
• May source and acquire land, select and monitor tenants, and/or directly manage farm operations!
RESEARCH QUESTIONS!
• What are the social characteristics, organization, motivations and business strategies of these entities?!
• How do they understand their role in the agricultural sector?!
• How will their emergence affect rural development, agri-food restructuring and the viability of ʻtraditionalʼ family farms?!
• Have conducted qualitative interviews with 17 representatives of the new 'farmers'!
THE NEW 'FARMERS': CANADA!
Name! Model! Investors! Investment! Land base!Assiniboia Capital Corp.!
Farmland investment firm (own lease-out)!
Canada Public Pension Plan!
$CAD 65 million! 46 500 ha!
AgCapita Partners, LP!
Farmland investment firm (own lease-out)!
Private investors (limited partnership)!
$CAD 100 million!18 000 ha!
Bonnefield! Farmland investment firm (own lease-out)!
Private investors (limited partnership)!
$CAD 51 million! 10 500 ha!
MaxCrop! Farmland investment firm (own lease-out and own-operate)!
Private investors (individually managed)!!
$CAD 70 million! 28 000 ha!
One Earth Farms!
Corporate mega-farm! Sprott Resource Corp.!
$CAD 107.5 million!
60 700 ha (2013)!
Broad Acre! Corporate mega-farm! Privately owned! ??! 30 000 ha!
THE NEW 'FARMERS': AUSTRALIA!
Name! Model! Investors! Investment (millions)!
Land base!
Laguna Bay Pastoral!
Agricultural investment firm (own-operate)!
Foreign sovereign wealth and institutional investors!
$AUS250! ??!
Sustainable Agriculture Fund!
Agricultural investment firm (own-operate)!
Australian institutional investors!
$AU150! 29 200 ha!
Warrakirri! Agricultural investment firm (own-operate)!
Australian institutional investors!
$AU200! 75 000 ha!
Macquarie Pastoral Fund!
Agricultural investment firm (own-operate)!
Private and institutional investors!
$AU670! 3.6 million ha!
PrimeAg! Corporate mega-farm! Publicly listed! $AU300! ??!
Hassad Australia! Corporate mega-farm! Qatar sovereign wealth fund!
$AU150! 250 000 ha!
Growth Farms! Farmland management! Private partners! $AU350! 110 000 ha!
KEY THEMES: World food narrative!
"[W]e saw an opportunity ... in agriculture and itʼs all of the things that people are talking about or reading about, where youʼve got declining arable land per capita, youʼve got declining yield growth in technology, youʼve got water issues, climate change, urbanization, pollution. Youʼve got changing diets in the developing world thatʼs leading to increased pressure on grain supply. Youʼve got all these secular trends that were really in our view going to make agriculture a great place to invest in the coming years" Corporate mega-farm!
KEY THEMES: World food narrative!
• Yet, a few expressed skepticism about the world food demand narrative!
• Over the very long term, commodity prices have been declining!• When prices do rise, farmers respond quickly with increased
production!• World food supply has until now kept pace with population growth!
KEY THEMES: Competing models!
• Wide range of views about the viability/merits of different 'models'!
• Some strongly favoured the 'own-operate' model:!• Want exposure to commodity upside!• Reduces 'agency risk' -- i.e., misalignment of tenant-
owner motives and time-horizons!• Exposed to production risks one way or another, so
better to be in control!• Own lease-out model may be unsustainable since
investors are only in it for the 'land play'!
KEY THEMES: Competing models!
• Others favoured the 'own lease-out' model:!• Easier to grasp, less risky for investors!• Provides both capital gain and rental income!• Can help family-farmers expand their land base!
"If you strip away all the complexity and the numbers, thatʼs the appeal of farmland as an investment - simplicity." Farmland investment firm!"[W]e see ourselves as being able to play a role with the mid- to larger family farm operations, and being able to be a financial partner on land ... we can empower good quality producers to keep doing what theyʼre doing, but to do it on a bigger scale or to do it at an efficient scale" Farmland investment firm!
KEY THEMES: Competing models!
• Family-farms recognized as being:!• Leaner and more responsive when faced with time-
sensitive decisions!• Having a long time-horizon, which allows them to ride out
bad periods!• Corporate and investor-backed models recognized as
benefitting from:!• Economies and efficiencies of scale, though these have
some limits!• Access to capital and lack of debt!• Ability to adopt new technology!
KEY THEMES: !Disconnect between farming and finance!
• Investor response to various schemes has been highly variable!• Some expressed difficulty in raising capital for farmland/
agricultural investment!• Need to educate wary investors about agriculture!• Low returns, long time-horizons unattractive to many
investors!• In Australia, failed investment schemes (timber) have scared
off domestic investors!• Little tolerance for bad years!
"[T]he main lesson about the listed market was the short term focus of investors and their lack of real understanding of intrinsic parts of agriculture." Publicly listed farming corporation!
KEY THEMES: !Environment and community!
• Consistent recognition of need for environmental sustainability!• Yet, framed in narrow, rationalist terms!• Key preoccupation: maintaining soli fertility through no-till,
crop rotation and other practices!• Reliance on key productivist technologies: GM crops, agro-
chemicals and precision-ag!• Some sensitivity to public and community perceptions:!• “[W]e have to be a good corporate citizen. When our
managers went to town, they needed to be respected rather than pilloried. No swagger.” Corporate mega-farm!
• Recognition that the corporate model can have adverse effects!
Conclusion!
• Recent macro conditions have made farmland/primary production more attractive to investors and corporate entities!
• Farm sector restructuring and consolidation has driven the need for outside capital!
• A range of new models brings new actors and logics into the agricultural space!
• This is a sector in flux, with a great deal of experimentation/uncertainty in the marriage between agriculture and finance!
• Must be cautious about some of the hype around ʻfinancializationʼ!
Remaining Questions!
• How is the relationship among land, enterprise, and labour changing?!
• How will new agri-food actors relate to family-based operations?!
• How will the new entrants influence land use, farm practices, and ecological sustainability?!
• What kind of rural development?!