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WORKSHOP ON FARMLAND MARKET REGULATIONS "SHARE DEALS" – NEW CHALLENGES FOR THE FARMLAND MARKETS?
3 JUNE 2019 - EUROPEAN COMMISSION DIRECTORATE-GENERAL FOR FINANCIAL STABILITY, FINANCIAL SERVICES AND CAPITAL MARKETS UNION DIRECTORATE-GENERAL FOR AGRICULTURE AND RURAL DEVELOPMENT
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antonio onorati - Associazione Rurale Italiana - ECVC, 2019
I I I
3% OF FARMS
>100ha
OWN 52%
OF FARM LAND
336,000 farms control almost 91 million ha
[e Utilised Agricultural Area (UM)
WHILE 75 %
Of FARMS <1 0ha
OWN 11%
OF FARM LAND
8 million farms control 19 million hectares 20% of farms, between 1
control 37%
Source: Eurostat. TNl's complete data set of fully referenced statistics for all EU members can be found here: https://www.tni.org/en/files/documents/land-for- the-few-the-state-of-land-concentration-in-europe-database-for-all-eu antonio onorati - Associazione Rurale Italiana - ECVC, 2019
MEASURE Of FARMLAND INEQUALITY
for selected Member States in 2013 Sweden 0.62 Poland 0.62 Italy 0.69 Romania 0.77 Hungary 0.91 • Bulgaria 0.93 I THE GINI COEFFICIENT IS A MEASURE OF INEQUALITY ON SCALE OF O0.82
LAND IN THE EU IS MORE UNEVENLY DISTRIBUTED THAN WEALTH in 2013
Gini coefficient for farmland A zero coefficient means that, in the case of farmland distribution, all agricultural holdings hold the same amount of farmland. A coefficient of 1.0 means that, in the case of farmland, a single agricultural holding holds all the farmland. For wealth, the Gini coefficient refers to the distribution of financial wealth amongst households. antonio onorati - Associazione Rurale Italiana - ECVC, 2019
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According to a Joint Research Centre report, if the current economic and demographic trends continue, one would expect a growing number of regions to be classified as ‘less developed’.
“…The physical structure has a significant effect on farm profitability, in
terms of GVA per holding and per employee: extensive northern EU agriculture (group 1) and the EU continental agriculture (group 2) are characterized by both larger farms and higher profitability indexes, while in semisubsistence agriculture regions (group 5) the micro/small farm size is strongly related to the lowest levels of GVA per holding and per employee…”
(Agricultural systems in the European Union: an analysis of regional differences Mario D’AMICO*, Adele COPPOLA**, Gaetano CHINNICI*, Giuseppe DI VITA*, Gioacchino PAPPALARDO*)
antonio onorati - Associazione Rurale Italiana - ECVC, 2019
The large farms that occupy more than 10 year work units, occupy only
2.7% of the labor forces and produce 5.4% of the production
The farms up to 10 year work units produce the remaining 94.6%, of which
25.5 % for farms with less than 1 year work units, that is the so-called "subsistence farms" which evidently are not subsistence and self- consumption but work for the local market
antonio onorati - Associazione Rurale Italiana - ECVC, 2019
“…Financialization can broadly be understood as the growing power and influence of the finance industry. Some scholars describe it as the „increasing importance of financial markets, financial motives, financial institutions, and financial elites in the operation of the economy and its governing institutions, both at national and international level”. Others emphasize that this includes the domination of financial interests not only materially but also with regards to the way in which land is understood and discussed…”
REF: Epstein (2005) Introduction: financialization and the world economy
antonio onorati - Associazione Rurale Italiana - ECVC, 2019
The rise of flex crops, meaning the strategy to use/process specific crops
(mainly the global staple crops soy, sugar cane, palm oil and maize) in multiple and flexible ways, opened up new horizons for finance investors
antonio onorati - Associazione Rurale Italiana - ECVC, 2019
The problem to be solved: investment webs are complex and dynamic
Financialization of land: quicker change of land control from one investor to another
Companies directly involved in production, processing and trading agricultural products have become more and more financial actors themselves. Many today have their own finance branch and most are strongly dominated by shareholder structures
In the finance world the distinction between investment and speculation is blurring, especially because all investments of the finance industry have a speculative component.
[•Further reading: HLPE (2013) Investing in Smallholder Agriculture for Food Security, http://www.fao.org/3/a-i2953e.pdf]
antonio onorati - Associazione Rurale Italiana - ECVC, 2019
Not buy the land itself but the company that owned the land Financial actors and funds typically invest in companies that are
constructed to pool land,
Agribusiness companies have joint ventures with investment companies
antonio onorati - Associazione Rurale Italiana - ECVC, 2019
antonio onorati - Associazione Rurale Italiana - ECVC, 2019
4000 3500 3000
GJ 2500
~CV
t:;
~
2000
...._
~~
1500 1000
Trend in land values in Bulgaria since 2000 Land rents up 4 tim .,s
In last 10 ears
Two-thirds land ren ed
500 -+---------------------------------1
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Rent Source: Eurostat
200 150 100
so
antonio onorati - Associazione Rurale Italiana - ECVC, 2019
Finance capital in land often also aims at “realizing capital gains through
the selective investment of the rural properties already developed.”
Or “…Transforming unproductive properties”, increasing their financial
value by increasing the “cash flow per unit of area” can be a relevant part
BrazilAgro at: http://www.brasil-
agro.com/conteudo_en.asp?idioma=1&conta=44&tipo=36892
ibid.
antonio onorati - Associazione Rurale Italiana - ECVC, 2019
Defining capitalization of agriculture as increase in capital inputs per unit
with the principal contribution from peasant investment;
Future EU agriculture development should favor peasant initiative, which
may be called ‘capitalization from below ?
With the marketization of agricultural inputs, the rise of the cost of
production is beyond the control of producers and block chance on capital accumulation and reduce cash flow of peasant economy;
antonio onorati - Associazione Rurale Italiana - ECVC, 2019
The agricultural sector is often considered to be under-capitalized. Could
the possibility of buying shares in farming companies be used as means to finance investments in agriculture?
This is a call and advocacy of ‘capital going to the countryside’ to
establish ‘capitalized agriculture.’ ?
This is expected to replace or displace small scale farming that often
contributes not only to simple reproduction but also to internal market and some time to international market
Not only will it be hard for capital to make profit, it will also be more difficult
for peasants to subsist from farming
antonio onorati - Associazione Rurale Italiana - ECVC, 2019
capital enters agriculture, it marginalizes rural households bargaining
power and weakens their ability to benefit from farming
agricultural development should rely on capital owned by rural
households
“…Defining capitalization of agriculture as increase in capital inputs per
unit of labour, they argue – based on national survey data --that Chinese agriculture is going through a process of capitalization with the principal contribution to capitalization from peasant investment…» (JPS, 2018)
antonio onorati - Associazione Rurale Italiana - ECVC, 2019
Capitalisation of public support to agriculture into land prices indicates
that the benefits are partly transferred toward landowners rather than toward producers
Most of the landowners live in towns, there is a risk of an extreme leakage
sector.
antonio onorati - Associazione Rurale Italiana - ECVC, 2019
REPORT on the state of play of farmland concentration in the EU: how to facilitate the access to land for farmers. (2016/2141(INI))
“…whereas the German Constitutional Court already ruled in its judgment
need not be as free as trade in any other capital, because land is unrenewable and indispensable, and an equitable legal and social order requires the public interest in land to be taken into account far more than in the case of any other property…”
antonio onorati - Associazione Rurale Italiana - ECVC, 2019
…..5. Calls on the Member States to focus their land-use policies on using available tools – such as taxation, aid schemes and CAP funding – to maintain a family-farm-based agricultural model throughout the EU; ….
….Calls on the Commission and the Member States to regularly collect data on rent levels and land prices of comparable quality, including the acquisition of land by means of share purchases and on transactions involving large areas of land, the loss of tenure, infringement of land tenure rights, and speculative price rises, in all Member States ….
medium-sized local producers, new entrants and young farmers – while ensuring equal gender access – priority in the purchase and rental of farmland, including pre-emptive rights where established, as the ownership of as much as possible of the land they farm is in the interest of a sustainable and reliable development of their farms,
antonio onorati - Associazione Rurale Italiana - ECVC, 2019
21…..calls, furthermore, for transactions on farmland to be subject to an
ex-ante procedure checking the conformity with regard to national land legislations, which would also apply to mergers, splits and the establishment of foundations;
antonio onorati - Associazione Rurale Italiana - ECVC, 2019
Acquisition of land by means of share purchases
Acquisition of land by means of share purchases and on transactions
involving large areas of land, the loss of tenure, infringement of land tenure rights, and speculative price rises pose serious and increasingly alarming problems in many Member States.
i. data should be collected on these phenomena, Ii. Member States should be provided with guidelines on how to counteract
these trends
The guidelines on land market regulation published by the EU Commission
do not reflect sufficiently on how to regulate share purchases.
antonio onorati - Associazione Rurale Italiana - ECVC, 2019
An EU Directive should clarify that transaction of shares in companies that
this, but it is critical in order to close loopholes that are being used by companies to circumvent existing legislation
antonio onorati - Associazione Rurale Italiana - ECVC, 2019
“From the view that large farms are the future to the consensus on the superiority of small farms”.
“ (China)…The abandonment of the Communes in 1979 and the adoption
to small family farms. And this change turned out to be the keystone of the economic reform movement which generated the spectacular economic growth of thelast three decades….»
(FARM, Authors : Michel P etit, Former Director of Agriculture and Rural
Development at the World Bank, President of the Scientific Council of the Foundation for World Agriculture and Rurality (FARM), Paris.
Jean-Christophe Deba r, Director of the Foundation for World Agriculture
and Rurality (FARM), Paris.2018)
antonio onorati - Associazione Rurale Italiana - ECVC, 2019
to the consensus on the superiority of
ma fam
antonio onorati - Associazione Rurale Italiana - ECVC, 2019
antonio onorati - Associazione Rurale Italiana - ECVC, 2019
United Nations Declaration on the Rights of Peasants and Other People Working in Rural Areas The General Assembly, Welcoming the adoption by……
United Na ions Declaration on the Rights of Peasants and Other People Working in Rural Area e General Assembly, Welcoming the adoption by ..... . Voting Result:
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Article 17
1. Les paysans et les autres personnes vivant dans les zones rurales ont droit
à la terre, individuellement et/ou collectivement, conformément à l’article 28 de la présente Déclaration, ce qui comprend le droit d’accéder à la terre et aux plans d’eau, zones maritimes côtières, zones de pêche, pâturages et forêts qui s’y trouvent, et de les utiliser et de les gérer d’une manière durable, pour s’assurer un niveau de vie suffisant, avoir un endroit
2. Les États prendront des mesures appropriées pour supprimer et interdire
toutes les formes de discrimination liées au droit à la terre, notamment les discriminations résultant d’un changement de situation matrimoniale, de l’absence de capacité juridique ou d’un accès insuffisant aux ressources économiques.
antonio onorati - Associazione Rurale Italiana - ECVC, 2019
Financialisation fully neglects the role land plays for social and cultural
reproduction and as the very basis for so many human rights (e.g. right to food, right to housing, right take part in cultural life, right of self- determination, right to health)
antonio onorati - Associazione Rurale Italiana - ECVC, 2019
ART.44 “For the purpose of ensuring the rational exploitation of land and in order
to establish equitable social relationship, the law imposes obligations and constraints on the private ownership of land; it sets limitation to the size of holdings according to the regions and agricultural zone; encourages and imposes land reclamation, the conversion of latifundia and the reorganization of farm units; and assists small and medium-size holdings. [see art.42 cc. 2,3]”
antonio onorati - Associazione Rurale Italiana - ECVC, 2019
…..
12.5 States should, with appropriate consultation and participation, provide transparent rules on the scale, scope and nature of allowable transactions in tenure rights and should define what constitutes large-scale transactions in tenure rights in their national context. ….
12.10 When investments involving large-scale transactions of tenure rights, including acquisitions and partnership agreements, are being considered, States should strive to make provisions for different parties to conduct prior independent assessments on the potential positive and negative impacts that those investments could have on tenure rights, food security and the progressive realization of the right to adequate food, livelihoods and the
( Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests in the Context of National Food Security - UN CFS, 2012)
antonio onorati - Associazione Rurale Italiana - ECVC, 2019
antonio onorati - Associazione Rurale Italiana - ECVC, 2019
antonio.onorati48@gmail.com http://wordpress.assorurale.it/ http://www.eurovia.org/
antonio onorati - Associazione Rurale Italiana - ECVC, 2019