“Could your pension fund be contributing to land grabbing in places like Brazil? From Rede Social de Justiça e Direitos Humanos, GRAIN, Inter Pares and Solidarity Sweden – Latin America.”
Since the global financial crisis of 2007-08, agricultural commodities and farmland have become major targets for speculative investment. These investments have been disastrous, contributing to a spike in the price of food that pushed 250 million people into starvation, and often generating conflicts over land and ecological destruction on the ground.
But the financial logic of investing in farmland is clear: fund managers seek regions where land prices are relatively low, such as Australia, Sudan, Russia, Zambia or Brazil, and they also use the price of farmland as a hedge against the stock market. The rising price of farmland provides a long-term payoff, while short-term revenue comes from renting the land back to farmers and selling crops, livestock, meat or dairy products.
Among the types of institutional investors that are behind this trend, pension funds play a leading role. Pensions are typically managed by public or private companies on behalf of unions, governments, individuals or employers; these companies are responsible for managing and growing people’s pension savings, so that the funds can be paid out to workers after they retire. Pension funds are the largest actors in the financial industry, holding around $39 trillion USD in assets globally. Therefore, any movement by pension funds generates huge impacts, which can be either positive or negative.
The institutional investors that manage pension funds have only recently begun investing heavily in farmland and global agricultural commodities. By 2013, some $5-15 billion USD had reportedly gone into farmland acquisitions, and this number doubled by 2015, with numerous pension funds having made their first farmland investments at that time.
But speculation on farmland poses many dangers for farmers and communities. Speculators predominantly fund large-scale agribusiness plantations, which destroy the soil, pollute the water, and make it harder for smaller farms to compete, both by driving up the price of land beyond what anyone in the local community can pay while at the same time driving down the prices that farmers are paid for their crops. This is particularly the case with small-scale peasant farmers in the Global South who have almost no cash and rely on the land for their livelihood. But it is also a serious problem for farmers in the U.S.
In the U.S., speculation has been linked to the rising price of farmland over the past few years. According to a 2014 study about the financialization of farmland, “of the farmland fund managers interviewed, almost all expected at least 50 percent of their fund’s total internal rate of return (IRR) to come from land appreciation, and some expected substantially more.”
The primary impact of speculation, then, is to make land so expensive that family farmers cannot afford it, leaving many new or beginning farmers — to say nothing of the millions of landless farmworkers — without the ability to own land. Because of “Get Big or Get Out” agriculture policies, which increase the costs of farming but decrease farmers’ earnings, many family farmers are forced to rent additional land to produce more crops on more acreage. This compounds the problem of skyrocketing land rents due to increased farmland speculation. Additionally, while rising land prices would supposedly benefit farmers who own their land, the National Family Farm Coalition cites cases in which banks have encouraged family farmers to sell their farms instead of providing them with loans.