Private Investment and Corporate Farming...Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola,...
Transcript of Private Investment and Corporate Farming...Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola,...
![Page 1: Private Investment and Corporate Farming...Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola, Maggi) ... supervision) more of an issue than access to ... However, implementation failures](https://reader035.fdocuments.in/reader035/viewer/2022070821/5f22a637bf292e3b5d18aeb3/html5/thumbnails/1.jpg)
Derek Byerlee Investment in Agriculture FAO, Dec 12-13th, 2011
Private Investment and Corporate Farming
![Page 2: Private Investment and Corporate Farming...Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola, Maggi) ... supervision) more of an issue than access to ... However, implementation failures](https://reader035.fdocuments.in/reader035/viewer/2022070821/5f22a637bf292e3b5d18aeb3/html5/thumbnails/2.jpg)
WB—Land acquisition study Rise of Large Farms in Land Abundant
Countries: Do They Have a Future?, World Development (with Deininger)
Field visits and interviews with LS Farms Historical review of FDI in agriculture
(under construction)
![Page 3: Private Investment and Corporate Farming...Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola, Maggi) ... supervision) more of an issue than access to ... However, implementation failures](https://reader035.fdocuments.in/reader035/viewer/2022070821/5f22a637bf292e3b5d18aeb3/html5/thumbnails/3.jpg)
FAMILY FARMING OVERLAPS MANAGEMENT AND OWNERSHIP
CORPORATE MODEL SEPARATES FACTOR OWNERSHIP WITH CONTRACTS WITH MANAGEMENT
Family-management
Land
Capital Labor
Management
Land
Capital Labor
![Page 4: Private Investment and Corporate Farming...Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola, Maggi) ... supervision) more of an issue than access to ... However, implementation failures](https://reader035.fdocuments.in/reader035/viewer/2022070821/5f22a637bf292e3b5d18aeb3/html5/thumbnails/4.jpg)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
% farms % sales
Farm ownership USA
Other
Nonfamily corps
Family partners and corps Family ownership
0
2
4
6
8
10
12
14
0
20
40
60
80
100
120
140
160
180
200
1900 1920 1940 1960 1980 2000
Trends in USA, 1900s Farm size (ha)
Manufacturing wage ($1992/hr)
Gardiner, 2002
![Page 5: Private Investment and Corporate Farming...Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola, Maggi) ... supervision) more of an issue than access to ... However, implementation failures](https://reader035.fdocuments.in/reader035/viewer/2022070821/5f22a637bf292e3b5d18aeb3/html5/thumbnails/5.jpg)
0 5
10 15 20 25 30 35 40 45
% Value added % Market cap 0.2%
Integrated companies not included
300 Publicly Listed Companies in the Agricultural Value Chain
![Page 6: Private Investment and Corporate Farming...Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola, Maggi) ... supervision) more of an issue than access to ... However, implementation failures](https://reader035.fdocuments.in/reader035/viewer/2022070821/5f22a637bf292e3b5d18aeb3/html5/thumbnails/6.jpg)
Developing Developed Agric Production • 1989-91 0.6 0 • 2005-07 3.3 0 Food and beverage • 1989-91 2.4 4.8 • 2005-07 6.8 34.1 0
1,000
2,000
3,000
4,000
5,000
6,000
1990
19
92
1994
19
96
1998
20
00
2002
20
04
2006
Flow of FDI in Agriculture ($US M) Flow of FDI ($US B/yr)
Source: UNCTAD, 2009
![Page 7: Private Investment and Corporate Farming...Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola, Maggi) ... supervision) more of an issue than access to ... However, implementation failures](https://reader035.fdocuments.in/reader035/viewer/2022070821/5f22a637bf292e3b5d18aeb3/html5/thumbnails/7.jpg)
Plantation crops—often large scale Coordination of production and processing Need for quick processing, bulky raw material favor LS
Often high upfront investments—tree crops, mills Year round labor demand—permanent labor Risky markets—export oriented, tree crops
Food crops (grains and oilseeds)—traditionally family farms
Investments for land development, settlement, and land speculation (not covered here)
![Page 8: Private Investment and Corporate Farming...Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola, Maggi) ... supervision) more of an issue than access to ... However, implementation failures](https://reader035.fdocuments.in/reader035/viewer/2022070821/5f22a637bf292e3b5d18aeb3/html5/thumbnails/8.jpg)
Sugar cane
Tea Rubber Bananas Oil palm
Grains/oilseeds
Coordination harvest & processing
H H L H H L
1st stage processing K
M-H L-M L L M L-M
Production front-end K
M-H M-H L-M M-H M L
Year round labor
M H H H M L
Risk relative to grains
L M H L-M M
H=High, M=Medium, L=Low
![Page 9: Private Investment and Corporate Farming...Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola, Maggi) ... supervision) more of an issue than access to ... However, implementation failures](https://reader035.fdocuments.in/reader035/viewer/2022070821/5f22a637bf292e3b5d18aeb3/html5/thumbnails/9.jpg)
Historical bête noire of plantation agric Was highly labor intensive processing Slave labor, later indentured migrants Contract farming in higher population density
Recent vertical integration to energy: economies of scale in processing + mech, biofuels +
standards Initial investment $ 1+ B and 70K ha. (Cosan 600+K
ha; Shell 2x) Early family-companies, now regional going
global (Brazil, China, South Africa)
![Page 10: Private Investment and Corporate Farming...Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola, Maggi) ... supervision) more of an issue than access to ... However, implementation failures](https://reader035.fdocuments.in/reader035/viewer/2022070821/5f22a637bf292e3b5d18aeb3/html5/thumbnails/10.jpg)
Historically large scale for export Highly labor intensive (harvesting) and startup K
Emergence of global VI companies (brands) Institutional innovations for greater equity Kenya top exporter with 2/3 smallholders, who also
own factories and KTDA (with donor/gov support) Also growing employee equity ownership in
companies (India, Rwanda, Tanzania)
![Page 11: Private Investment and Corporate Farming...Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola, Maggi) ... supervision) more of an issue than access to ... However, implementation failures](https://reader035.fdocuments.in/reader035/viewer/2022070821/5f22a637bf292e3b5d18aeb3/html5/thumbnails/11.jpg)
Wild to cultivated crop initially plantations Labor and some land issues
Global VI companies early responding to strategic industrial input Also spectacular failures (Fordlandia 1 M+ ha)
Early emergence of smallholders although uneven playing field (on-farm processing) Asia 40% smallholder by 1940, now 90% Africa—large scale but smallholders emerging
![Page 12: Private Investment and Corporate Farming...Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola, Maggi) ... supervision) more of an issue than access to ... However, implementation failures](https://reader035.fdocuments.in/reader035/viewer/2022070821/5f22a637bf292e3b5d18aeb3/html5/thumbnails/12.jpg)
0%
20%
40%
60%
80%
100%
Est
ate
Est
ate
Est
ate
Est
ate
Sm
allh
olde
r
Sm
allh
olde
r 1922 1963 1978 1995 1964 "1995"
Rubber in Malaysia
Capital
Labor and management Land
Source: Barlow, 1997
![Page 13: Private Investment and Corporate Farming...Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola, Maggi) ... supervision) more of an issue than access to ... However, implementation failures](https://reader035.fdocuments.in/reader035/viewer/2022070821/5f22a637bf292e3b5d18aeb3/html5/thumbnails/13.jpg)
Bete noire of the 20th century Export industry by few large scale VI
companies Land issues dominated (disease buildup and large
tracts for shifting plantations) United Fruit ownership of 1 M ha+ in CA
From 1960s, largely moved to contracted medium scale family-based farms Political backlash on land and powerful interests New varieties for disease
![Page 14: Private Investment and Corporate Farming...Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola, Maggi) ... supervision) more of an issue than access to ... However, implementation failures](https://reader035.fdocuments.in/reader035/viewer/2022070821/5f22a637bf292e3b5d18aeb3/html5/thumbnails/14.jpg)
Efficient unit for mill 10K ha and overall establishment costs of $40 M
Global companies then Asian Very large VI companies with 600K+ ha, $1 B rev,
8 of top world’s top 25 agric prod companies Asian companies investing in Africa and LA
Smallholders increasing 30+ % of Indonesian production
![Page 15: Private Investment and Corporate Farming...Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola, Maggi) ... supervision) more of an issue than access to ... However, implementation failures](https://reader035.fdocuments.in/reader035/viewer/2022070821/5f22a637bf292e3b5d18aeb3/html5/thumbnails/15.jpg)
No historical examples of sustained corporate investment in LS farming State driven often for food security (UK post-war
Africa and Aust , Sudan mechanized scheme, Saskatoon on the savannah, FSU Universal failures
Private—”Bonanza farms” in US but soon converted to family farms
Rise of corporate grain/oilseed farming only since 1990
![Page 16: Private Investment and Corporate Farming...Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola, Maggi) ... supervision) more of an issue than access to ... However, implementation failures](https://reader035.fdocuments.in/reader035/viewer/2022070821/5f22a637bf292e3b5d18aeb3/html5/thumbnails/16.jpg)
Russia, Ukraine, Khaz(RUK)—historical legacy of LS
Emergence of “superfarms”. Ukraine: Top 40 companies manage 4.5 M ha; Russia: Top 30 companies 6.7 M ha (mostly home grown but listed companies, some FDI)
Highly variable performance—Ivolga 1 M+ha?
Latin America Emergence of very large farming companies mostly national (El
Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola, Maggi) Argentina: Top 30 companies total 2.4 m ha (mostly rented).
Brazil Cerrado: 20% of the farmland foreign owned
Operate regionally, some FDI and many raise international capital
![Page 17: Private Investment and Corporate Farming...Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola, Maggi) ... supervision) more of an issue than access to ... However, implementation failures](https://reader035.fdocuments.in/reader035/viewer/2022070821/5f22a637bf292e3b5d18aeb3/html5/thumbnails/17.jpg)
0
50
100
150
200
250
300
350
400
Cos
t (U
S$/t)
Comparative Production Costs, Soybean, 2007-08
Other
Inputs
Land
0
20
40
60
80
100
120
140
160
180
200
Cos
t (U
S$/t)
Comparative Production Costs, Maize, 2007-09
Inputs
Other
Land
![Page 18: Private Investment and Corporate Farming...Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola, Maggi) ... supervision) more of an issue than access to ... However, implementation failures](https://reader035.fdocuments.in/reader035/viewer/2022070821/5f22a637bf292e3b5d18aeb3/html5/thumbnails/18.jpg)
HISTORY OF FAILURE OF LARGE-SCALE FARMS IN AFRICA
UPLAND RICE INVESTOR IN LIBERIA, 2009?
1940s—British groundnut scheme in Tanzania • Overlooked smallholders
1970s—Sudan mechanized
schemes
1980s--Saskatoon on the savannah—wheat E Africa
2000s—Non-traditional investors
![Page 19: Private Investment and Corporate Farming...Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola, Maggi) ... supervision) more of an issue than access to ... However, implementation failures](https://reader035.fdocuments.in/reader035/viewer/2022070821/5f22a637bf292e3b5d18aeb3/html5/thumbnails/19.jpg)
Technology
Size (ha)
Yield (t/ha)
Cost ($/t)
Existing Company 8000 0.5 277
Large farm 400 0.4 495
Smallholder 20 0.5 204
Zero tillage, fertilizer and others
Large farm 400 4.0 125
Smallholder 20 3.0 143
Source: Min of Agriculture, 2009
-1.25% pa
0.76% pa
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
Yie
ld (t
on
s p
er H
a)
Sorghum Sesame
Mechanized rainfed system, Sudan; Lose-lose investments
Source: Gov of Sudan, 2009
![Page 20: Private Investment and Corporate Farming...Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola, Maggi) ... supervision) more of an issue than access to ... However, implementation failures](https://reader035.fdocuments.in/reader035/viewer/2022070821/5f22a637bf292e3b5d18aeb3/html5/thumbnails/20.jpg)
Factors favoring large scale Opening new lands (need K, lack L) Standards and certification—fixed costs
Able to overcome diseconomies of size at level of operating units: New technologies (ZT, GMOs, ITs) Institutional innovations
![Page 21: Private Investment and Corporate Farming...Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola, Maggi) ... supervision) more of an issue than access to ... However, implementation failures](https://reader035.fdocuments.in/reader035/viewer/2022070821/5f22a637bf292e3b5d18aeb3/html5/thumbnails/21.jpg)
Specialized management companies combine production factors • Argentina—”Pools de
Siembra” Lease land and machinery Raises funds Assets—Human capital-
management • State of art IT systems
![Page 22: Private Investment and Corporate Farming...Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola, Maggi) ... supervision) more of an issue than access to ... However, implementation failures](https://reader035.fdocuments.in/reader035/viewer/2022070821/5f22a637bf292e3b5d18aeb3/html5/thumbnails/22.jpg)
Diversified portfolio—spatially and by product Smooth covariance of risks
Market imperfections and transactions costs Access to cheaper finance in global markets Argentinean companies 10-20% price discount inputs in
monopsonistic markets Vertical integration to overcome poor logistics Own intensive livestock operations Own rails and ports (Brazil, Ukraine)
![Page 23: Private Investment and Corporate Farming...Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola, Maggi) ... supervision) more of an issue than access to ... However, implementation failures](https://reader035.fdocuments.in/reader035/viewer/2022070821/5f22a637bf292e3b5d18aeb3/html5/thumbnails/23.jpg)
Distorted capital markets such as subsidized interest rates e.g., Brazil
Regulations that promote mechanization Labor laws that add transactions costs
Low or zero land prices that encourage risky investments and LS farming Mozambique $0.60/ha Forest governance (Indonesia, Brazil)
![Page 24: Private Investment and Corporate Farming...Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola, Maggi) ... supervision) more of an issue than access to ... However, implementation failures](https://reader035.fdocuments.in/reader035/viewer/2022070821/5f22a637bf292e3b5d18aeb3/html5/thumbnails/24.jpg)
A MAJOR OPPORTUNITY WITH SIGNIFICANT RISKS
Fills a huge investment gap
Transfer of technology and know-how
Export development New industries--biofuels Employment generation Opening of remote
regions
Lack of land markets—rights of users
Enclaves with few local benefits
Negative environmental impacts (forests)
Risks of highly unequal agrarian structure • Governance, services
![Page 25: Private Investment and Corporate Farming...Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola, Maggi) ... supervision) more of an issue than access to ... However, implementation failures](https://reader035.fdocuments.in/reader035/viewer/2022070821/5f22a637bf292e3b5d18aeb3/html5/thumbnails/25.jpg)
State of markets
Example Risks Policy needs
A Land and other markets function well
Australia, Argentina, Sth-C Brazil
Few Transparency--registry of foreign purchases
B Land and other markets still emerging
RUK Amazon Indonesia
Significant Strengthen property rights, contracts, information
C No formal land markets
sub-Saharan Africa, Cambodia
Major Transparency, careful screening, formalize property rights
![Page 26: Private Investment and Corporate Farming...Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola, Maggi) ... supervision) more of an issue than access to ... However, implementation failures](https://reader035.fdocuments.in/reader035/viewer/2022070821/5f22a637bf292e3b5d18aeb3/html5/thumbnails/26.jpg)
Smallholders/ communities with
land rights
Land
Labor
Local knowledge
“Good” Companies
Capital and risk
Access to markets and technology
Specialized knowledge
![Page 27: Private Investment and Corporate Farming...Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola, Maggi) ... supervision) more of an issue than access to ... However, implementation failures](https://reader035.fdocuments.in/reader035/viewer/2022070821/5f22a637bf292e3b5d18aeb3/html5/thumbnails/27.jpg)
Not new– surge in FDI and SWFs strongly relate to commodity booms But big shift from N-S to S-S investments Speculative elements—access land but not used
No easy generalizations and often major changes over time LS at frontier then smallholder after infrastructure,
technology established High failure rates and significant social and env
issues in short term but in long term, often seen as successes (also CDC review)
![Page 28: Private Investment and Corporate Farming...Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola, Maggi) ... supervision) more of an issue than access to ... However, implementation failures](https://reader035.fdocuments.in/reader035/viewer/2022070821/5f22a637bf292e3b5d18aeb3/html5/thumbnails/28.jpg)
Historically labor issues (supply, standards, supervision) more of an issue than access to land Incentive to outsource, smallholder advantage
Indigenous land rights recognized early Good practices—prior surveys, auctions,
consultations etc However, implementation failures and corporate
powers often prevailed at local level to subvert regulations Implications for RAI
![Page 29: Private Investment and Corporate Farming...Tejar, Los Grobos, Adecoagro, Cresud, SLC Agricola, Maggi) ... supervision) more of an issue than access to ... However, implementation failures](https://reader035.fdocuments.in/reader035/viewer/2022070821/5f22a637bf292e3b5d18aeb3/html5/thumbnails/29.jpg)
Both old and new drivers toward large scale Emerging evidence that large-scale farms can be efficient
for food crops as well Economic and social impacts highly variable Big investment gap--Need to exploit a variety of institutional
models to attract private K that might involve range of farm sizes
Family farming still more efficient and equitable in most circumstances Priority to level the playing field + incentives for SS But new tech, markets, institutional innovations favor LS