Impact

ESG (environmental, social, and governance) has become a moniker for doing good and doing green via financial markets. Many financial investments in agriculture are carried by this more general spirit, but at the same time have been forced into it due to accusations of land grabbing. Especially when land grab accusations arose, investors in agricultural assets stressed their ESG credentials.  

Several of the cases studied reported annually about the ESG impacts. In one of the Aotearoa New Zealand cases, the founder of an asset manager even regularly blogged about the pursued investment schemes as well as its investment locations. In two other cases from Tanzania, investee companies supported smallholder farmers via outreach programmes, or, as was the case in the dairy case study, made smallholders an integral component in their impact investment scheme.  

However, meeting ESG criteria does not necessarily indicate an ethical drive to ‘do good’ but can also be seen as part of a symbolic value creation strategy. Also, building a solid ESG platform in the present does not preclude the possibility of future business models that are less employment-intensive or offer fewer smallholder linkages. For instance, the smallholder-linkage model of one asset manager operating in Tanzania, backed by socially conscious pension funds from Europe, might be replaced by a vertically integrated feed production and animal husbandry operation if another, more profit-oriented investor bought the asset.  

Finally, even asset managers with a strong ESG agenda need eventually generate returns that allow for satisfying various claims along the chain, including the fees of asset managers, the equity claims of original asset owners, and the interest claims of external debt providers. For instance, one of the Aotearoa New Zealand asset managers with a strong ESG agenda drew a clear line between being cutting edge in terms of production and social and environmental responsibility, and “bleeding edge” (spending too much on “doing good” and “doing green”).  The same applies to more outright impact investors such as a dairy investment studied in Tanzania. Despite the lower return expectations of some family offices often backing impact-oriented investors, certain key principles of private equity are still being maintained.  

ESG agendas therefore often remain in friction with the concerns of workers, local communities, and the environment. However, in order to uncover the full social, economic and environmental impact of agri-investment chains requires a different research design. Some of this work has been published more recently, for instance, the work of Cochet (2018). One of the most common ways to measure economic impact locally is the labour impact of newly created assets but doing so is fraught with methodological challenges due to a wide range of investment and crop-specific business models at work. Also, a full assessment of the labour footprint of assetized farms would require comparative analysis or even the need to establish counterfactuals, which are both challenging tasks. Table 8.1 in my book (Ouma 2020: 158) gives a cursory overview of the strong variation in labour impacts of the sampled investment chains, one of the most common measurements to attest economic impact. 

(Ouma 2020:156-158) 

It is important to embed assetized agricultural ventures in their broader regional and relational context, centering on the question of regional welfare and sustainability. The relationship between finance-gone-farming, rural welfare, and sustainability is not as straightforward as it first appears, however. 

The structural imperatives and metabolic ramifications of modern money management

Despite notable differences in operational models and investment cultures, institutional investors favour productivist, scalable investments over smaller scale, and socio- ecologically more diverse production models. This can have huge ecological effects, as in the case of the Brazilian soy frontier or conventional dairy or beef farming in the United States, Aotearoa New Zealand, or Australia. Even though investors may also opt for production models with better environmental track-records (e.g., permanent crops such as nuts or apples or organic dairy), even these cases cannot escape some of the structural imperatives and metabolic ramifications of modern money management. In addition, organic production does not necessarily mean improved labour conditions. These issues all require further research. 

Dashboard and boardroom farming

In all the case studies examined in this book, and also in cases studied by other scholars, investors and asset managers try to instill a new form of dashboard and boardroom farming, in which the rhythms of farms are synchronized with the rhythms of money management, via the intermediation of data-driven governance structures. Yet, as the case of Aotearoa New Zealand shows, the datafication should not be tied exclusively to the increasing influence of financial investors but is also owed to the professionalization of productivist agricultural practices in different regions of the world over the past 20 years. Even so, the use of monitoring and accounting technologies is further intensified in farming ventures transformed into financial assets, with potentially significant implications for the future of farming in such areas [1]. 

Rural inequalities

Financial investments in farming have the potential to further exacerbate rural inequalities and diminish local social cohesion owing to new spatio-spatial patterns and distantiated forms of farm ownership. For instance, it was estimated in 2017 for the United States that, within the next five years, some 92 million acres would “change hands, with much of it passing to investors rather than traditional farmers”[2], reinvigorating the fears that even Republican politicians voiced when the first farmland fund was proposed in 1977 by the Continental Bank of Illinois and Merrill Lynch. Similar trends are reported from Aotearoa New Zealand and Australia, where the increasing corporatization of dairy and other agricultural subsectors increasingly seems to lock out aspiring farmers. Although the country will definitely not go back to the 1890s, when “422 individuals and companies (less than 1 percent of all landowners) controlled eight million of the total twelve and a half million acres of freehold land in 1890”[3], land concentration has become a major concern for young Aotearoa New Zealand farmers. 

Aotearoa New Zealand is also a good example of why we should be careful not to exclusively tie these trends to the increasing interest of genuine financial investors, however. Aotearoa New Zealand dairy, one of the main domains of foreign financial investments, has experienced an increasing concentration of land and a rise in land and herd prices since at least the 1980s, and farming for capital gains has been an integral part of agricultural biographies since the colonial age. With the average dairy farm size nationwide standing at 147 hectares in 2018, a young farmer in the popular farming region of Taranaki, where the average price per hectare of farmland was NZ$38,025 in the same year, would have to spend NZ$6 million for that farm. With an average cost of NZ$1,000 per cow and an average herd size of 419 in 2018, share-milking arrangements (whereby someone else would own the land and infrastructure) have become equally exclusive [4]. In the Waikato, prices could shoot up as high as NZ$60,000 per hectare, as one farmer interviewed in 2018 reported (interestingly, the same person also estimated that about 25 percent of his own land’s value, standing at NZ$45,000 to 50,000 per hectare, was not matched by productive capacities). Foreign investors surely play only a part in this story, alongside domestic corporate farmers and family farmers, as well as wealthy migrant farmers from overseas. 

To further complicate things, those who have worked their way up into farm ownership, those who come from landowning families or those who are able to subsidize farm purchases from other sources of wealth and income have often been profiteers of the contemporary land rush, since additional demand increases, or at least stabilizes, land prices (and many farmers taking on debt have speculated on that). As one farmer interviewed in 2018 put it, “We operate in a free-market economy and foreign investment is part of the package” (he also noted that local buyers would often successfully compete with foreigners for land, and, for him, the anti-foreigner stance was mostly driven by urbanites removed from the realities of rural life, as with other issues too, such as environmental concerns about dairy). In addition, the Aotearoa New Zealand case shows that it is not just foreign money that increasingly flows into farming via equity investments but local money as well. This complicates narratives in which local farmers are often presented as mere victims or bystanders to the finance-driven land rush. 

In other contexts, such as Tanzania, the real inequality driver in rural communities is not the few institutional investment cases. A recent study has found that a significant driver has been well-connected and educated urbanites. With access to salaries, credit, and other forms of capital, they have been significant drivers of the expansion of the capitalist farming frontier [5]. These actors are key to understanding new patterns of rural inequality related to resource access and ownership. 

(Ouma 2020: 162-165)

[1] Rotz S, Gravely E and Mosby I et al. (2019) Automated pastures and the digital divide: How agricultural technologies are shaping labour and rural 
communities. Journal of Rural Studies 68: 112-122.

[2] Keiffer, K (2017) Who really owns American farmland? Available at: https://thecounter.org/who-really-owns-american-farmland/ (accessed 12 
March 2018).

[3] Wynyard, M (2016) The price of milk: primitive accumulation and the New Zealand diary industry 1814-2014, University of Auckland: 89.

[4] Macdonald, M (2018) Harvard spent $100 million on vineyards: now it's fighting with the neighbors. Available at: https://www.seattletimes.com/business/harvard-spent-100-million-on-vineyards-now-its-fighting-with-the-neighbors/ (accessed 12 December 2018).

[5] Jayne TS, Chamberlin J, Traub L, et al. (2016) Africa's changing farm size distribution patterns: the rise of medium-scale farms. Agricultural 
Economics 47 (S1): 197-214.

The question of land inequalities induced by the finance-driven land rush has gained further prominence with the publication of two high-profile reports on the matter, which can be accessed here and here.