Melanie Sommerville


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Melanie Sommerville

  1. 1. Finance Capital, Investment and the‘Financialization’ ofCanadian Food SystemsMelanie SommervillePhD CandidateDepartment of GeographyUniversity of British ColumbiaVancouver, CanadaPresentation to the ‘Food, Farms, Fish and Finance Forum’Saturday, May 25, 2013
  2. 2. ConventionalFood SystemsSustainableFood SystemsFocus of the presentation‘Mainstream’Finance‘Alternative’FinanceMyresearch4-FForum
  3. 3. ‘Financialization’ of Canadian Food Systems• Massive influx of investment capital into our food systems• Worldwide phenomenon playing out in CanadaWho’s involved?• Wealthy individuals• Chartered banks andtraditional lenders• Institutional investors (pensionfunds, mutual funds,specialized investment funds)• Sovereign wealth
  4. 4. What are investors buying?• Farmland• ‘Global land grab’ - 17.3 millionacres of landThe Dominion 2010• Agro-food production, processing,retail, distribution• Agricultural derivatives• ‘Global food crisis’ - price spikes2007/08, 2011, 2013?• Trend also affects other naturalresource sectors• Especially ‘soft commodities’ likeforestry and fisheries
  5. 5. Why are they buying it?• Turbulence in global financial markets• Collapse of previous investments• “Attractive returns, excellent capitalpreservation, low risk and broadportfolio diversification”Financial Performance of CanadianFarmland Relative to Other AssetsBonnefield Financial Inc. 2013• Predictions of strong future performance• High commodity prices• Good supply-demand ‘fundamentals’• Particular qualities of Canadianagricultural resources
  6. 6. Sprott Resource Corp. 2008
  7. 7. Why is our food system vulnerable tothis investment?• History of underinvestment• Long period of low commodity prices• Land appreciation and historical tenure patterns• Rising production costs• Rising debtFarm income from market, government and non-farm sources, Canada 1971-2005AAFC 2012
  8. 8. 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 theyperfectly reflective of them.AGRO-FOODSYSTEMSRentLand AppreciationInterestDividendsCapital Gains
  9. 9. Canadian Examples
  10. 10. 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 andworkers’ 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
  11. 11. FAO 2013Assiniboia Capital Corp. 2011
  12. 12. 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 andsocial ‘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 andyoure a thousand miles from the corn field.”-Dwight D. Eisenhower