Land scarcity. Fight for fertile land in our future

Fight for fertile land in the world

The Research Institute for Africa and Asia analysed the global land asset market and concluded that in the future Russia and Ukraine will be the most attractive for acquiring cheap land assets as the distribution of land in Africa is coming to an end. Due to low prices, land laws and low production costs, these regions have attracted great interest from investors. In 2008, Karaturi Global purchased huge plantations in Ethiopia, approximately one million hectares, at $10 per acre or $25 per hectare. In comparison, a hectare in Brazil or Argentina in 2008 was worth 5-6 thousand dollars. Of course, these lands cannot be compared, some are of good quality and others are sandy and clayey. Chernozems in Ukraine (where land is currently only leased, not sold) and black soils in Russia are many times better than red soils in Argentina or Brazil. The best black soils in the Voronezh Region cost from $1,000 per hectare. In the Krasnodar Region, land plots cost around $3,000. Land for gardens and vineyards in the Krasnodar Region, the most expensive region of Russia, is sold from 2000 dollars, and rice fields – from 2500 dollars. The remaining southern regions of Russia also have rice paddies, which cost around USD 800. In the Volga region, where soybeans, potatoes or fodder grasses are grown, plots are valued at around $500 per hectare.

The old regions of Russia, the Tver, Yaroslavl, Pskov, Vladimir or Novgorod Regions, have put up a price of USD 250. There are also cheaper plots in Siberia and the Urals, for example, where the price starts from $200. And all these plots of land are much better than in Africa, and most importantly, they are located in places where there is enough moisture, unlike the arid lands of the African continent.

According to an Auckland Institute report in the USA, since 2008 foreign companies have bought or leased more than 100 million hectares of land in Africa, which is more than the total area of France and Ukraine. Until 2008, around 4 million hectares were purchased annually, but later the volumes increased. Analysing the situation on the land assets market, we can conclude that the struggle for the African continent has just begun. However, while in the past only a few European countries tried to get land in Africa, which was then joined by the USA and the USSR, today the list of these countries has increased significantly. And now the main buyers are China, the Gulf States, India and Brazil.

The Gulf countries are mainly represented by oil-producing countries such as Qatar, Saudi Arabia and the United Arab Emirates. The area of agricultural land in these countries is extremely small, due to geographical features. However, large financial resources help solve the food problem for a growing population. For Saudi Arabia, purchasing agricultural land from other countries has become part of a government programme. The government is trying to support agricultural companies outside the Middle East, provided that most of the harvest goes to Saudi Arabia.

In 2008, Riyadh announced that domestic grain production had fallen by 12% per year. This was a result of water conservation, which is extremely scarce in the region. At the same time, the authorities have allocated 5 billion dollars to provide soft loans to companies that are willing to invest in countries with large water resources and agricultural potential. The private Saudi company Foras, with the support of the Islamic Development Bank, has decided to invest $1 billion in the purchase of land for rice cultivation. For this purpose, the company has acquired land in Mali, Senegal, Kenya, Sudan and Uganda.

The results of this expansion have been very successful. Already in March 2009, a lavish ceremony was held in Riyadh to celebrate the first rice and wheat harvest resulting from a $100 million agricultural project in Ethiopia.

Other Asian countries are also buying up land just as actively. China is the most active, strengthening its position in Africa in all directions. Chinese companies use government support to buy African land. China is home to 20% of the world’s population, but it still accounts for only 7% of the world’s agricultural land. Many of them are in very poor condition due to excessive human exposure (use of pesticides, herbicides, growth hormones and GMOs, and soil erosion), so these lands have extremely low yields. For China, agriculture in Africa, Russia and Latin America is a good way out of the current situation. In the Congo, for example, China owns 3 million hectares of land, which is comparable to Albania. These land assets are used to produce palm oil, which is used to produce biofuels. For the same purpose, China has acquired approximately 2 million hectares of land in Zambia. In Tanzania and Mozambique, Chinese companies have purchased over one million hectares for rice cultivation.

Another major buyer of African land is India. Indian companies own several million hectares of land assets. India is not going to give up buying land assets around the world as planned. India’s problems are very similar to those of China: a huge population that can no longer be fed on its own land. Moreover, the active use of GMOs, pesticides and herbicides has worsened the soil conditions in the country. But the most serious problem, as in India, China, the Arab countries and the African continent, is the lack of sufficient water. In 20 years, more than 300 rivers have disappeared in China. Large water sources in China and India have lost 12-20% of their volume. Active industrial production in India and China has had a very serious impact on water clarity and the presence of micro-organisms and fish in the basins of the great Yangtze and Ganges rivers.

Another major challenge is the structure of India’s agriculture, which is becoming less and less efficient in the current economic climate. in India, agriculture is mainly represented by small farms, horse-drawn wagons and many middlemen. The clumsy and cumbersome system is called the number one reason why much of the agricultural produce spoils before it even goes on sale. Annual losses are estimated at around USD 6 billion. This is why large Indian companies see Africa as a test site where a new agricultural system can be built, with large farms and efficient technologies.

It is the loyal government of India that provides its corporations with special loans on favourable terms. In the past three years, more than one hundred Indian agricultural companies have acquired hundreds of thousands of hectares in Ethiopia, Senegal, Kenya, Mozambique and other African countries. These lands are mainly used to grow rice, sugar cane, corn, lentils and flowers. The leading Indian company in this segment is Karaturi Global, the world’s largest rose-growing company, which owns around 1 million hectares in Ethiopia, Kenya and Tanzania.

Western European countries have also not given up buying land in Africa. They mainly work through investment and hedge funds. Sweden and the UK are the most active among these countries. Sweden owns about 100,000 hectares in Mozambique. These areas are used to grow agricultural products to create biofuels. Companies from the United Kingdom own plantations in Tanzania to grow agricultural products to create biofuels.

American companies are far ahead of their European counterparts. Various American companies have bought up land that is over 1 million hectares in several African countries. American universities such as Harvard University and many others with large charitable foundations are particularly active in purchasing. Most transactions are made through the English company Emergent Asset Management, which operates one of the largest land funds in Africa.

US private companies are also involved in the redistribution of land in Africa, many of which are associated with large banks such as Goldman Sachs and JP Morgan. An example is Kinyeti Development, which is located in Texas and owns over 600,000 hectares of land in Southern Sudan. Its head is Howard Douglas, former U.S. Ambassador Extraordinary and Plenipotentiary in the region, who also served as the refugee coordinator. It should be noted that Sudanese land, which until recently was the site of the civil war, was particularly popular. In Northern Sudan, companies from the UAE, Saudi Arabia and South Korea own over 1.5 million hectares. The government, which has recently appeared on a map of South Sudan, is already overwhelmed with offers from European and American companies to buy large plots of land. The areas along the Nile River are in particular demand.

American companies are also buying land in Africa. Many of these companies work with major banks such as Goldman Sachs and JP Morgan. Kinita, for example, is based in Texas and owns 600,000 hectares of land in South Sudan. The company is headed by Howard Douglas, a former U.S. Ambassador who also served as a refugee coordinator. Sudan is a particularly popular country, which until recently was the scene of a civil war. In Northern Sudan, companies from Saudi Arabia and South Korea own more than 1.5 million hectares of land. The government, which recently emerged in South Sudan, is already considering offers from European and American companies to buy large tracts of land. Land along the Nile is in high demand.

The acquisition of African land, which has reached such incredible proportions over the past fifteen years, is already described as a new stage in the colonization of Africa. However, companies operating in the African land market do not agree with this statement. They claim to be contributing to Africa by investing billions and billions of dollars in agriculture, creating new jobs, buying modern equipment, and opening new businesses. Representatives of the Ethiopian government said that foreign investors only buy unused land that does not belong to farmers, which is actually very far from the truth.

It’s a little different. It is estimated that more than 300,000 indigenous people from the Bako and Gambella areas where Indian companies operated have moved to Ethiopia. Only 22,000 of them were employed on new farms and plantations. They are really lucky – even the small salaries they receive far exceed the average income in this poorest African country. And the rest, almost 280 thousand people, were unemployed and without means of livelihood. Many small farms were destroyed and farmers received no compensation. In fact, 280,000 people were unable to feed themselves and their families. This is a dangerous situation and should not be underestimated in the future.

Governments and people in Africa are politically unstable, and this can lead to unrest and the destruction of large foreign farms, resulting in serious financial losses for investors. The situation is similar in other African countries. According to UN experts, the food situation in East Africa in 2011 was the world’s largest humanitarian disaster. More than 15 million people died of hunger, almost 3% of them died, including more than 2 million children, which is 1.5 times more than in 2009.

Citizens of many African countries have tried several times to resist this mass sale of land to foreigners, but the protests continue to be suppressed. However, all this will make the local population more resistant to the confiscation of their land by multinational companies. In fact, there are revolutions and coups in Africa, as well as land nationalization. The company was to lease almost 1.5 million hectares of land for 99 years.

Understanding that one of the most frequent causes of local conflicts in Africa is the struggle for access to water and land that can feed a family. The consequences of the new redistribution of the African continent can only be guessed. Analysts at the Auckland Institute predict that this will lead to even greater instability in global food markets, which can be much worse than terrorism and small local conflicts. They behave very strangely when foreign colonial countries such as India and Arab countries come to Africa and shake up the resources of only the black continent, including the earth.

While this behavior is normal in European countries that have been accustomed to colonialism for centuries, the new players have forgotten how they were exploited and have not learned the historical lesson. China is on a completely different path than before in the USSR (Russia), and has built infrastructure such as schools, hospitals, seaports, and roads. This Chinese policy shows that the governments of most African countries should understand that 15 years of active land purchases have passed! There are almost no countries left in Africa, and many companies have turned their attention to Eastern Europe and the former Soviet Union.

Russian land is one of the best investment platforms in the world

20 years ago, foreign companies began to expand and buy agricultural land in Russia. These were mainly European and Chinese companies, but recently companies from Iran, India and Arab countries have been actively involved. One of the largest projects in the Arab countries was an attempt by the Minister of economy of the United Arab Emirates, Sultan bin Saeed al-Mansouri, to create a logistics center in the Emirates in 2014 for storing and further delivering Russian grain to other countries. in the Midwest, investments in the grain center are estimated at $ 7 billion. However, this initiative has not been further developed.

The partners are ready to buy this package from the Bank’s Russian capital. These funds are used by the holding to ” increase agricultural production, expand the land Bank and create agricultural infrastructure, expand the product line, and develop new brands. AFG national agricultural holding is one of the largest rice producers in Russia. In addition, a consortium of the Russian direct investment Fund and the State Fund of the United Arab Emirates Mubadala announced its intention to invest an additional $ 150 million in a significant, but not dominant, stake in the Russian oil and gas company. group. Investors from the Middle East will invest $1 billion together with Charoen Pokfand Group and China BannerDairy in a huge dairy complex for 80,000 cows in the Ryazan region.

At the same time, Russia has every chance to become one of the most attractive places to invest in its land assets. These lands account for 10% of the world’s agricultural area. Most of it is currently inactive and not growing. Given this fact and the current land crisis in many countries, the interest in Russian territories and land is quite understandable.

In Russia, the sale of agricultural land to foreigners is prohibited. This problem can be easily solved with the help of law firms. One of its leaders is a Society with limited liability “Jaburo”. According to the Institute for agricultural market research, foreign companies in Russia already control about 5 million hectares of agricultural land through their subsidiaries. For example, the Swedish consortium Black Earth Farming acquired 300,000 acres of land under a similar scheme, mainly in the black earth region.

Entrepreneurs from India and China are more interested in large land plots in Russia. Chinese entrepreneurs already own about 2 million hectares of land in the far East and about half a million hectares in Siberia and the European part of Russia. Chinese entrepreneurs say why would they buy land somewhere abroad when it is closer and cheaper, with a much better natural irrigation system.

Conclusions about the near future of agricultural land in Russia

Let’s find out which land assets are better in Russia and why they are bought?

  1. Russian land assets are cheap: from $ 100 for pastures, from $ 150 for deposits (uncultivated), from $ 200 for prairies and from $ 500 for good arable land.
  2.      In Russia, unlike in Africa, has its own infrastructure.
  3. Russia, unlike African countries, has a high-quality training system and a large potential for qualified, low-cost workers.
  4. Russia, unlike Africa, has a system of natural irrigation of agricultural crops; this is humidity due to regular rains and a large number of rivers and lakes.  And in the southern regions there are channels with irrigation systems.
  5. Russia has a market of 150 million people, of which only 10% or 15 million live outside the Urals, the Far East, and Siberia.
  6. The Russian agricultural school has developed many technologies for growing certain crops in certain regions of Russia. The fact is that most foreigners do not even know about it, because Western propaganda convinces us that there is no science and technology in Russia, especially in the agricultural sector.
  7. GMOs and plant growth hormones are banned in Russia.  This allows us to produce environmentally friendly products.
  8. Russia has funds to support agriculture. For example, preferential loans to banks, subsidies for planting orchards and vineyards. Subsidies for grain crops. Grants for uprooting and clearing fertile agricultural land from shrubs. The possibility of obtaining equipment for long-term lease or leasing.
  9. In the coming years, all agricultural land will be re-focused on growing certain crops, which will lead to a reduction in the production of expensive food products, such as beef, due to the amount of water per kilogram of beef, which is almost 2000 liters. Russia could become a world leader not only in the production of wheat and sunflower oil, as it is now, but also in the production of soy, corn, medicinal herbs, forage herbs, as well as in processing them into hay or granulated grass flour.

Russia has been and remains a world leader in the production of flax, hemp, buckwheat, mustard, coriander in the Crimea and Krasnodar territory. Taking advantage of all these advantages, competent farmers and investors will begin to actively invest in Russian agricultural land and agriculture. According to our expert estimates, in the next 3-5 years, land assets in Russia will rise in price by about 200-300%. Whoever comes first will have a greater economic impact.

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