We Need a New Paradigm for Investments in Agriculture

By Renatto Barbieri and Daniel Bornstein

Renatto Barbieri is the Portfolio Manager of the Galtere Global Agribusiness Fund (Galtere is a financial investment advisory firm based in New York). An agronomist by training, Mr. Barbieri has 20 years’ experience in commodity trading, structuring, financing, investment, and business development.

Daniel Bornstein is a junior at Dartmouth College majoring in anthropology and environmental studies. He has written articles on global food security for Nourishing the Planet, PolicyMic.com, and College News Magazine.

A growing social movement, led by a large number of sustainable farmers all over the world, is fighting daily in order to bring nutritious, clean produce to our tables (Photo Credit: Kyle Woollet)

The most recent price report from the UN Food and Agriculture Organization warned of climbing food prices, a worrying reminder of the precarious state of the global food situation. Whenever corn and soybean prices climb in the various exchanges, investors—in the form of finance companies, pension funds, university endowments, trading companies, seed processors, fertilizer and chemical manufacturers—rush to take advantage of perceived bottlenecks in agricultural production in order to extract a monetary gain. Unfortunately, most of them will have contributed to accelerating the destruction of some of our most precious natural resources and the livelihood stability of rural communities all over the world.

Little notice is paid to the fact that over 90% of soybeans are dedicated to animal production and industrial uses, a figure acknowledged by the United Soybean Board, which is charged with maximizing profit opportunities for U.S. farmers. A large amount of corn finds its way into ethanol production, industrial foods and animal feeds.

In response to rising demand for meat in developing countries, Brazil has converted the Cerrado region into massive soybean plantations.  The notion that the land is simply being “transformed” is a convenient euphemism for this disaster: continued tree felling, local communities’ displacement, the depletion of water resources, and soil degradation—all for the purpose of export production, not local food consumption. Brazil has become one of the world’s largest users of chemical fertilizer, standing as the world’s second-largest importer of phosphate and potash fertilizers, according to Corn and Soybean Digest. This leaves farmers susceptible to international price volatility and exacts a heavy toll on the environment.

The Brazilian government’s initiative to boost domestic fertilizer production, in response to the price volatility issue, only continues down this unsustainable path and distracts attention from alternative approaches. At the same time, vast sugarcane plantations for ethanol production—touted as an alternative to fossil fuel energy—are not only extending chemical-intensive agriculture, but displacing local food production.

So why do we continue to speak about simply increasing crop yields to feed the world, when what we have today is a total mismanagement of our agricultural natural resources by multinational agribusinesses intent on making the biggest returns for themselves within the shortest amount of time? What sustains this system, and prevents public outcry, is that these companies have co-opted people all over the world into expecting cheap food, despite its poor nutritional content and its social and environmental impacts. As long as this remains the case, there is little hope that the real problems will be addressed.

What’s troubling is that development institutions are embracing the very approaches—the “Green Revolution” model—that have long benefited Western agribusiness at the expense of the food security of the developing world. The deployment of improved crop varieties and chemical inputs as the centerpiece of agricultural development—beginning with Asia and Latin America in the 1960s—has been accessible mainly to large-scale farmers, while many small farmers have been left behind. And now there are efforts to scale up this model in Africa.

One of the most startling recent trends is that foreign investors are buying up vast tracts of highly productive African farmland for food and biofuel production. In response to the 2008 financial crisis, investors have come to see agricultural land as an assured way to recoup their losses. This is threatening to displace local farmers and compromising food security.

The 2008 food riots in over three dozen countries—sparked by high food prices—were a visible example of the fragile state of world agriculture. In Haiti, riots led to the ouster of the prime minister, a sign that food insecurity was becoming a political liability for developing countries. Yet the 2008 crisis has yet to truly be addressed. Industrial agriculture’s continued reliance on chemical fertilizers and pesticides is undermining the natural resource base that is critical to sustaining long-term food production. And this type of agriculture requires cheap oil prices, leaving the world vulnerable to energy price spikes.

A growing social movement, led by a large number of sustainable farmers all over the world, is fighting daily in order to bring nutritious, clean produce to our tables.  This is where investment should go—not toward speculative farmland plays in Brazil that lead to nothing but the destruction of some of the most diverse forests and biomes in the world, or in more corn and soy production destined for feedlots and gas pumps in the U.S., or the extension of the “Green Revolution” into Africa.

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