Food and Farms

""According to our laws and our policy, foreigners or foreign companies are not allowed to rent or buy land to grow rice or any kind of food, including raising any livestock in Thailand," Deputy Commerce Minister Alonkorn Pollabutr told reporters."

Reports Maktoob Business here.  I have written previously about the consumer choices for farm commodities and products in regions where the ability to produce either is minimal or difficult, and the results of it.  Collectively, the GCC states currently lead the world in land acquisition and/or leasing of farms.  Yet the above may be a small set back for now.

The Economist writes an excellent article on the subject here.  The article states:

"It is not just Gulf states that are buying up farms. China secured the right to grow palm oil for biofuel on 2.8m hectares of Congo, which would be the world’s largest palm-oil plantation. It is negotiating to grow biofuels on 2m hectares in Zambia, a country where Chinese farms are said to produce a quarter of the eggs sold in the capital, Lusaka. According to one estimate, 1m Chinese farm labourers will be working in Africa this year, a number one African leader called “catastrophic”."

Below is a revealing data diagram highlighting investment and deal structure from the Economist.

(Click to enlarge)

A bit of hype and herd (crowd) mentality is shown in the following statistics followed by of course pullback - "Between the start of 2007 and the middle of 2008, The Economist index of food prices rose 78%; soyabeans and rice both soared more than 130%. Meanwhile, food stocks slumped. In the five largest grain exporters, the ratio of stocks to consumption-plus-exports fell to 11% in 2009, below its ten-year average of over 15%."

Yet, all this activity is termed as "neocolonialist" as the article states - "The head of the UN’s Food and Agriculture Organisation, Jacques Diouf, dubs some projects “neocolonialist”."

As the need continues to grow for food, the agri-focused economics will gain from it.  Will the results be similar to oil economics?

World Perspective / Photo - 2 [Farming Investment]

Global trends are the excitement for the hedge funds, banks and investors. One that has been gaining steam / noise in the past six to twelve months has been farming for food supplies to regions of the world where farming is cost prohibitive and / or not possible at all.

It is interesting to see the investments out of the Gulf into South and South East Asian farms. A great article on the subject from the Economist here. The not so fortunate part is that the agreements / contracts are mostly at a governmental level, which leave a lot to be desired when it comes to the application of the rule of law in those regions. The loser is and will be the uneducated farmer of these nations. See another good article from Asian Times here.

On the other hand lessons can be learned from the USA where the large corporations have caused the small farmer to cease to exist in an economically viable / successful fashion and other difficult issues have emerged. See explanations, insights and further links in an interesting article here from the Food & Water Watch.

For me it is exciting to see a new opportunity for the Frontier Markets such as Pakistan, Vietnam and Thailand. The topic to watch would be that does the "openness" in business practices that are driven when the individual investor come into a market happen? Does healthy regulation gets developed and then executed consistently? I believe it will.