Russian-farmland.com
Support of agricultural business for foreignersLand wars for the Africa and Russia
The Research Institute of Africa and Asia, analyzing the situation on world land asset markets, came to the conclusion that in the near future, Russia and Ukraine will become the most promising in terms of buying cheap land assets, since the distribution of land assets in Africa is already ending. Due to low prices, weak land legislation, which usually does not protect the interests of local residents, and low production costs, this region was of great interest to buyers of land assets. For example, in 2008, the Indian company «Karaturi Global» bought huge plantations in Ethiopia, more than one million hectares, at a price of $ 10 per acre or $ 25 per hectare. For comparison, one hectare of farmland in Brazil or Argentina at that time already cost 5,000 - 6,000 US dollars per hectare of arable land. Of course, one cannot compare these quality lands with the sandy and clay soil of Ethiopia. Black soil of Ukraine (where there is no sale now, only rent) and black soil of Russia are several times better than the red soil of Argentina and Brazil For example, the best chernozem land plots in the Voronezh region cost from $ 1,000 per hectare. Land plots with chernozem in the Krasnodar Territory cost no more than $ 3,000. Land for orchards and vineyards in the most expensive region of Russia in the Krasnodar Territory can be purchased from $ 2,000, and rice fields in the Krasnodar Territory can be purchased from $ 2,500.In other southern regions of Russia there are also rice fields where the price is no more expensive than 800 US dollars. If we talk about agricultural lands of the Volga region, where you can get large yields of soy, potatoes or forage grass, so these land plots cost no more than $ 500 per hectare. The history of Russia began with such ancient Russian lands - Tver, Yaroslavl, Pskov, Vladimir or Novgorod regions, where the price does not exceed 250 US dollars. There are land plots even cheaper, for example, in Siberia or the Urals, there the price is from $ 200. And all these lands are an order of magnitude better than land in Africa, and most importantly, they are located among forests and where there is enough moisture for natural watering, in contrast to the arid lands of the African continent.
According to a report from the Auckland Research Institute in the United States, since 2008, foreign companies have acquired or leased more than 100 million hectares of agricultural land in Africa, more than the territory of France or Ukraine combined. Until 2008, no more than 4 million hectares were bought annually, then purchase volumes increased. Understanding this situation in the land asset market, it can be argued that the final phase of the struggle for the African continent has begun. However, if in the 19th or 20th century several European countries tried to divide Africa, which the USA and the USSR then joined, the list of participants today has expanded significantly. And now the main players in the redistribution are China, the Gulf countries, India and even Brazil.
The Gulf countries on the African land market are represented primarily by oil-producing countries - Qatar, Saudi Arabia, the UAE and Kuwait. Due to geographical features, the area of agricultural land in these countries is extremely small. However, large financial resources can solve the food security problem of a growing population. In Saudi Arabia, the purchase of agricultural land in Africa and European countries has become part of the state program. The government provides serious support to agricultural companies outside the Middle East - provided, of course, that most of the harvest goes to Saudi Arabia.
In 2008, Riyadh announced a decrease in domestic grain production by 12% per year. In order to save water resources, which are in great shortage in the region. At the same time, authorities allocated $ 5 billion to provide soft loans to companies that will invest in countries with large water resources and expanded agricultural potential. Then, the private Saudi company «Foras», with the support of the «Islamic Development Bank», announced plans to invest $ 1 billion in the purchase of land assets for rice cultivation to provide Saudi Arabia with food. For this, the company acquired land in Mali, Senegal, Sudan, Kenya and Uganda.
Another example is the entrepreneurial activity of Sheikh of Ethiopian descent, Mohammed Al-Amoudi, who at that time was the second person on the list of the richest citizens of Saudi Arabia. His company «Saudi Star» bought in 2007 or leased for a long time several tens of thousands of hectares of farmland, which began to grow wheat, rice, vegetables and flowers. In the future, the company planned to expand its holdings by several thousand hectares.
The results of this expansion were quite successful. Already in March 2009, a magnificent ceremony was held in Riyadh on the occasion of the celebration of the first crop of rice and wheat, obtained through the implementation of an agricultural project in Ethiopia, estimated at $ 100 million.
No less active are the lands being bought by other Asian countries. Among them is the most active China, which is strengthening its position in Africa in all directions. When buying African farmland, Chinese companies enjoy significant government support for the purchase of African farmland. In China, 20% of the world's population lives, it accounts for only 7% of the world's agricultural land. Many of them are in poor condition due to excessive anthropogenic effects (the use of pesticides, herbicides, growth hormones and GMOs, as well as soil erosion), these lands have poor yields. Therefore, African, Russian and Latin American plantations have become a completely natural solution in the current situation for China. In Congo, China owns nearly 3 million hectares, a territory comparable to the state of Albania, these land assets are used to produce palm oil for biofuels. For these purposes, nearly 2 million hectares were acquired in Zambia. Chinese companies in Tanzania and Mozambique have acquired over a milion hectares for rice cultivation.
Among the main buyers of African lands stands India. Indian companies own several million hectares of agricultural land. Moreover, India does not intend to abandon the planned course on the purchase of land assets around the world. Indian problems are very similar to Chinese: a huge population, which is already impossible to feed on the existing land plots of the country. In addition, the active use of GMOs, pesticides and herbicides worsened the condition of soils. But the most serious problem, as in India, China, the Arab countries and the African continent, is the lack of renewable water sources. Over the past 20 years, more than 300 rivers have disappeared in China. The large rivers of China and India lost 12-20% of their water resources. Active industrial production in India and China has very seriously affected the purity of the waters, microorganisms and fish found in the basins of the great Yangtze and Ganges rivers.
Another serious problem is the structure of Indian agriculture, which is becoming less and less effective in modern economic conditions. Farming in India is characterized mainly by small family farms, horse-drawn vehicles and many intermediaries. The clumsy cumbersome system is called the main reason why a significant share of Indian agricultural production spoils before it enters the market and is sold. Annual losses are estimated at about 6 billion US dollars. For this reason, large Indian companies see Africa as a testing ground where it is possible to build a new agricultural system based on large farms and efficient technologies.
For these purposes, the Government of India provides large loans to its corporations on very favorable terms. Over the past three years, more than one hundred Indian agricultural companies have acquired hundreds of thousands of hectares in Ethiopia, Kenya, Senegal, Mozambique and other countries. Rice, sugarcane, corn, lentils and flowers are mainly grown on these lands (the flower business is the most quickly paid back). The leading Indian company on the African land market is «Karaturi Global», the world's largest rose-growing company, which owns approximately 1 million hectares of land in Ethiopia, Kenya and Tanzania.
Western European investors also did not stand aside from the purchase of land assets in Africa. They mainly operate through hedge and investment funds. Among European companies, the most active are representatives from Sweden and the United Kingdom. Sweden owns about 100,000 hectares in Mozambique. On these land plots, agricultural products are grown for processing into biofuels. Companies in the United Kingdom own plantations in Tanzania for growing agricultural products for biofuel processing.
American companies are far ahead of Europeans. Various American companies have set up a land bank covering more than 1 million hectares in several African countries. American Universities, such as «Harvard University» or «Vanderbilt University» and many others with large charitable foundations, are particularly active in buying. Most transactions are conducted through the English company «Emergent Asset Management», which manages one of Africa's largest land funds.
Private companies in the United States also participate in the land redistribution in Africa, many of which are associated with large banks such as «Goldman Sachs» and «JP Morgan». An example is the Texas-based «Kinyeti Development», which owns over 600,000 hectares in South Sudan. Its leader is Howard Eugene Douglas, the former US Ambassador Extraordinary and Plenipotentiary to the region, who also served as the refugee coordinator. It should be noted that Sudanese lands, where until recently there was a civil war, were especially popular. In North Sudan, companies from the UAE, Saudi Arabia, and South Korea have more than 1.5 million hectares. The government, which recently appeared on the map of South Sudan, is already inundated with offers from European and American companies to purchase large land plots. Territories along the Nile River are in special demand.
The purchase of African lands, which has gained such incredible proportions over the past fifteen years, is already called the new stage in the colonization of the African continent. However, companies operating in the African land market disagree with this statement. They claim that they contribute to the development of Africa by investing billions of dollars in the development of agriculture on the poorest continent, creating new enterprises, buying modern equipment, and providing jobs. For example, representatives of the Ethiopian government claim that foreign investors buy exclusively unused land assets that did not belong to farmers, which, of course, is far from reality.
In a real situation, everything is a little different. According to preliminary estimates, more than 300,000 indigenous people from the Bako and Gambela regions, where Indian companies operated, were displaced in Ethiopia. Of these, only 22,000 people got jobs on new farms and plantations. They are really lucky - even that small salary that they receive far exceeds the average income in this poorest African state. And the remaining almost 280,000 people were left without work and livelihoods. Many small farms were destroyed; no compensation was paid to farmers. In fact, 280,000 people were deprived of any opportunity to feed themselves and their families. This is a dangerous situation and should not be underestimated in the future. African governments and populations are politically unstable, and all this can lead to uprisings and the destruction of large foreign farms, resulting in serious financial losses for investors. A similar situation is developing in other African countries. According to UN experts, the food situation in East Africa in 2011 was the largest humanitarian disaster in the world. More than 15 million people were starved, of which almost 3% died, including more than 2 million children starving, which is 1.5 times more than in 2009.
Citizens of many African countries have tried several times to counter such massive sales of land to foreigners, but protests are still being suppressed. But all this will lead more and more to the resistance of the local population, to the seizure by their transnational corporations of their land plots. Ultimately, we can observe revolutions and coups in Africa, and the nationalization of the land. At the time, such events had already occurred - a coup in Madagascar, which resulted in the cancellation of the deal with the South Korean conglomerate «Daewoo». The company was to lease nearly 1.5 million hectares for 99 years.
Understanding that one of the most common causes of local conflicts in Africa is the struggle for access to water and land, which can feed a family. One can only guess the consequences of a new redivision of the African continent. Analysts at the «Auckland Institute» predict that the result will be even greater instability in world food markets, which could be much worse than terrorism and small local conflicts. They behave very strangely, once colonial weird, such as India and the Arab countries, they come to Africa and only pump resources from the Black Continent, including from land assets. If such behavior is normal for European countries that have been accustomed for centuries to the politics of colonialism, then new players have forgotten how they were exploited and have not learned a historical lesson. China is on a completely different path, it, as the USSR (Russia) once came to the country, created the infrastructure, namely, built: schools, hospitals, seaports and roads. This Chinese policy indicates that most African governments are to understand that 15 years of active purchase of land assets has ended! In Africa, there is practically no free land left, many companies turned their attention to the countries of Eastern Europe (Bulgaria, Romania, Poland) and the countries of the former Soviet Union (Russia, Ukraine and Kazakhstan).
Russian lands are one of the best investment sites in the world
20 years ago, the expansion and purchase of agricultural land by foreign companies in Russia began. These were mainly Chinese and European companies, but recently companies from Iran, India and the Arab countries have been actively participating. One of the largest projects in the Arab countries can be called an attempt by the Minister of Economy of the United Arab Emirates Sultan bin Saeed Al-Mansouri in 2014 to build a logistics center in the Emirates for the storage and further delivery of Russian grain to other countries in the Middle East. Investments in a grain hub were valued at $ 7 billion. However, this undertaking was not further developed. And we can say that in 2016, the UAE sovereign fund «Mubadala» announced its intention to invest $ 150 million in various businesses of the «AFG National» agro-holding for a share (19.9%) in the company. Partners are ready to buy this stake from «Russian Capital Bank». The agricultural holding will use these funds to “increase production of agricultural products, expand the land bank and build agricultural infrastructure, expand the product line and develop new brands”. Agroholding «AFG National» is one of the largest rice producers in Russia. In addition, a consortium consisting of the «Russian Direct Investment Fund» and the UAE sovereign fund «Mubadala» announced their desire to invest another $ 150 million in a significant, but not controlling stake in the oil and fat products producer in the Russian corporation «Efco». «Efko» Company is a monopolist in the supply of palm oil from East Asia to Russia, and controls the bulk terminals of the «Kavkaz» seaport. Middle Eastern investors, together with Thailand's «Charoen Pokphand Group» and China's «BannerDairy», are investing $ 1 billion in a huge dairy complex for 80,000 cattle in the Ryazan Region.
And while Russia has every chance to become one of the most attractive object of investment in its land assets. The country has 10% of agricultural land in the world. Most of them are currently idle and not processed. Given this fact and the current crisis situation with land resources in many countries of the world, interest in Russian territories and lands is quite explainable.
The sale of agricultural land to foreigners in Russia is prohibited. This problem is easily solved with the help of land law companies. One of their leaders is «GeoBuro» Limited Liability Company. According to the Institute for «Agricultural Market Studies», foreign companies, through subsidiaries, already control about 5 million hectares of Russian agricultural land. For example, the Swedish consortium «Black Earth Farming», using a similar scheme, acquired 300,000 hectares of land assets, mainly in the Chernozem region. Then he sold everything to a Cypriot offshore company at a price three times the purchase price. Entrepreneurs from India and China are more interested in large land assets in Russia. Chinese entrepreneurs already own about 2 million hectares of land assets in the Far East and about half a million hectares in Siberia and the European part of Russia Chinese entrepreneurs say, why buy land somewhere overseas when there is closer, moreover, it’s inexpensive and much better in quality with a natural irrigation system.
Conclusions about the near future of Russian agricultural lands
Let's look at what the land assets of Russia are better and why they are buying up?
1. Russian land assets are cheap: from $ 100 for pastures, $ 150 for fallow lands (uncultivated), from $ 200 prairies and from $ 500 good arable land.
2. Russia is not Africa, it has infrastructure (seaports, roads, elevators).
3. Russia, unlike African countries, has a high-quality training system and a large potential of skilled, inexpensive workers.
4. In Russia, unlike Africa, there are natural crop irrigation systems; this is humidity due to regular rains and a large number of rivers and lakes. And in the southern regions canals with an irrigation system.
5. In Russia there is a sales market of 150 million people, of which only 10% or 15 million people live outside the Urals in the Far East and Siberia.
6. The Russian agrarian school has developed many technologies for growing certain crops in certain Russian territories. The fact is that most foreigners do not even know about it, since Western propaganda convinces us that there is no science and technology in Russia, especially in the agricultural sector.
7. In Russia, GMOs and growth hormones for plants are prohibited. This makes it possible to produce environmentally friendly products.
8. In Russia there are, although small, measures to support agriculture. For example, soft loans to banks, subsidies for planting orchards and vineyards. Subsidies for sowing grain crops. Subsidies for uprooting and liberation from shrubs of fertile agricultural land. It is possible to get equipment for long-term rent or leasing.
9. In the coming years, all agricultural land will be reoriented to the production of certain crops, this will lead to a reduction in the production of expensive food products like beef, this is due to the amount of water per one kilogram of beef, and this is almost 2,000 liters. Russia can become a world leader not only in the production of wheat, sunflower oil as it is now, but also a world producer of soy, corn, medicinal herbs, fodder herbs and their processing into haylage or granular grass flour.
Russia was and will remain the world leader in the production of flax, hemp, buckwheat, mustard and coriander in the Crimea and Krasnodar Territory.Looking at all these advantages, competent farmers and investors will begin to actively invest in Russian agricultural lands and agriculture. According to our expert assessment, in the next 3-5 years, land assets in Russia will grow in price by about 200-300%. Whoever comes first has the greater economic effect.