Thursday, June 25, 2009

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?

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