Capitalism in the Steppes
A few months ago, as grain prices soared, the Wall Street Journal wondered if we were reaching a Malthusian moment, where the world’s ability to feed itself would be challenged. I certainly felt like the ability of the U.S. agriculture economy was severely stressed. But this morning the New York Times ran an article on Russian agriculture that was a real eye opener.
Russia occupies an unusual niche in the global food chain. Before the Russian Revolution and the subsequent forced collectivization of farming under Stalin, it was the largest grain exporting nation in the world.
Today, roughly 7 percent of the planet’s arable land is either owned by the Russian state or by collective farms, but about a sixth of all that agricultural land — some 35 million hectares — lies fallow. By comparison, all of Britain has 6 million hectares of cultivatable land.
What is happening is that global capital (including the infamous Carlyle Group) is flooding into the Russian agriculture sector, buying up huge collective farms and providing modern technology–much of it made by John Deere–to increase the productivity of the land. If this works, it will be one more huge export commodity for the Russian economy, which already controls more oil and gas reserves than any other country.
Or else foreign investors are going to get screwed on a massive scale when Putin nationalises their farms, as he has done with the oil & gas sector. Isn’t Rupert Murdoch trying to sell their Russian outdoor advertising business as he’s worried it will be stolen from News Corp?
Or else foreign investors are going to get screwed on a massive scale when Putin nationalises their farms, as he has done with the oil & gas sector. Isn’t Rupert Murdoch trying to sell their Russian outdoor advertising business as he’s worried it will be stolen from News Corp?
Adam-That’s the big question. My guess is that Russia is already too integrated into the global capital markets.
Adam-That’s the big question. My guess is that Russia is already too integrated into the global capital markets.
It would be fascinating to see what cost of capital these investors use in their calculations regards Russian agricultural investment!
But if agricultural commodity prices have gone up so substantially then returns available (especially given shaky times for other more traditional investments i.e. equities and property) will no doubt go a long way to mitigating this kind of sovereign risk
cheers!
It would be fascinating to see what cost of capital these investors use in their calculations regards Russian agricultural investment!
But if agricultural commodity prices have gone up so substantially then returns available (especially given shaky times for other more traditional investments i.e. equities and property) will no doubt go a long way to mitigating this kind of sovereign risk
cheers!
Now this is the type of post that I like the Jon Taplin blog for.
Interesting, informative and relevant, with only a light intimation of contempt for politicos.
Now this is the type of post that I like the Jon Taplin blog for.
Interesting, informative and relevant, with only a light intimation of contempt for politicos.