Tag Archives: agriculture
Missouri Moves To Lift Ban On Foreign Farm Owners
Alan Scher Zagier, AP 4:47 p.m. EDT June 18, 2013 (Photo: Amanda Lucier, AP) JEFFERSON CITY, Mo. (AP) — Weeks before a Chinese conglomerate agreed to buy Smithfield Foods in the largest such takeover of a U.S. business, Missouri lawmakers quietly approved legislation removing a ban on foreign ownership of agricultural land. Missouri is one of several Midwest states with little-known laws passed in the 1970s amid concerns over Japanese investment that prohibit or restrict foreign farmland ownership. The company has operations in 26 U.S. states, including several in the Midwest. Smithfield has said it doesn’t believe these issues will be an obstacle to the takeover deal being approved. Meanwhile, Smithfield announced Tuesday it is laying off 120 more workers as part of its previously announced closure of a Virginia facility that makes hot dogs and deli meat. The Smithfield, Va.-based pork producer plans to close its Portsmouth, Va., plant in the middle of August, said Jeff Gough, Smithfield’s senior vice president for human resources. A northern Missouri legislator whose amendments to a pair of larger bills helped push the plan through the state legislature and onto the desk of Gov. Jay Nixon said he wants to provide greater oversight of foreign ownership, which will be capped in Missouri at 1% and require state approval. The changes were approved on the final day of the legislative session. “The law doesn’t work,” said Rep. Casey Guernsey, R-Bethany, citing legal loopholes that allow foreign owners to mask their assets behind domestic-based groups. “What I want to do is make it work … It will provide a degree of accountability for an international corporation that it wouldn’t have before.” Shuanghui International Holdings announced its plans to purchase Smithfield Foods on May 29 in a deal that still requires shareholder approval and a federal regulatory review by the U.S. Committee on Foreign Investment. The deal’s expected value is $7.1 billion, including debt. In Oklahoma, the law limiting foreign farmland ownership exempts swine operations, said Diane Clay, an Attorney General’s Office spokeswoman. And in Iowa, the office of Attorney General Tom Miller said it expects Smithfield Foods’ new owner to “comply with all (laws and) agreements,” including a consent decree related to livestock production by meatpackers. “We hope to close the loop soon, whether it’s a final letter from Smithfield to us or a memo of understanding from our office to Smithfield,” said Geoff Greenwood, a Mille spokesman. The Missouri bill awaits Nixon’s approval, and his office declined to say whether he would sign it. The offices of Attorney General Chris Koster and the state Department of Agriculture also declined to comment. A Columbia-based group that opposes the corporate consolidation of the agriculture industry criticized Guernsey’s handling of the legislation. Language removing the foreign ban was added to two Senate bills in late April while in the House Agribusiness Committee, which is chaired by Guernsey. The underlying bills to which the amendments were added deal with farm loans and University of Missouri Extension districts. In early May, Guernsey added an amendment while the bill was on the House floor that doubled the allowable foreign farmland ownership from half a percent to 1%. “To call it a coincidence is doing a disservice to the democratic process,” said Tim Gibbons of the Missouri Rural Crisis Center, referring to the legislative votes that preceded the Smithfield sale announcement and the absence of broader debate. “These things should have been discussed. And they weren’t.” Guernsey, a dairy and beef cattle farmer, countered that he introduced a similar bill in May 2012. He bristled at suggestions that the foreign ownership ban was lifted at the request of Smithfield, which he said is the largest employer in his five-county district and a campaign contributor of Guernsey’s. “I didn’t even know about Smithfield until we were out of session,” he said. “Trust me, the last person Smithfield tells about any of their business decisions is Casey Guernsey.” While Guernsey said he “can’t stand the thought of the Chinese owning our largest employer,” he’s eager to see the potential economic benefits of a deal that some observers believe was driven by greater demand among Chinese consumers for U.S.-produced food. U.S. Sen. Roy Blunt shared a similar sentiment. “That’s a great opportunity for U.S. agriculture and a great opportunity for American agriculture,” he said. “Once people get better food they universally do not want to go back to the bad food again. Not only is there going to be more people but there’s going to be more demand and more competition for the food that’s out there. ” Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed Continue reading
Farmland Values Are Cooling After Years Of Explosive Growth
http://www.stltoday.com/search/?l=50&sd=desc&s=start_time&f=html&byline=By%20Georgina%20Gustin%0Dggustin%40post-dispatch.com%0D314-340-8195 The boom in farmland values, which triggered frenzied auctions and record sale prices, is over. That’s the bad news for Midwestern farmers. The good news is there’s no bust on the horizon, economists believe. Midwestern farmland values have soared in the past five years, along with grain prices, climbing as much as 20 percent two years in a row — something that’s never happened before. In some areas land prices rose 25 percent. One Iowa parcel sold for a record $20,000 an acre, and in Illinois, prices were reaching the mid-teens. Missouri farmland was fetching up to $5,000 an acre, up from $500 or $600 a quarter-century ago. The rise in values drew not just farmers, but outside investors who began to see American farmland as a safer investment than the stock market. But now, economists believe, the boom is cooling off. “We’re talking about the first slowing in the rate of increase,” said Chris Hurt, an agricultural economist with Purdue University. “There’s a leveling off in farmland values, and with anything that’s had a strong upward slope, you’d expect this. The primary driving forces of this period of rapid increase are beginning to come to a close.” Government mandates for ethanol and demand for grain from developing countries have been the major drivers behind record grain prices in recent year, which have stoked land prices. But now these and other factors are waning. Mandates under the Renewable Fuel Standard call for 13.8 billion gallons of corn-based ethanol this year. But because most cars only take a 10 percent ethanol blend, ethanol is hitting what’s known as the “blend wall” — the limit at which ethanol can be added to the gasoline supply. “We use about 133 billion gallons of gasoline,” Hurt said. “Ten percent of that is 13.3 billion, not 13.8 billion, so we’re running into a policy dilemma. We just don’t need a lot more corn.” At the same time, economists say, demand from developing countries is tapering off. In China, where a growing middle class is newly flush with cash for grain-intensive proteins, incomes are declining slightly — and that has meant a slight slowdown in demand for American soybeans, Hurt said. “Their incomes aren’t growing by 10 percent; they’re growing by 7 percent,” Hurt said. “There’s still very rapid growth, but it’s slowing.” China, and other countries, are also buying grain from countries where farmers have expanded grain acres in response to high grain prices. With drought and rain curtailing American harvests and driving up prices over the past three years, those farmers — particularly in South America — have been able to capitalize. “When prices of agricultural things get high, you see a supply response, and the response is really showing up now,” Hurt said. “We’ve seen multiple years of this explosion to the upside, particularly with short production. If we can get back to normal supplies in the U.S., we’re going to moderate these basic farm prices — and those prices are what drive land values.” But most Midwestern farmers should be in fine financial shape. During the last agricultural bust, in the early 1980s, farmers were heavily in debt and many lost farms. But since then, lenders have been especially cautious, lending only a small percentage of a sale price. Besides, farmers have been making record incomes, and that means they’ve been paying with cash — if they’ve been buying land at all. “There’s a lot of talk of a possible bubble in land values,” said Ron Plain, an agricultural economist with the University of Missouri. “But the good news is we haven’t sold a lot of land, so not a lot has been purchased at these high prices. A lot of farmers have pretty good cash flow, so the land that’s been sold hasn’t been sold with a lot of debt.” A stronger stock market, Plain said, has sent investors back to Wall Street. “I would guess we’re not going to see a lot of investors buying farmland.” So, if farmers get what they want in the next couple of years — good weather and good harvests — farmland values could come down, Plain said. But in the meantime, they’re just growing at a relatively modest 2 or 3 percent. “We’ve had weather, huge demand growth, changes around the world. What’s normal these days? We’ve lost our base of understanding,” Hurt said. “We’re going to learn what’s normal in agriculture in the next few years.” Continue reading
GCC Investors Eye African Farmland
22 April 2013, 9:26 GMT | By Paul Melly Africa’s fertile soil can provide food security and investment opportunities In the capital-rich countries of the GCC, the chronic shortage of rainfall limits the prospects for food production. On the other hand, the African continent has vast agricultural potential but suffers from a shortage of investment. The complementarity of interests between the Gulf and its economic partners south of the Sahara seems clear, and has been recognised since the late 1990s as governments on both sides explore the scope for deals that could make African land available to Arab investors. However, translating this vision into a mutually beneficial reality has proved a complex challenge. For GCC states, the key concern has been to ensure security of food supply. Populations in the GCC states are growing fast and traditional local oasis agriculture cannot satisfy the consumption demands of booming societies in the modern era. GCC constraints To mitigate the problem, Gulf governments have encouraged domestic irrigated production. But the potential for this practice is limited by environmental and financial constraints. Natural aquifers in the region are becoming depleted, while using desalinated water is hugely expensive. The method might be viable for some high-value horticultural crops, but makes little sense for cereals. Saudi Arabia eventually concluded that the large-scale irrigated production of wheat was not a sensible use of limited and highly subsidised water supplies, and the practice is now being phased out. High oil prices have enabled GCC states to maintain security of food supply despite rising world prices. But most have felt uncomfortable relying so heavily on the open world market. Over the past 15 years they have explored the scope to invest in land in other regions that have more reliable agricultural potential. But it has not always been possible to buy or lease land in countries that are major global grain exporters; big rice producers such as Thailand, for example, impose tight restrictions. This has led GCC governments to look to Africa, where fertile land and rainfall are in more ample supply than on the Arabian peninsula. Since the 1990s, there has been a steady trickle of announcements about major investments in the continent’s land, often from Saudi Arabia. In 2009, the Jenat consortium of Saudi agricultural firms announced plans for a $40m investment in food production in Sudan and Ethiopia, while another Saudi group, Hadco, is reported to have acquired 25,000 hectares of Sudanese cropland. Last year, Sheikh Mohammed al-Amoudi’s Saudi Star group launched a programme to develop 500,000 hectares of land in Ethiopia, and a small area of this is already in production. Governments have also been important actors in this process. Qatar agreed a deal to take over large tracts of the Tana River delta in Kenya, in return for building a new port at Lamu. The Abu Dhabi Fund for Development is said to be funding a 28,000-hectare project in Sudan to grow alfalfa, maize, beans and potatoes for export to the UAE. Riyadh leads Once again it is Saudi Arabia that has led the field, with government support for agricultural partnerships with Africa, notably through the state’s King Abdullah Initiative for Saudi Agricultural Investment Abroad (KAISAIA). In 2012, the kingdom’s Agriculture Minister, Fahd Balghunaim, announced that the task of agricultural investment abroad would be transferred to a KAISAIA offshoot, the Saudi Company for Agricultural Investment and Animal Production (SCAIAP). The firm has capital of SR3bn ($800m), although it is not thought to have disbursed funds yet. Many of the announced GCC agricultural investments have never been implemented, or even started, on the ground in Africa, says Eckhart Woertz, author of Oil for Food: The Global Food Crisis and the Middle East, a new book examining these issues. “There is a huge discrepancy between amounts projected and amounts actually implemented,” he says. Moreover, he points out that concrete schemes have been confined to a relatively small number of countries. “Sudan is certainly top of the list, followed by Ethiopia, Tanzania, West Africa, Senegal and Mali,” he says. “Sudan is the most popular country for announcements, but most of the projects have either not started or, if they have started, are at a very early stage of implementation.” There are several reasons for the gap between ambition and reality. Other than livestock from the Horn of Africa, GCC countries have little track record of importing food from the continent. The GCC’s plans to invest in sub-Saharan agriculture as a source of food crops for home markets have been hindered by the fact that many of the targeted African countries have a tropical climate that is not well suited to the cultivation of some of the products most heavily consumed in the Arab world, such as wheat and barley. These temperate-climate cereals are mainly imported from Canada, the US, Australia, Russia, Ukraine and EU states such as France. Rice is widely grown in Africa and is a crop that is also heavily consumed in the GCC. At present, most Gulf imports of basmati rice come from Pakistan and India, although Arab investors have now developed some pilot projects in Senegal and Mali for export to the Gulf. Local challenges A further major hurdle is that local social and political conditions are not always welcoming. Land-lease agreements between Gulf investors or governments and central governments in sub-Saharan Africa are often seen as attempted land grabs by wealthy outsiders. These deals can be hugely controversial in countries that are poor and where much of the indigenous local population is undernourished. They can spark protests among local populations, local and international media, and non-governmental organisations. Woertz cites the example of Qatar’s agreement with Kenya to take over land in the Tana River valley. “The locals started complaining; there was a lot of resistance by land groups,” he says. “Originally, the scheme was tied to the construction of a port at Lamu, but now the Chinese have got the contract to build the port.” Land deals with Gulf investors – and other outsiders, including the Koreans – have provoked fears that existing local users such as pastoralists or smallholders will be pushed out to make way for big, foreign commercial investors. Still, Woertz says Arab investors have become more sensitive to these issues. “There is a certain readiness to take these things into consideration,” he says. “So, perhaps you may see other types of projects taking place: to share equity or have outgrower schemes.” Gulf governments and investors have held talks with the UN’s Food & Agriculture Organisation (FAO), which could act as an honest broker in identifying opportunities for agricultural partnerships between the GCC and Africa that would respect the interests of communities on both sides. But the realisation of such an approach presents complex challenges. Woertz points out that Saudi Arabia’s strategic goal remains the production of food for its domestic consumption. Indeed, those Saudi agricultural firms that have been looking at investment in Africa expect to enjoy substantial subsidies from the kingdom’s authorities. This is because their role would be to produce food to replace the output of the domestic cereals programme that is now being wound up for environmental reasons. The cereals scheme was massively subsidised, says Woertz. “The direct costs of subsidies for the Saudi wheat program were $85bn between 1984 and 2000. This was equivalent to 18 per cent of Saudi Arabia’s $485bn in oil revenues during that period.” Rethinking strategy Another option is to treat African agriculture as essentially an investment; a business proposition focused on the world market rather than a means of satisfying Gulf demand for food imports. This is a strategy being pursued by Hassad Foods, an arm of Qatar Holding, which is part of the emirate’s sovereign wealth fund, Qatar Investment Authority. Hassad’s publicity material says: “While all investments are there to generate profits, they also exist to fulfil certain needs to support the food security programme when required.” But such an approach can pose tough challenges for GCC investors, who mostly lack experience in producing or marketing tropical cash crops and risk finding themselves in direct competition with long-established sub-Saharan and Western players. They will often need to recruit foreign sector specialists to actually establish and run the projects for them. Even so, some have taken on the challenge. In 2011, Saudi-based Menafea Holdings revealed plans to invest $125m in a new pineapple farm and processing plant in Zambia. The GCC is short on food, but rich in cash. African nations are fertile and need money. As ties between the Gulf and Africa strengthen, investment in agriculture is likely to grow. Continue reading
