China secured the right to grow palm oil for biofuel on 2.8m hectares of Congo, which would be the world's largest palm-oil plantation. It is negotiating to grow biofuels on 2m hectares in Zambia, a country where Chinese farms are said to produce a quarter of the eggs sold in the capital, Lusaka. According to one estimate, 1m Chinese farm labourers will be working in Africa this year, a number one African leader called "catastrophic".
If any investor has a long view on world markets, it's Lord Jacob Rothschild. The 73-year-old scion of the world-famous European banking dynasty need only look to his own family history, which dates back some 200 years to the rise of patriarch Mayer Amschel Rothschild in Frankfurt. "We think right now is an excellent point of entry for taking a long-term position in agriculture," he recently said.
Rothschild did just that last year when he invested $36 million for a 24% stake in a venture called Agrifirma Brazil.
Agrifirma has already acquired some 100,000 acres in the Brazilian state of Bahia and holds an option on another 60,000. This summer it will produce its first crops of soybeans, cotton, and corn. Rothschild and Watson say they chose Brazil in part because there was a large quantity of scrubland, or cerrado, that could be irrigated and converted to farmland, enhancing the value greatly. They also liked the fact that its economy has been growing robustly. And perhaps most important, Brazil has 14% of the world's freshwater resources, the most of any country. "The world is fully in a water crisis, and we haven't realized it yet," says Watson. "When you're exporting agriculture, you're de facto exporting water."
If Water is becoming the "rate limiting Step", the the drought in Australia is forcing farmed to decide crop planting based on water efficiency. recently , the Australian govt. passed tradable rights laws which allow Australian farmers to have the right to use a certain amount of water free. They can sell that right (called a “usufructuary right”) to others. But if they want more water themselves, they must buy it from a neighbour. The result of this trading is a market that has done what markets do: allocate resources to more productive use. Australia has endured its worst drought in modern history in the past ten years. Water supplies in some farming areas have fallen by half. Yet farmers have responded to the new market signals by switching to less thirsty crops and kept the value of farm output stable. Water productivity has doubled. Australia’s system overcomes the usual objections because it confirms farmers’ rights to water and lets them have much of it for nothing.
Tradable-usage rights have another advantage: they can be used in rough and ready form in huge countries such as China and India that do not have meters to measure usage, or strong legal systems to enforce usage rights. Instead of sophisticated infrastructure, they depend on local trust and knowledge: farmers sell a share of their time at the village pump. A system like that works in parts of Pakistan’s Punjab.
As the adjoining graph shows, India, China have to find ways to combat the unsustainable water withdrawal rates and outsourcing crops and tradable water rights are one water to drive the productive use of water. exporting the entire crop production to Africa, as China is pioneering, is one way to conserve water.
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