Farmland is becoming part of financial markets across the world

Farmland is increasingly becoming part of financial markets. The controversy around the sale of the Kidman Beef Company’s ranch in Australia to a Chinese investor illustrates quite well the point that investments into farmland are shaped by complex configurations of investors, access to finance and public organisations and regulation.

At the end of 2015, the sale of the 77,300 square kilometer ranch – almost twice the size of the Netherlands - was blocked by the otherwise very investor-friendly Australian government out of national security issues, but by involving an Australian fund manager, the Chinese investor managed to buy the ranch in April this year, pending the approval of Australia’s Foreign Investment Review Board. The deal has since felled through, as it is often the case with such investments.

In the article ‘From financialization to operations of capital’, part of the special section ‘Beyond Land Grabbing’ in Geoforum, Dr. Stefan Ouma, Goethe Universität in Frankfurt am Main, offers a new way of thinking through how farmland is increasingly becoming part of financial markets. This includes focusing on the rules, instructions and standards that guide investments as well as the organisations that enforce the contracts signed under these rules. Ouma argues that the dynamics of investment into farmland are shaped at the intersection of investment structures, operational models and the specific geographical context.

Ouma suggests that the concept of operation of capital can help explain the variations in outcome of investments. The concept of operation of capital, he writes, help analyse how diverse actors such as investors, asset managers, agribusiness companies, intermediaries (industry intelligence, placement agents, due diligence providers, etc.), as well as national and regional governments, local elites, communities and the farming properties themselves are part of shaping investment patterns. Only by including these actors into our analyses can we provide a better understanding of the relation between finance and farmland.