Saturday, 26 April 2008
Hedge Funds Target Farming (!!!)
(Image of Haiti following recent food riots)
From Yesterday's FT (25/04/08): Hedge funds and investment banks are swapping their Gucci for gumboots as they bet on rising food prices by buying farms. Billions of dollars are flowing into farmland across the world as investors gorge themselves on vast tracts of Australia, South America and eastern Europe. “Sell banks, buy cheese,” Crispin Odey, manager of London-based hedge fund Odey Asset Management who has started investing in farming companies, said recently. His recommendation is being followed by many hedge funds and a new type of farmland holding company – often backed by hedge funds – which believe the food boom will make farming highly profitable. Mr Odey, who has started investing in farming companies, told investors in a conference call this week: “What we wanted to do was get ourselves involved in making the recurring revenues that we felt that we could make from the price of wheat staying up.” Other hedge funds and investment banks are buying farms to give their commodity traders an edge from first-hand information about costs and prices. Ospraie Management, a New York commodity fund, for example, owns farms, while Morgan Stanley’s commodities business has several thousand acres of Ukraine. Most of the new breed of farm investors believe the world is entering an era of high food prices where farms will once again be profitable, after two decades of being starved of investment. “It is an unashamed bet on the continuing rise in the price of food stuffs and the rapid recovery of the farming industry,” said one hedge fund manager. This creates two opportunities: buy successful farms to profit from rising food prices and possible land price rises, or pick up cheap land in developing countries and bring it into production or improve it to raise yields. (...)Emergent Asset Management is even more ambitious, with the British hedge fund manager aiming to raise €1bn (£787m) over the next year to put into sub-Saharan African farmland. It has firm commitments of €100m for the first round, and investors have taken options to invest another €500m for the five-year closed-end fund, set up in partnership with local farming specialist Grainvest. “The cost of land is very, very low,” said Paul Christie, marketing director of Emergent. “We want to make the land more productive. It is industrial scale farming and it is going to make a big difference down there.”
JG comment. The likely result? Continuing high food prices (they are in this for maximum profit). Billions still starving. Destructive farming practices. The idea of hedge fund style speculation targeting the farming sector is both sadly inevitable (speculation in commodities must be partly responsible for the food price hike in the first place) and represents likely increases in throwing people off land, deforestation, soil erosion, mass use of chemical pesticides & so on. You have to vaguely wonder if a (Brent Spar scale) NGO response might be one of the only ways of diverting this? I really dont think we can afford to let the people who brought us the credit crunch loose on developing world food supplies?