IN THIS ERA OF TIGHTENING world food supplies, the ability to grow food is fast becoming a new form of geopolitical leverage, and countries are scrambling to secure their own parochial interests at the expense of the common good.
The first signs of trouble came in 2007, when farmers began having difficulty keeping up with the growth in global demand for grain. Grain and soybean prices started to climb, tripling by mid-2008. In response, many exporting countries tried to control the rise of domestic food prices by restricting exports. Among them were Russia and Argentina, two leading wheat exporters. Vietnam, the No. 2 rice exporter, banned exports entirely for several months in early 2008. So did several other smaller exporters of grain.
With exporting countries restricting exports in 2007 and 2008, importing countries panicked. No longer able to rely on the market to supply the grain they needed, several countries took the novel step of trying to negotiate long-term grain-supply agreements with exporting countries. The Philippines, for instance, negotiated a three-year agreement with Vietnam for 1.5 million tons of rice per year. A delegation of Yemenis traveled to Australia with a similar goal in mind, but had no luck. In a seller's market, exporters were reluctant to make long-term commitments.
Fearing they might not be able to buy needed grain from the market, some of the more affluent countries, led by Saudi Arabia, South Korea, and China, took the unusual step in 2008 of buying or leasing land in other countries on which to grow grain for themselves. Most of these land acquisitions are in Africa, where some governments lease cropland for less than $1 per acre per year. Among the principal destinations were Ethiopia and Sudan, countries where millions of people are being sustained with food from the U.N. World Food Program. That the governments of these two countries are willing to sell land to foreign interests when their own people are hungry is a sad commentary on their leadership.
By the end of 2009, hundreds of land acquisition deals had been negotiated, some of them exceeding a million acres. A 2010 World Bank analysis of these "land grabs" reported that a total of nearly 140 million acres were involved -- an area that exceeds the cropland devoted to corn and wheat combined in the United States. Such acquisitions also typically involve water rights, meaning that land grabs potentially affect all downstream countries as well. Any water extracted from the upper Nile River basin to irrigate crops in Ethiopia or Sudan, for instance, will now not reach Egypt, upending the delicate water politics of the Nile by adding new countries with which Egypt must negotiate.
The potential for conflict -- and not just over water -- is high. Many of the land deals have been made in secret, and in most cases, the land involved was already in use by villagers when it was sold or leased. Often those already farming the land were neither consulted about nor even informed of the new arrangements. And because there typically are no formal land titles in many developing-country villages, the farmers who lost their land have had little backing to bring their cases to court. Reporter John Vidal, writing in Britain's Observer, quotes Nyikaw Ochalla from Ethiopia's Gambella region: "The foreign companies are arriving in large numbers, depriving people of land they have used for centuries. There is no consultation with the indigenous population. The deals are done secretly. The only thing the local people see is people coming with lots of tractors to invade their lands."
Local hostility toward such land grabs is the rule, not the exception. In 2007, as food prices were starting to rise, China signed an agreement with the Philippines to lease 2.5 million acres of land slated for food crops that would be shipped home. Once word leaked, the public outcry -- much of it from Filipino farmers -- forced Manila to suspend the agreement. A similar uproar rocked Madagascar, where a South Korean firm, Daewoo Logistics, had pursued rights to more than 3 million acres of land. Word of the deal helped stoke a political furor that toppled the government and forced cancellation of the agreement. Indeed, few things are more likely to fuel insurgencies than taking land from people. Agricultural equipment is easily sabotaged. If ripe fields of grain are torched, they burn quickly.
Not only are these deals risky, but foreign investors producing food in a country full of hungry people face another political question of how to get the grain out. Will villagers permit trucks laden with grain headed for port cities to proceed when they themselves may be on the verge of starvation? The potential for political instability in countries where villagers have lost their land and their livelihoods is high. Conflicts could easily develop between investor and host countries.
These acquisitions represent a potential investment in agriculture in developing countries of an estimated $50 billion. But it could take many years to realize any substantial production gains. The public infrastructure for modern market-oriented agriculture does not yet exist in most of Africa. In some countries it will take years just to build the roads and ports needed to bring in agricultural inputs such as fertilizer and to export farm products. Beyond that, modern agriculture requires its own infrastructure: machine sheds, grain-drying equipment, silos, fertilizer storage sheds, fuel storage facilities, equipment repair and maintenance services, well-drilling equipment, irrigation pumps, and energy to power the pumps. Overall, development of the land acquired to date appears to be moving very slowly.
So how much will all this expand world food output? We don't know, but the World Bank analysis indicates that only 37 percent of the projects will be devoted to food crops. Most of the land bought up so far will be used to produce biofuels and other industrial crops.
Even if some of these projects do eventually boost land productivity, who will benefit? If virtually all the inputs -- the farm equipment, the fertilizer, the pesticides, the seeds -- are brought in from abroad and if all the output is shipped out of the country, it will contribute little to the host country's economy. At best, locals may find work as farm laborers, but in highly mechanized operations, the jobs will be few. At worst, impoverished countries like Mozambique and Sudan will be left with less land and water with which to feed their already hungry populations. Thus far the land grabs have contributed more to stirring unrest than to expanding food production.
And this rich country-poor country divide could grow even more pronounced -- and soon. This January, a new stage in the scramble among importing countries to secure food began to unfold when South Korea, which imports 70 percent of its grain, announced that it was creating a new public-private entity that will be responsible for acquiring part of this grain. With an initial office in Chicago, the plan is to bypass the large international trading firms by buying grain directly from U.S. farmers. As the Koreans acquire their own grain elevators, they may well sign multiyear delivery contracts with farmers, agreeing to buy specified quantities of wheat, corn, or soybeans at a fixed price.
Other importers will not stand idly by as South Korea tries to tie up a portion of the U.S. grain harvest even before it gets to market. The enterprising Koreans may soon be joined by China, Japan, Saudi Arabia, and other leading importers. Although South Korea's initial focus is the United States, far and away the world's largest grain exporter, it may later consider brokering deals with Canada, Australia, Argentina, and other major exporters. This is happening just as China may be on the verge of entering the U.S. market as a potentially massive importer of grain. With China's 1.4 billion increasingly affluent consumers starting to compete with U.S. consumers for the U.S. grain harvest, cheap food, seen by many as an American birthright, may be coming to an end.
No one knows where this intensifying competition for food supplies will go, but the world seems to be moving away from the international cooperation that evolved over several decades following World War II to an every-country-for-itself philosophy. Food nationalism may help secure food supplies for individual affluent countries, but it does little to enhance world food security. Indeed, the low-income countries that host land grabs or import grain will likely see their food situation deteriorate.