WORKSHOP ON FARMLAND MARKET REGULATIONS 0 ::J 0 0 :::!: )> - PowerPoint PPT Presentation

0 ::J -+ 0 ::J o· WORKSHOP ON FARMLAND MARKET REGULATIONS 0 ::J 0 0 :::!: )> Vl Vl 0 "SHARE DEALS" – NEW CHALLENGES FOR THE () o· !:::!. 0 ::J FARMLAND MARKETS ? (D Al C 0 ro 3 JUNE 2019 - EUROPEAN COMMISSION DIRECTORATE-GENERAL FOR FINANCIAL STABILITY, FINANCIAL SERVICES AND CAPITAL MARKETS UNION DIRECTORATE-GENERAL FOR AGRICULTURE AND RURAL DEVELOPMENT

.. ...... - .......... I I I .............. I I I .................. .................. .................. .................. .................. .................. ...... WHILE 75 % 3% OF FARMS Of FARMS <1 0ha >100ha OWN 11% OWN 52% OF FARM LAND OF FARM LAND 8 million farms control 336,000 farms control 19 million hectares almost 91 million ha o 20% of farms, between 1 and 100 ha, contro l 37% Source: Eurostat. TN l's complete data set of fully referenced statist ic s for all EU [e Ut il ised Agricultur al Area (UM) members can be found here: https://www.tni.org/en/files/documents/land-for- the-few-the-state-of-land-concentration-in-europe-database-for-all-eu antonio onorati - Associazione Rurale Italiana - ECVC, 2019

0.82 LAND IN THE EU IS MORE UNEVENLY MEASURE Of FARMLAND INEQUALITY DISTRIBUTED THAN for se lected Member Stat es in 2013 WEALTH in 2013 Sweden 0.62 Poland 0.62 Italy 0.69 Romania 0.77 0.91 • Hungary 0.93 I Gi ni coeffi cie nt Gi ni coefficient f or wea lth fo r farmland Bulgaria THE GINI COEFFICIENT IS A MEASURE OF INEQUALITY ON SCALE OF O - 1. A zero coefficient means that , in the case of farmland distribution, all agricultural holdings hold the same amount of farmland. A coefficient of 1.0 means that, in the case of farmland, a single agricultural holding holds all the farmland. For wealth, the Gini coefficient refers to the distribution of financial wealth amongst households. Source: Eurostat. TNl's co mplete data set of fully referenced statistics for all EU membe rs can be found here: https : //www.tn i. org/en/ fil es /documents/land-for- • Uti li sed Ag ricultural Ar ea ( UM ) the-few-the-state-of -l and-concentration -i n-europe-database- for -all-eu antonio onorati - Associazione Rurale Italiana - ECVC, 2019

~ ~ ~ utll 5ed agnrultural area mrdlng to , lz.e, lO 6 (%) 70 -- "Cl. !iM "" 00 - ii 52.7 :I 50 - [5. 'i ' I 40 - ~ J!! · • - : ... 30 - ;:;i . I· .; . ... 20 - ------------------------------------------ 55 ----- ' ; i ~ I ' 0 - ra/. 1 0 :! l OO ha - F:a s - UAA mi !rime r · a · ~ es hold Of less to he at.a l AA &d udlrg Ollffilo n SDI! · :ce:EtJrosta t [D n ll r;:! ata · ef_m_F Jr antonio onorati - Associazione Rurale Italiana - ECVC, 2019

EU rural differentiation is significant According to a Joint Research Centre report, if the current economic and  demographic trends continue, one would expect a growing number of regions to be classified as ‘less developed’.  “…The physical structure has a significant effect on farm profitability , in terms of GVA per holding and per employee: extensive northern EU agriculture (group 1) and the EU continental agriculture (group 2) are characterized by both larger farms and higher profitability indexes , while in semisubsistence agriculture regions (group 5) the micro/small farm size is strongly related to the lowest levels of GVA per holding and per employee…” ( Agricultural systems in the European Union: an analysis of regional differences Mario D’AMICO*, Adele COPPOLA**,  Gaetano CHINNICI*, Giuseppe DI VITA*, Gioacchino PAPPALARDO*) antonio onorati - Associazione Rurale Italiana - ECVC, 2019

“ Semisubsistence agriculture” (Italy)  The large farms that occupy more than 10 year work units , occupy only 2.7% of the labor forces and produce 5.4% of the production  The farms up to 10 year work units produce the remaining 94.6%, of which 25.5 % for farms with less than 1 year work units, that is the so-called "subsistence farms " which evidently are not subsistence and self- consumption but work for the local market antonio onorati - Associazione Rurale Italiana - ECVC, 2019

“…Financialization can broadly be understood as the growing power and influence of the finance industry. Some scholars describe it as the „increasing importance of financial markets, financial motives, financial institutions, and financial elites in the operation of the economy and its governing institutions, both at national and international level”. Others emphasize that this includes the domination of financial interests not only materially but also with regards to the way in which land is understood and discussed…” REF: Epstein (2005) Introduction: financialization and the world economy antonio onorati - Associazione Rurale Italiana - ECVC, 2019

Flex crops…..  The rise of flex crops , meaning the strategy to use/process specific crops (mainly the global staple crops soy, sugar cane, palm oil and maize) in multiple and flexible ways , opened up new horizons for finance investors antonio onorati - Associazione Rurale Italiana - ECVC, 2019

The problem to be solved: investment webs are complex and dynamic Financialization of land: quicker change of land control from one investor to another  Companies directly involved in production, processing and trading agricultural products  have become more and more financial actors themselves. Many today have their own finance branch and most are strongly dominated by shareholder structures In the finance world the distinction between investment and speculation is blurring,  especially because all investments of the finance industry have a speculative component. [• Further reading: HLPE (2013) Investing in Smallholder Agriculture for Food Security,  http://www.fao.org/3/a-i2953e.pdf] antonio onorati - Associazione Rurale Italiana - ECVC, 2019

«SHARE DEALS»…..  Not buy the land itself but the company that owned the land  Financial actors and funds typically invest in companies that are constructed to pool land,  Agribusiness companies have joint ventures with investment companies antonio onorati - Associazione Rurale Italiana - ECVC, 2019

~ ~ ~ ~ Trend in land values in Bulgaria since 2000 4000 3500 Land rents up 4 tim .,s 200 3000 In last 10 ears GJ 2500 150 Two-thirds land ren ed CV t:; ...._ 2000 0 100 1500 1000 so 500 -+---------------------------------1 - ccess1on 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 - Price arable I nd - Rent antonio onorati - Associazione Rurale Italiana - ECVC, 2019 Source : E urostat

antonio onorati - Associazione Rurale Italiana - ECVC, 2019

Finance capital in land: who they are?  Finance capital in land often also aims at “ realizing capital gains through the selective investment of the rural properties already developed .”  Or “… Transforming unproductive properties ”, increasing their financial value by increasing the “cash flow per unit of area ” can be a relevant part of strategies of financial actors.  BrazilAgro at: http://www.brasil- agro.com/conteudo_en.asp?idioma=1&conta=44&tipo=36892  ibid. antonio onorati - Associazione Rurale Italiana - ECVC, 2019

Defining capitalization  Defining capitalization of agriculture as increase in capital inputs per unit of labour, is possible a process of capitalization with the principal contribution from peasant investment;  Future EU agriculture development should favor peasant initiative, which may be called ‘ capitalization from below ?  With the marketization of agricultural inputs, the rise of the cost of production is beyond the control of producers and block chance on capital accumulation and reduce cash flow of peasant economy; antonio onorati - Associazione Rurale Italiana - ECVC, 2019

Need for ‘capitalized agriculture’ ?  The agricultural sector is often considered to be under-capitalized . Could the possibility of buying shares in farming companies be used as means to finance investments in agriculture?  This is a call and advocacy of ‘ capital going to the countryside ’ to establish ‘capitalized agriculture .’ ?  This is expected to replace or displace small scale farming that often contributes not only to simple reproduction but also to internal market and some time to international market  Not only will it be hard for capital to make profit , it will also be more difficult for peasants to subsist from farming antonio onorati - Associazione Rurale Italiana - ECVC, 2019

Possible impact  capital enters agriculture, it marginalizes rural households bargaining power and weakens their ability to benefit from farming  agricultural development should rely on capital owned by rural households  “…Defining capitalization of agriculture as increase in capital inputs per unit of labour, they argue – based on national survey data --that Chinese agriculture is going through a process of capitalization with the principal contribution to capitalization from peasant investment…» (JPS, 2018) antonio onorati - Associazione Rurale Italiana - ECVC, 2019

Public intervention on capitalisation  Capitalisation of public support to agriculture into land prices indicates that the benefits are partly transferred toward landowners rather than toward producers  Most of the landowners live in towns, there is a risk of an extreme leakage of support not only outside the farming sector, but also out- side the rural sector. antonio onorati - Associazione Rurale Italiana - ECVC, 2019