Instead of the ideology of speculators, the agricultural sector requires the development and implementation of competent state agricultural policies that will contribute to the development and stability of the land market.
Who are some of the largest investors in farmland?
What is their argument regarding investing in farmland?
The world's richest and most successful investors already have significant investments in agricultural land and show no signs of stopping. An example is Michael Burry from Scion Capital, who bet on the fall in 2008 and won, that is, he professionally predicted a financial bubble in the American real estate market. By the way, now he is also betting billions on the fall of stock markets, anticipating the current American growth bubble, which is now caused only by top software companies with AI projects. So, a man, based on whose life story a Hollywood film was even made, is now betting a lot of his own and other people’s money on the collapse of the key so-called. index funds, because it turned out that American stock exchanges are in the black only because of multiplicative expectations from “artificial intelligence” technologies. The investments he makes today are largely focused on farmland, which makes up a significant portion of his net worth + a billion-dollar speculative bet on the collapse of the top 7 (Apple, Microsoft, Amazon, Nvidia, Alphabet, Meta, Tesla - ranked by S&P500) . “I believe that agricultural land, productive agricultural land with water, will be very valuable in the future, and I have invested a significant amount of money in it,” Michael Burry said in an interview with Bloomberg.
Also sharing concerns for his software assets during the global economic recession, Bill Gates, co-founder of Microsoft, has also made significant investments in agricultural land in recent years (under 110 thousand hectares) and even became the largest private owner of agricultural land in the United States. Famous American investors also include Warren Buffett, founder of Berkshire Hathaway, who constantly touts the benefits of investing in farmland and has often used it as an example of a great investment, comparing it to gold, as opposed to the insignificance of cryptocurrencies. “If you said that 1% of all farmland in the United States could pay your group $25 billion, I will write you a check this afternoon,” Buffett said. “[For] $25 billion, I now own 1% of farmland. If you offer me 1% of all the multifamily properties in the country and want another $25 billion, I'll write you a check, it's very simple. Now if you told me you owned all the bitcoins in the world and offered them to me for $25, I wouldn't take them because what would I do with them? One way or another, I'll have to sell it to you. It won't do anything. Apartments will produce rent and farms will produce food.”
One thing is clear - over the past few years, “earth” has been accelerating as a speculative, but hard asset, with which, at the level of gold, they are trying to insure and diversify their capital from inflation and sudden crashes. Farmland is incredibly resilient for a simple reason: it produces goods with uninterrupted demand.
Factors for a sharp increase in the value of agricultural land:
1) population growth and a projected significant increase in consumers in a short period of time: by 2050 the world will reach almost 10 billion people (and the demand for food will soar by 50% - I wrote about this) and a drop in crop yields due to climatic turbulence and changes in thermal conditions (NASA forecast for a minus 20+% drop in harvests around the world over 10 years); 3) farmland appreciation has proven to be an attractive hedge against inflation as food prices are driven up by inflation, which then translates into higher incomes for farmers and higher rents/values for land owners. But the latter is relevant and acceptable only for countries without war and those that have not experienced it over the past 10 years. War violates the rules of fairness in free markets, undermines the institutions of financial insurance of business and always opens up opportunities for predatory speculative interests - luring away key means of production. For our current economic foundation, the agro-industrial sector, this is land.
A standard scenario for the behavior of a subject of a non-contemplative, speculative type (some stages require the involvement of agents of influence and the corruption lobby):
Study of the market and land rights: a financial speculator studies in detail the land market in a particular country, studies the legislation on land ownership and the rules for its use;
Identification of farmers' vulnerabilities: the speculator identifies farmers who may be in financial difficulties or need funds to develop their agricultural business. (Howard Buffett (middle son) recently opened a so-called “dry dock” on the border with Hungary.
Watch your hands: in whose interests is blocking the borders in this case?);
Unlawful land acquisition: a speculator uses improper methods or takes advantage of legal deficiencies to acquire land at a lower price than its market value (there is a broader context for this danger);
Use of hidden schemes and structures: To avoid transparency and excessive control, the speculator creates complex corporate structures or uses tax regimes that allow tax evasion;
Speculative activities: after obtaining ownership of land, the speculator begins speculative operations, such as the rapid purchase and sale of land, which leads to higher prices and promotes illegal mechanisms;
Social consequences: this approach will lead to a deterioration in the financial situation of farmers, their loss of agricultural resources and land, further bankruptcy and the “death” of national business.
Based on this context, we can say that an agent is now actively working in Ukraine who serves an external request for the opening of Ukraine, its land, during war and deep crisis (at the worst moment) for the objective interest of speculators who consider it as an asset. One of these agents is the Center for Food and Land Use Research at the Kyiv School of Economics. Under them, the project “LAND OF WEAKNESS” was created - “a project to support and develop the land market in conditions of war and post-war reconstruction.”
For comparison. Briefly, what I recommend as an anti-crisis policy “for today”.
My motive: maintaining state agricultural policy - a tool for supporting a sustainable, efficient and competitive national economy. agricultural sector and ensuring its development towards increasing productivity and profitability, with internal food security and conservation of national natural resources.
To do this in a short time you need:
Launching state leverage through the creation on a temporary basis of a special budget “Stabilization Agrarian Fund” (2-3+ billion US dollars) under the wing of the Ministry of Agrarian Policy. The conditions for long-term lending with a minimum rate can also serve the policy of increasing the share and depth of processing in the country’s agricultural sector through the mechanism of a progressive rate. As an administrative and financial incentive, this would help not only to leverage the operating costs of our largest exporters, but also, under clear conditions, to stimulate processing as a factor in ensuring domestic multi-sectoral industrial demand (economic multiplier) and a means to quickly alleviate the logistics factor due to a physical decrease in export volumes ;
Individual long-term “European lending” through connection to steel markets. Agribusiness, especially direct exporters to Europe, have the opportunity from this year to blaze a direct path to cheap European loans (and MDB-affiliated loans). The key to this is rapid preparation for the implementation of a business strategy based on the principles of sustainable policies, which the new EU CSRD directive on non-financial reporting requires not only to describe, but to implement (more details).
What does the School recommend?
On the policy of assistance to the agricultural sector during the war. quote: “The timely opening of the 2nd stage of the land market from 01/01/2024 for legal entities will increase the liquidity of land, and as a result, the income of landowners and communities, and will also contribute to the development of lending secured by land.”
Immediately leading question: Why not on the security of the products? Pledge for the means of production - the logic of the intent to redeem from a bankrupt - deliberate bankruptcy. A pledge for products is a trust and incentive and one of the mechanisms for carrying out state agricultural policy, because the type and depth of processing of such products can be discussed as a lending criterion. But further.
KSE wants to help increase the liquidity of agricultural land as an asset. But land is not an asset in itself. It is a means of food production and is the main objective of any agricultural land policy. In most cases, land is leased. An increase in the value of the land itself in the hands of consolidating managers will mean an increase in the cost of rent and income of landlords and nothing more. And the next rise in price will make possible other types of financial speculation secured by this land and not in the hands of the national government. subjects, but from large foreign buyers (using the example of Buffett or Gates - because in the USA they simply rent out their land). And such collateral speculative lending will not occur within the agricultural production cycle of this land (not for food production), but, for example, for the purchase of the next annual government bonds, etc.
The simplicity and stinginess of the motivation in the above justification for such an opening of the land market shows the simplicity and directness of the intention of our “patriotic” neoliberals - serving the interests of speculative capital. But, I will add, and their consequences (their possible lack of awareness for ideological or intellectual reasons does not relieve responsibility) is a vile use of the moment of war and the difficulties of Ukrainian farmers, who actually need reliable leverage and long-term geoclimatic strategies in the global food market. This scenario will make it possible to take advantage of numerous temporary bankruptcies as a reason to consolidate their lands from creditors with the subsequent sale to internal, and in the end - to purely external speculators (and who, in fact, will be the only ones with money in our situation?). This will cause the rental price on the “market” to rise. And the Ukrainian agrarian, already without land, will be forced to either lose his independence in choosing the direction of activity (because he will be dependent only on the trend crop, which is again determined by the trader, a problem with which our “school” is silent), or go out of business. Moreover, such an agrarian “on zero” and with rent, the cost of which will be determined by the world market for speculation in it, will most likely work only for export in order to maintain the liquidity of his business. Therefore, in a war-torn country with a mostly poor population, food security will be lost.
All that remains is to privatize state land banks, which will close the last element of state agricultural policy and one can ask in silence: “Who said famine?”
Moreover, we do not have the right to lose control, the right to determine long-term disposition, over our key wealth (land) at the time of the struggle for the geoclimatic harbors of the world, including Ukraine.
