Yet problems remain. Not all producers operate within the existing protocols. And production takes place on land that could otherwise produce food, forcing a debate on the relative merits of 198 soybean cultivation versus the cultivation of food crops. Just as importantly, the Brazilian forest code was recently changed, and a broad amnesty of deforestation fines was granted to farmers who illegally deforested until 2008. These amendments would dispense with elements of the soy moratorium, and would open more land for possible cultivation. In addition, there are concerns that the moratorium in the Amazon is increasing pressure on other regions of Brazil. Soy expansion in the Cerrado has led to deforestation and displacement, for example. There are also proposals to greatly expand the area of land under cultivation to palm oil, including ADM's planned investment already discussed. The biofuels subsidiary of the state-owned oil company Petrobras – Petrobras Biocombustivel – is planting some 6,000 hectares to palm oil, with plans to expand this to 74,000 hectares. There are also reported to be proposals to eventually commit 13m acres of ‘abandoned and degraded 199 agricultural areas’ to palm oil cultivation. The final – and perhaps most significant – challenge comes from the emergence of the ‘megafarms’, discussed in the section above on the financialization of agricultural production. These are primarily emerging in South America, especially in Brazil, Argentina, and Uruguay. These operations are devoted to the production of a number of commodities, including soybeans and palm oil, using land that was already under cultivation and virgin land. These mega-farms, sometimes extending over millions of acres, are created by large financial institutions – for example, European hedge funds and private equity consortia – operating without the scrutiny and the accountability required of public companies. Under these conditions, the production of biofuels feedstock is part of a system that raises significant issues in terms of global food security. The exact nature of the relationship between the development of such mega-farms and the ABCD companies is as yet unclear. ADM and Louis Dreyfus are currently acquiring land for their own operations, but not on the scale of the ‘mega-farmers’ such as El Tejar, the world’s largest farm operator. Despite this, opportunities may exist in the future for ABCD involvement, especially given that El Tejar, for example, is planning to offer shares through an initial public offering (IPO) in 2013. It will be interesting to see who purchases a shareholding should this IPO occur; it is possible that any one – or more – of the ABCD companies would see this as an 200 opportunity to maintain their dominance in soybean production in Latin America.
TRADERS AND DEVELOPING COUNTRY AGRICULTURE Somehow the very term ‘financialization’, hard to understand and hard to explain, captures something of how remote the world of high commodity finance is from the reality of the vast majority of those who earn their living from agriculture, particularly those in the developing world. For smallholder producers, who make up some 70 per cent of the agricultural world, worries include how to protect and increase soil fertility; how to ensure reliable seeds; where to get credit for the season’s planting; whether the rains will come; where to store the harvest so as to avoid the low prices at harvest time. Guessing at the political mood in Russia or what changes the Dodd-Frank legislation might bring, let alone which way the rouble or the yuan will move against the dollar, are not factors. Yet both the increased presence of financial investors as owners and operators of farms (the financialization of production) in a number of developing countries and the significantly increased activity of speculators and investors in commodity exchange markets (the financialization of price formation and risk management) affect the context in which smallholders operate. First, the financialization of production has brought new competitors for land, and to
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Cereal Secrets: The world’s largest commodity traders and global trends in agriculture