Downward pressure on foreign direct investment in agriculture brought on by lower food prices should see partial relief in the coming years thanks to government-led initiatives and the promise of higher returns for private investors, the UN’s Food and Agricultural Organization and the Organization for Economic Cooperation and Development said.
In a commentary within the OECD-FAO Agricultural Outlook 2017-2016 released Monday, the organizations cite FAO statistics that show $20 billion in annual FDI in food, beverage and tobacco in 2013-14 (their latest figures), down from a high of $35 billion in 2009.
“While global agricultural FDI flows are still lower than in the aftermath of the global food crises of 2007-08 and 2011-12, they are still higher than their average levels in the early 2000s,” wrote the authors of a commentary entitled “Will lower food prices reduce foreign agricultural investment in developing countries?”
“Partly, this reflects the fact that real food prices are still higher than in the early 2000s. Partly, other factors (such as food security policies) are at play, as output prices are not the only driver of agricultural investment.”
The commentary detailed how the 2007-08 surge in commodity prices and subsequent export restrictions motivated unspecified net-food-importing countries to invest in countries with under-utilitized land. It predicted that such investments will come to play an increasingly-important role in agricultural FDI as slowing demand growth and muted impact of biofuels policies on agriculture are expected to keep global food commodity prices low over the next decade.
The FAO and OECD also wrote in the report that improving the quality of private agricultural investments is a key goal of their collaboration in agriculture. The report said the two organizations are preparing a pilot project that utilizes their Guidance on Responsible Agricultural Supply Chains and that the FAO has already initiated a program to support responsible investments into agriculture and food systems.
“These activities and other related initiatives aim to promote agricultural investment and increase its returns,” the authors wrote. “Higher returns are expected to make developing country agriculture more attractive to foreign investors.”