Agriculture Reference
In-Depth Information
The agricultural investment frontier
The question here is: why has agriculture become a significant frontier of invest-
ment? There are two - related - explanations. One is that food itself became a spec-
ulative investment through the device of commodity index funds. In this scenario,
'agrofutures' became targets of investment (alongside energy and industrial metals)
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as agricultural contracts were converted into derivatives, following pressure in the
1990s, by financiers on legislators, to deregulate the commodity contract business. A
market in food became a market in food contracts, taking on a life of its own (count-
ing on rising derivative prices, as suh futures were traded repeatedly). What was
once a mehanism of hedging risks on food prices for producers and consumers, re-
ducing volatility, became a virtual mehanism whereby inanciers constructed com-
modity index funds with whih they could proit from price volatility without risk -
by harbouring large percentages of clients' index fund investments in safer ventures
and then profiting from rising, or declining, food prices (Kaufman, 2010, pp30-31).
Buying and selling food futures, then, developed into a derivative market, whih
in turn inlated food prices. Suh speculation was enabled by automation in com-
puting, and intensified during the first decade of the new century as the real estate
market crisis unfolded. At that point, investors shifted funds into commodity fu-
tures: between 2003 and 2008 commodity index holdings increased from $13 billion
to $317 billion (Kaufman, 2010, p32). This speculative spike resulted from the process
whereby 'the mehanism created to stabilize grain prices had been reassembled into
a mehanism to inlate grain prices' (Kaufman, 2010, p34).
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The other explanation is that, in the context of an accumulation crisis and the
financial crisis (symbolized in the sub-prime mortgage shake-out of 2008-09), inter-
national capital markets have gravitated towards agriculture as a relatively safe in-
vestment haven for the relatively long-term. Most notably, in 2007, 'soft' commod-
ities (renewable crops) overtook 'hard' commodities (non-renewables, suh as oil
and metals) as 'prime performers' in the commodities investment market. Researh-
ers have cited new demands for bioenergy and other 'bioproducts' from agricultur-
al crops among the causes of this 'bull-run on soft commodities' (Daniel, 2009, p5).
Some examples of this trend in agricultural financialization are presented in the box
overleaf.
These comments clearly signal an important threshold in the history of the 'food
regime': a concept underlining the political role of agricultural commodification and
circuits of food in the institutional development of world capitalist economy (Fried-
