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Partnerships can help investors and farmers more than land grabs - study

by Olesya Dmitracova | Thomson Reuters Foundation
Tuesday, 13 July 2010 10:27 GMT

LONDON (TrustLaw) – Joint projects between big investors and small farmers in developing countries can often be more mutually beneficial than unilateral acquisitions of large tracts of land by the investors, a new study said.

The high food prices that sparked riots and supply scares in 2008 have pushed countries such as Saudi Arabia, China and South Korea to acquire large tracts of fertile land to feed their growing populations, a practice that has been criticised for harming the interests of local people.

The report by the International Institute for Environment and Development (IIED) outlines farming business models that could serve as alternatives to these "land grabs".

“Agricultural investment can bring benefits to developing nations, but large land deals carry big risks as local people may lose access to the land and resources they have used for generations," said Lorenzo Cotula, co-author of the report commissioned by several global bodies, including the United Nations’ Food and Agriculture Organisation (FAO).

“The more promising investments are those that involve supporting local smallholders, rather than large plantations,” said Cotula.

 

Below are the main business models discussed in the study.

** Pre-agreed supply agreements between farmers and buyers:

Usually, local farmers grow and deliver produce of specified quantity and quality at an agreed price and date. The buying company provides credit, seeds, fertilisers, pesticides and technical advice, all of which may be charged against the final purchase price.

** Arrangements for a farmer or farm management company to work land belonging to someone else:

Large-scale agricultural businesses or big farmers let smaller farmers work their land for either a rental fee or a pre-agreed share of the crops.

** A joint venture:

Two independent groups, such as a company and a farmers’ organisation, co-own a business, sharing financial risks and benefits and, in most cases, decision-making powers in proportion to their stake in the business. In this way, farmers can pool their assets, access finance or limit the liability of individual members.

** Business activities supplementing agricultural production:

Such activities, which can be done by local small businessmen or firms, include supplying seeds, insurance, micro-credit and training to farming projects, or the processing, storage, transport, wholesale and retail of agricultural produce.

 

No approach is perfect, the report says. It cites pre-agreed supply agreements which can either help small farmers sell their produce or lead to the farmers becoming cheap labourers who carry all the risks of farm production, such as crop damage through drought or a pest infestation.

“The focus of this report does not imply that the business models reviewed here are in all cases preferable to large-scale plantations. In some instances, plantations may be the best option for the investor, host country and the local community,” the study adds.

For example, in sparsely-populated areas it may be difficult to set up agricultural businesses that are part-owned by local people and use a lot of local labour.

But governments must consider alternatives when approached by investors over large-scale land acquisitions, and any international guidance on such acquisitions - for example, the global guidelines being developed under FAO’s leadership - must promote investment models that are most beneficial to local small farmers, the report says.

Our Standards: The Thomson Reuters Trust Principles.

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