Finance Capital, Investment and the ‘Financialization’ of Canadian Food Systems

Melanie SommervillePhD Candidate

Department of GeographyUniversity of British Columbia

Vancouver, Canada

Presentation to the ‘Food, Farms, Fish and Finance Forum’Saturday, May 25, 2013

Conventional Food Systems

Sustainable Food Systems

Focus of the presentation

‘Mainstream’ Finance

‘Alternative’ Finance

My

research

4-F Forum

‘Financialization’ of Canadian Food Systems

• Massive influx of investment capital into our food systems

• Worldwide phenomenon playing out in Canada

Who’s involved?• Wealthy individuals• Chartered banks and

traditional lenders• Institutional investors

(pension funds, mutual funds, specialized investment funds)

• Sovereign wealth fundswww.capuchinomics.com

What are investors buying?

• Farmland • ‘Global land grab’ - 17.3

million acres of land

The Dominion 2010

• Agro-food production, processing, retail, distribution

• Agricultural derivatives• ‘Global food crisis’ - price

spikes 2007/08, 2011, 2013?

• Trend also affects other natural resource sectors • Especially ‘soft commodities’

like forestry and fisheries

Why are they buying it?

• Turbulence in global financial markets• Collapse of previous investments• “Attractive returns, excellent

capital preservation, low risk and broad portfolio diversification”

Financial Performance of Canadian Farmland Relative to Other Assets

Bonnefield Financial Inc. 2013

• Predictions of strong future performance• High commodity prices• Good supply-demand

‘fundamentals’

• Particular qualities of Canadian agricultural resources

Sprott Resource Corp. 2008

Why is our food system vulnerable to this investment?

• History of underinvestment• Long period of low commodity prices• Land appreciation and historical tenure patterns• Rising production costs• Rising debt

Farm income from market, government and non-farm sources, Canada 1971-2005

AAFC 2012

Key dynamics of ‘financialization’

• In a ‘financialized’ economy, the main opportunities for profit-making lie in ‘financial’ channels:

• Profits raised in these channels are not totally delinked from the ‘productive activities’ underpinning the sector, but nor are they perfectly reflective of them.

AGRO-FOOD SYSTEMS

Rent

Land Appreciation

Interest

Dividends

Capital Gains

Canadian Examples

Implications of ‘financialization’

• Loss of farmland• Increasingly held by investors, not farmers• Increasing conversion to other uses

• Driving up farmland and food prices, but agricultural producers and workers’ portions of returns squeezed• Risk of ‘bubbles’

• Loss of autonomy, control over food systems

• Food systems increasingly driven by ‘financial logic’• Rather than food security, farmer livelihoods, family history

• Decreasing ecological sustainability

• Hollowing out of rural communities

FAO 2013

Assiniboia Capital Corp. 2011

Insights and Questions for 4-F Forum

• Be mindful of these broader dynamics

• ‘Sustainable’ food systems need ‘sustainable’ finance• Appropriate level of and balance between economic,

ecological and social ‘logics’ or returns• Measured, steady influx of ‘patient’ capital• Attention to ‘productive’ vs. ‘financial’ channels• Sensitivity to questions of autonomy and control• Appropriate distribution of risks and rewards

“Farming looks mighty easy when your plough is a pencil and you're a thousand miles from the corn field.”

-Dwight D. Eisenhower