Land grabbing can be broken down into three general types: food-driven investments, biofuel production and straight agricultural speculation.
Two kinds of actors operate in this field, which accounts for roughly one third of all land grabs worldwide. State-owned investment funds, often from the Gulf region, invest in agricultural lands overseas to respond to national food security issues. These Sovereign Wealth Funds (find out more here) have initiated a number of land grabs, especially in Sub-Saharan Africa and Latin America.
Agribusinesses are the foot soldiers of land investments; they are commissioned by investors to execute the work onsite but increasingly become active out of self-initiative acquiring agricultural land themselves. The agricultural sector is especially attractive for these businesses because it allows for a diversification of their portfolios which is at the same time risk-reducing. Agribusinesses can not only invest in agricultural land and production but also in processing and distribution and are thus able to extend their control of the food supply chain.
Rising oil prices and interest in renewable energy sources have caused a significant increase in biofuel production over the past ten years. In some countries, subsidies have made growing crops for fuel more attractive than growing for food, causing land to be diverted away from food production. This directly influences food supply and thus plays an important part in the distortion of food prices. More the 50 per cent of land-grabbing deals are for growing biofuels, according to the Land Rights and the Rush for Land report released in December 2011 by 40 organizations. Campaigners say ‘land grabbing’ is being driven by EU targets to source 10 per cent of all transport fuels for buses and cars from biofuels rather than conventional fossil fuels by 2020.
As the financial markets collapsed in the face of the 2008 economic crisis, fund managers and investors began to shift from pure financial assets like real estate to agricultural land or soft commodities such as energy and food crops. They were deemed more profitable and less risky for two key reasons:
• Increasingly high food prices lead to increasing land rents, which encouraged turning investments to cheap land in developing countries.
• Rising incentives for agricultural production caused by an increasing global demand for food and an ongoing exhaustion of resources like water and land suitable for agricultural production.
In particular, hedge funds and private equity funds have since purchased or leased land on these speculative terms.