Gulf nations seeking farmland for food security have shifted their focus to East Europe and Australia after a buying spree in the developing world as they look for land that comes with less political and financial risk.
The Gulf is one of the world’s biggest food-importing regions. It stepped up efforts to buy and lease farmland in developing nations to secure food supplies after global commodity prices rose to record levels in 2007-08.
Gulf investors initially targeted Sudan, Iraq, Pakistan and Thailand, among others.
“If you have a look at the countries that have so far been targeted you’ll find that all of them have a degree of political risk,” said Sudhakar Tomar, managing director of Dubai-based Hakan Agro DMCC, one of the largest food-trading companies in the Gulf region.
“But there are other options that are commercially attractive, ethically justifiable and legally more secure.”
Hassad Food, owned by Qatar’s sovereign wealth fund, formed a Sydney-based subsidiary in December, Hassad Australia, to buy farmland for wheat and livestock production.
It plans to have the capacity to produce 150,000 sheep and 50 tonnes of wheat per year, the company said.
Last year Pharos Miro Agriculture Fund, a joint venture between UAEbased Pharos Financial Group and Miro Holdings International, was launched and aims to develop farmland in eastern Europe.
Last month, U. K.-based Swire Group went to the Gulf in search of a buyer for its agricultural business in Australia, Clyde Agriculture.
“We came to the Gulf region because we noticed that there’s an interest in not only agriculture investment but also in locations that are more sustainable in the long term and are already developed,” said John McKillop, managing director of Clyde Agriculture.
The company owns 165,000 hectares of farmland in eastern Australia, McKillop said.
While land in developed countries is more expensive, the cost of building infrastructure in developing countries can quickly make cheap land look pricey, analysts said.
“Many people think that land in Africa is cheap but it’s not because you have to invest in infrastructure which is not there so costs around $1,500-$2,000 per hectare,” said Miro chief executive Oliver Barnes.
Foreign land acquisitions have provoked opposition from some sectors and from farmers in developing nations.
Buying land in countries that can barely feed themselves and exporting produce from it has exposed investors to popular unrest and political disapproval in their target countries in the developing world.
Pakistan and Iraq are in the process of finalizing laws that would govern long-term foreign land leases. Both countries have conditions where investors have to share a percentage of the produce with the local market.
Changes in legislation combined with political upheaval in target countries have made farmland in the developing world less of a magnet for Gulf cash.
“Investing in developing countries was attractive in the beginning, but we just came to a point where laws and governments are changing overnight and it was just not a secure option,” said a UAE-based investor who spoke on condition of anonymity.
Bunge Seeks Investors For Brazil Land Fund
Global agribusiness and food company Bunge Ltd. is gauging investor interest for the launch of an investment fund that would buy land in Brazil to take advantage of demand for sugar and sugar-based ethanol, the company’s chief financial officer said May 19.
The offering would build on Bunge’s expanding presence in the sugar industry in Brazil and is one of many new investment vehicles by a range of companies and investment groups that are funnelling capital into global agriculture.
“We’ve been out in the market gauging investor appetite,” said Bunge chief financial officer Jacqualyn Fouse. “Depending on that appetite we’ll figure out what the size of it might be and when it could actually get kicked off. It is a pretty active project but it is not up and running yet.”
Fouse said investor interest in farmland ownership appeared to be growing, and Bunge was aiming to draw more than $100 million in investor dollars to its land fund.