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Small and mid-sized farms in America have been dwindling for decades. Often these farms are bought up by larger conglomerates. One relatively recent example is Perdue’s purchase of Niman Ranch. You can read my post about the buyout here and my concerns about CAFOs (Concentrated Animal Feeding Operations) taking over companies with higher standards of production. 

In the episode, we learn that it’s not only Big Ag that’s getting into the small farm business. Financial institutions have been in the farmland game for years. My co-host James Connelly interviews Madeleine Fairbairn, an Associate Professor of Environmental Studies at the University of California, Santa Cruz about her latest book. Fields of Gold: Financing the Global Land Rush explores the financialization of farmland and how financial institutions began treating farmland as investment opportunities. You can download the ebook for free here.

James and Madeleine start their discussion in the 1970s with skyrocketing crop prices, quickly followed by overproduction and inflation, making farmland attractive to wealthy investors. This situation coupled with financial deregulation in the 80s and 90s caused changing mindsets in companies and consumers that now make finance a part of our everyday lives. 

Their conversation concludes with our current landscape where we see major investment companies like Harvard Management Company and TIAA owning huge swaths of farmland, often to the detriment of the local community. 

Tune in to learn more about:

• Financialization and how it affects all areas of our lives
• The Global Land Grab
• The Shareholder Value Revolution
• Congress’s bipartisan measure to prevent institutions from taking over farmland and how those measures went away in the 1980s
• California’s water shortage problem
• How Harvard Management Company bought a vineyard
• The rise of ESGs (Environmental, Social, and Governance) or socially responsible investing
• Madeleine’s skepticism of ESGs

Resources:

• Fields of Gold by Madeleine Fairbairn (free ebook)
• The Looting Machine: Warlords, Oligarchs, Corporations, Smugglers, and the Theft of Africa’s Wealth by Tom Burgis
• Greta Krippner 
• The Great Grain Robbery
• The Last Supper for Malthus: Part 1, Part 2, and Part 3
• Perilous Bounty: The Looming Collapse of American Farming and How We Can Prevent It by Tom Philpott

Connect with Madeleine:

Website: Madeleine Fairbairn and UC AFTeR Project

LinkedIn: Madeleine Fairbairn

Email: [email protected]

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Episode Credits:

Thank you to all who’ve made this show possible. Our hosts are Diana Rodgers and James Connelly. Our producer is Meg Chatham, and our editor is Emily Soape. And of course, we are grateful for our sponsors, Patreon supporters, and listeners.

A big thanks to Nakano Knives for their support of my work and the podcast. I’ve been using their knives for a couple of years now and I love them. They are beautiful, easy to hold, and a fantastic value. And just in time for the holidays, you can use my offer code DIANA for 10% off plus get a $25 voucher toward your next purchase. Who doesn’t love a new knife, right? 

Quotes:

“Since the 1970s we’ve seen a growing centrality of financial actors, financial institutions, of financial profits as a portion of the economy, and of financial motives as a guiding force in our economy. And that’s true globally.”       –  Madeleine Fairbairn

“And so when the farm crisis happened, and farmers were losing their land, life insurance companies were getting their land and had all of these foreclosed farms on their books, and basically started getting this professional farm management capacity because they had to suddenly manage all these farms.” – Madeleine Fairbairn

 “I think that when you look at groundwater depletion, especially for marginalized communities, agricultural workers… what happens with the concentration of toxins that are in that water? And I think we’re starting to see a lot of sky-high rates of cancer and heavy metal toxicity and arsenic poisoning and all this stuff within these communities.” –  James Connelly

“I think that we will be seeing big investors and big agricultural producers working very hard to position themselves as, inherently,  a good investment that is battling climate change so that big institutions can kind of put some of their money in that and say, ‘hey, I did my ESG investing.’” – Madeleine Fairbairn 

Transcript:

James Connolly  1:32  

Good morning to Madeleine Fairbairn, and afternoon to myself. This is James Connelly, one of the cohosts of Sustainable Dish’s podcast. And I’m actually really excited about this conversation. It’s… I was trying… I was actually struggling to sort of figure out how I came across your work. Because I think, you know, you kind of end up going down these sort of weird little secondary and tertiary rabbit holes as you’re doing research. And I found this really wonderful book. It’s called Fields of Gold: Financing the Global Land Rush. And Madeleine is the Associate Professor of Environmental Studies at the University of California, Santa Cruz. She has a PhD in Sociology from the University of Wisconsin, and her research is primarily focused on the political economy of global agrifood systems, including work on the financial sector’s growing interest in farmland, more recently Silicon Valley’s agrifood tech sector. Her book came out fairly recently, right? And so I just wanted to bring you on. The thing that I find sort of really fascinating about the early 20th century is how much it seems to mimic the early 21st century, in terms of the way that technology has really functionally changed the way that we are viewing land. And this book really goes very deeply into that. So welcome. Thank you so much for coming on.

Madeleine Fairbairn  2:55  

Thank you for having me.

James Connolly  2:56  

Yeah. I mean, I kind of want to start out with like, how did you get into this sort of the agricultural sector?

Madeleine Fairbairn  3:06  

Great question. I don’t know how I began researching agriculture in general, but I was doing my PhD in rural sociology, which is sort of an old fashioned major that doesn’t really exist anymore. No, it does. It’s not as popular as it used to be. But it’s always been my interest. And I was sort of looking for topics to spend a few years researching for my PhD. And at that time, I got interested in this sort of rush for farmland globally because actually, one of my best friends from high school had been in the Peace Corps in Madagascar. And she… because she has all these friends in Madagascar was immediately started getting all of these messages when there was a big land deal for the South Korean government and the Malagasy government made a deal or the government of Madagascar made a deal to have Daewoo, the South Korean Corporation be able to farmland and Madagascar for many years was a very long term lease. I think, 50 years or something. And in order to sell… to provide food for South Korea. And this was, you know, blowing up on my friend’s Madagascar social media channels. And she was asking me if I knew about this, and soon I started seeing a lot more about it. I think activists in the media because of just the scale of this massive land deal began becoming a lot more aware that there was a lot of land changing hands around sort of 2008-2009, beginning in 2007, even. And that there seem to be a lot of governments, a lot of corporations, just a lot of actors trying to acquire land and other countries and particularly but not exclusively, governments and corporations from wealthier countries trying to acquire land in more sort of resource-rich but cash-poor countries. Although, there were also sort of South investments. And so I started getting interested in this topic. Sometimes activists in the media sometimes called it the Global Land Grab. I also often call it the Global Land Rush. And what I really started to notice was that quite a lot of people were doing research on this topic, but I wasn’t seeing very much research on this one area of actors, which were financial institutions. There was sort of a lot of mentions of investors becoming increasingly interested in buying farmland, but not a lot of in-depth research on the topic. And I just started delving more and more into it and getting more and more interested. And one of the things that interested me about it was, that it’s sort of it’s something that’s happening in the US, it’s something that’s happening… in my book, I particularly look at the US and Brazil, but it’s something that’s happening everywhere. So it sort of unites it kind of a little bit removes that sort of dimension of actors from the global north, investing in the global south kind of are from, you know, rich countries, investing in poor countries. It’s kind of a dynamic that’s happening all over, including internally. And so yeah, I guess that’s, that’s how I was drawn to this topic.

James Connolly  6:05  

There’s a book that came out a few years ago called The Looting Machine. And it was an investigative journalist who spent a lot of time in Sub Saharan Africa, primarily focused on the Congo. But he, you know, he made an estimate, somewhere around the extraction of about $300 billion, I think worth of mineral and mining resources and labor and agriculture from Africa. That, if it was actually fairly paid for, would be a huge boon for the economies in Africa. But would also, you know, have subset costs across the board for the global north. And I found that really interesting because I think that what… so I kind of want to jump back and forth, because I think we what we want to do is get to 2008, and the financial crisis, but I kind of want to get into a subject that I don’t necessarily know all that much about, but is primarily focused the US agricultural system, and what happened in the sort of 70s into the 80s. And so I have sort of a list of questions that I think will kind of lead us into 2008, which I find is really fascinating. It’s like a sort of treasure hunt, your book kind of goes through. So the first is, I would love for you to define financialization. It’s… sorry… I’d like… but I think it’s actually very important, because it’s like, it’s, it’s seminal to the understanding of your work.

Madeleine Fairbairn  7:29  

Yeah, absolutely. Sure. So it’s a macro-level phenomenon that has been defined in pretty different ways by different people. So I would say the kind of overarching definition of it is that it’s a trend that since particularly since the 1970s, basically, we’ve seen a growing centrality of financial actors, financial institutions, of financial profits as a, as a portion of the economy, and of financial motives as a whole, just sort of as a guiding force in our economy. And that’s true globally. It’s true within the US. And so people focus on… sort of, scholars of financialization focus on very different aspects of this. Some kind of define it in terms of showing that, for instance, the amount of profit made by financial, the financial sector, as a portion of GDP has really gone up a lot. Or others talk about how there’s been a change, a major change that’s come about with financialization has been in the sort of mindsets of investors and the mindsets of corporate executives, where it used to be that corporations were… were valued in a lot of different ways. They could be valued for the quality of the products they’re producing, for the number of people they’re employing, etc, etc. But around the 80s, the 70s, and 80s, we see this shift. It’s often called the Shareholder Value Revolution, where corporations essentially come to be valued increasingly on one metric, which is the returns they produce for investors. And there’s a growing movement to sort of align the actions of corporations totally… sort of, get it totally in line with just… get that stock value going up, get those returns to investors going up. So that’s another aspect. People also talk about it in terms of the financialization of everyday life. It used to be that people worked and they just kind of put their money in a bank account, and that was the end of it. Whereas now everyone is kind of looking at their 401k and thinking, you know, people are downloading Robin Hood on their phones, like people are doing college savings accounts for their kids and we’re all kind of financially attuned and the rhythms of our daily life and the… our ability to retire or take a vacation or based on the movements of the stock market in a way that they didn’t used to be in even mid-century. For my purposes in this book, one thing, one aspect… so another big aspect of financialization that I haven’t mentioned, but a lot of some of these things stem from it, also – financial deregulation. So there were a lot of policy changes that took place, beginning in the 70s, but particularly the 80s and 90s, where we see all kinds of things like the, you know, changing implementation, decommissioning kind of Glass Steagall, where you have kind of the barriers between investment and commercial banking, broken down. All kinds of changes that have made it so that the financial sector is much less regulated. It used to be really very strictly regulated and pretty kind of reined in. And then we’ve seen this… just tons and tons of changes over the course of the 80s and 90s, particularly, which some people, you know, there was a lot of talk about this, around the time of the financial crisis in 2008. People began to wonder if that had been the best move. And you get things like Dodd Frank being implemented. But so they’re all of these, this kind of suite of changes. To me, one of the most interesting is the tendency, sort of… one scholar named Greta Krippner, who I admire a lot, defines financialization as the tendency for financial profits to accrue increasingly through financial activities, rather than through productive activities. So you see, even productive companies like, you know, airlines, are increasingly also making money by, you know, trading in fuel derivatives. Or you have all kinds of businesses that are even non-fi… So you have financial businesses making more and more money, but also nonfinancial businesses increasingly, depending on interest and stock market investments, etc, loans as a way to make money themselves. So just the economy as a whole becomes more and more sort of, they’re sort of a… becomes more and more to revolve around financial activities as a primary way of making money rather than just sort of producing things and selling things, which is how we normally think of the economy. So that’s the not short answer.

James Connolly  11:49  

No, that’s great. And it leads me actually into the question. So like, we’ll get into the sort of the key players that were functionally trying, I think, changed the agricultural system, the barriers for entry for them into in the late 70s, into the early 80s. And how much of a pushback that… actually like how important it was to even just the Congress at the time that people were trying to sort of financial… financialize, the agricultural system. And so you have here it says, the financialization of land and agriculture has had many material and temporal obstacles, each presenting its own logistical challenge or risk, seasonal labor requirements, production, and processing, spread over many acres, limits of plant and animal biology, the unpredictability of weather. And so industrial capital has managed to reduce many of these spatial and temporal difficulties by technological innovation. And so these innovations themselves, I think, are actually really interesting, because the promise of the tech industry was that it was going to create this utopia, what it really did was consolidate so that you could, you could have so much of a wealth of knowledge if you were willing to sort of pay for it. But the 70s and 80s, I think people were really scared of that. And so can you kind of talk about some of the trusts that had kind of come about and the, you know, the sort of mechanisms that were taking place? In around that time?

Madeleine Fairbairn  13:20  

Yeah, why don’t I… I’m going to start by talking about the 1970s. And then maybe we can come back to some of those kinds of modern innovations for getting around the awkwardness and difficulties of investing in land because I think that’s also a really important topic. But they’re kind of two different things. I want to first speak to the sort of social obstacles to the farmland investment industry emerging. Because I think that, you know, really, as I, as I did this research, one of the things I realized pretty early on was that this isn’t actually an easy thing to do. Investing in farmland is not, you know, there are a lot of ways that investors could invest in agriculture, if they want exposure to the sort of agricultural investment space, as they might say. They could buy soybean futures, you know, or they could buy stock in John Deere. And they’re these much easier ways to invest in agriculture. Buying farmland is really difficult in a lot of ways. And one of the ways that it’s difficult is kind of socially. It’s, it’s a… it’s a pretty emotionally and morally, and socially kind of socially embedded commodity sociologist might say, but sort of, you could also just think of it as kind of emotionally fraught. And one of the…, you can kind of see this through this episode in the 1970s. So the 1970s was a time when, in a lot of ways, it was a time that was very similar to the time around 2008, the sort of late 2010s, I guess, in that farmland markets were just completely booming during the 1970s in the US. So it was the time when grain prices were really really high for various reasons. Inflation was also really really high, which made it so that just having money sitting in a bank account, you would be getting pretty low or even negative real interest rates. So a lot of people wanted to buy land in order to protect themselves from inflation. And because of various different things, including the dollar being sort of its valuation going down. But also because of this huge grain sale that happened to the… between the US and the Soviet Union, crop prices started skyrocketing in the 70s. And so farm incomes are going up. So you have these massive… this farm income going up that’s getting capitalized into the value of land, farmland prices are going up, inflation is high, so everyone wants farmland. And so there’s this kind of perfect storm of factors. Farmland market started booming. Farmland values increase, I think, fourfold between 1971 and 1981, if you can imagine what an amazing investment that was. And this was a time when I mean, of course, wealthy… farmland values always go up. So wealthy people have always wanted to own land as a way to protect their capital. But it was not a time when, with a few exceptions, when major financial institutions were owning a lot of land. And but they were seeing these land values going up and thinking, you know, that would be nice to have a slice of that action. And it was a time when we’re starting to see this kind of financialization of everyday life where money…, people are increasingly keeping their savings in these pension funds. They’re growing very, very fast. And so there was a proposal at the time of this huge land boom, in the 70s. It was the Merrill Lynch and Chicago Bank came together and proposed to create a fund, which they call Ag Land Trust, which would invest… it would be particularly catered to pension funds and other investors that are exempt from capital gains tax. And it would take their money and invest it in farmland that was a very high minimum investment. So it had to be these kind of big insti… financial institutions, that they would buy farmland with it. And it would be a long-term investment to basically profit from the land going up in value. I find this episode in history really fascinating, because it’s, it’s partly just because they were so ahead of their time. You know this is basically what started to happen a lot starting around 2007-2008. So they were 30 years ahead of their time in proposing this fund. But also because it was just such a colossal disaster.

James Connolly  17:18  

It was because of the sociological aspects of it, right?.

Madeleine Fairbairn  17:24  

Because of these, these kinds of political and social and cultural ideas around farmland in the US, you know, where this sort of Jeffersonian ideals about a family farm being the moral backbone of America and this kind of, you know, agrarian ideal that is motivated a lot of US politics historically.

James Connolly  17:43  

Can I like, sort of, because a lot of my recent research, and so I’m sorry, like, I’m an artist brain. So it’s a, it’s been very difficult to kind of get into all of the intricacies of the commodity world. But a lot of my primary research over the past six months has focused on that. So the Great Grain Robbery is what you were kind of referring to, which is really kind of really fascinating. Because at the height of the Cold War, the… all of these sort of burgeoning commodities brokers, just really just starting out – ADM, Cargill, Louis Dreyfus. We call them ABCD: ADM, Bunge, Cargill, and Dreyfus. But they were able to kind of come in. Russia wanted to buy enormous amounts of grain. They ended up selling it at a loss but had offices in Switzerland that were sort of betting on the rise in prices. And so they actually made a killing off of it. They sold it at a loss. I think, and maybe you can correct me if I’m wrong. I think the American taxpayer essentially fitted the bill for this, you know, huge fence row to fence row, massive growth in an industry, the commodities industry. That’s sort of built off of the Department of Agriculture, Earl “Rusty” Butz, Nixon. That said, essentially get big or get out. And the only real people who made enormous amounts of profits off of that were essentially these commodities brokers. And it’s really hard to find information on them because they’re so secretive. They don’t really put out prospectuses. They don’t particularly give interviews. There was a book that came out in the late 70s, early 80s, called I think it was called The Great Grain Robbery that sort of really tries to go into it. But it’s almost like you’re dealing in a shadow world. And so, you know, for me, that’s like, sort of interesting, because now you have a financialization that’s happening within sort of Merrill Lynch and these the pension and pension funds. We also see the massive loss of farmland ownership in the 70s as well.

Madeleine Fairbairn  19:44  

Well, especially in the 80s. So well, let me… you know what I’m going to go chronologically let me finish telling you about that, and then I have thoughts about the farm crisis, right, but that literally followed on from this era. So yeah, because I think it is very fascinating how it’s kind of all tied up together. So you have this moment in the 70s, before any of this crisis sets in, right where I mean, some farmers were hurt by the grain robbery. But it also meant that farm incomes went up a lot. And it was also bad for consumers, obviously, because food prices went way up. But a lot of farmers were making a killing in the immediate aftermath of that. So anyway, so finally in price are booming, Merrill Lynch and Chicago Continental Illinois bank come up with this idea. And the outcry was massive. There was this congressional hearing about it, where it’s, I mean, it’s actually really fun to read this transcript in this day and age, because it’s so refreshingly bipartisan. It’s just across the board, Democrats and Republicans just abusing this idea that the pension funds might be sort of explicitly encouraged or helped in acquiring farmland through this fund structure. And, you know, just speaker after speaker at this hearing basically said, this has the potential to drive up farmland prices. This is against everything that sort of America stands for is a land of family farmers, you know, it really, they really ran headlong into this agrarian ideal. And the whole thing ended up being scrapped. But the idea didn’t go away. The idea was kind of still there simmering. And I really found in my research that it… you know, there’s… I sort of had this idea of this farmland investment being something that was new, in 2008. And in and in certain ways, it was new, there were a lot of pension funds, like TIAA that didn’t buy farmland at all before 2007 or 2008, and then suddenly bought a lot. And there was a lot of kind of professionalization and institutionalization of farmland as an asset class that went on starting around 2008. But I found that there was this kind of long trajectory of sort of building the groundwork and sort of leading up to this. So one of these episodes was Ag Land Trust, which ended in disaster. But then the whole farmland boom ended in disaster. Then we had the farm crisis of the 1980s. And this was for a lot of the reasons that you’ve… that you’ve kind of laid out or started to started to hint at, which is that, during the 70s, the Secretary of Agriculture, the sort of the government, the USDA was basically telling people, great now… now, crop prices are so high, you should produce as much as you can. And so we had, you know, Earl Butz famously saying plant fence row to fence row. Basically signaling we are taking… we’re ending US policies of doing supply management, of trying to encourage farmers to take some land out of production. So we don’t get overproduction. Because there’s been a problem in US agriculture for a long time. So saying plant everything, and get big or get out. Basically saying, you know, encouraging farmers to take on loans to buy more land to buy more machinery to, you know, it’s this era in which we have very, very explicit signaling from the government to intensify production and expand operations. But meanwhile, farmers all over the world, we’re also getting the same price signals, we’re also seeing the high crop prices of the 1970s. And were also expanding their production. And so basically, all of the things that combined, all of the factors that combined to make… to create this farmland boom in the 70s, just reversed at the late 70s, early 80s, and led to this massive crash where you have, suddenly everybody, every farmer everywhere is producing a lot more. And so, so crop prices decline, and a lot of different agricultural commodities. And you have also the inflation of the 1970s. The Federal Reserve tackled inflation. In 1979, all of a sudden, interest rates basically overnight went up to 20%. And so all of these farmers who’ve taken out loans, you know, have gone into debt to expand their operations to try to get big or get out, were now suddenly had very low farm income and 20% interest rates on their loans. And just, it was devastating. It was just, you know, so many farmers losing their farms, as I’m sure a lot of your listeners will know. But interestingly, from my perspective, this also kind of contributed to building up this farmland investment industry that really kind of blossomed around 2008. But this was another moment of kind of building the groundwork towards it. Because I found in my research that some of the most established farmland asset managers, agricultural asset management companies that help investors buy land actually have their roots in this era of the 1980s. Where basically, you know, big institutional investors, with some exceptions, hadn’t been very interested in owning land previously, but there had been a lot of institutional investors that were lenders to farmers. So life insurance companies, for instance, had held a lot of farm debt. And so when the farm crisis happened, and farmers were losing their land, life insurance companies were getting their land and had all of these foreclosed farms on their books, and basically started getting this professional farm management capacity because they had to suddenly manage all these farms. And a lot of the earlier, a lot of the earliest farmland asset management, sort of the earliest most experienced actors in this farmland Investment Industry kind of spun off from these life insurance companies after the farm crisis. So there’s a really interesting trajectory where the farmland industry today really has its roots in this wave of financialized dispossession during the 1980s. So yeah, I guess that’s kind of the long history.

James Connolly  25:34  

And I find that I mean, you, you, you say something to the effect of all of these institutions, essentially, they would go all the way up to the fence post of the farm but hadn’t really crept past that. And then because of this, this crisis, you had all of these insurance companies, sort of taking over. Yeah, let’s, let’s jump to the 90s then. So we’re at this point we have, we have a growing sort of market for these, I don’t know what you call them, like landlord ships. And the return on investment was healthy, you say it’s somewhere around maybe 11%.  Fairly healthy, But with the dot com bubble and all of the other… the tech bubbles that were happening in the 90s. Nobody was particularly interested in it. Other than these, you know, huge institutions that had pension funds, and TIAA and who had to look over kind of long term investments over a longer period of time, and just wanted a healthy return on investment that didn’t require a ton of speculation. And so you get it’s you start to see a sea change in it. And then can we jump to like 2007-2008? Or do we need to like focus on… 

Madeleine Fairbairn  26:47  

Yeah well, I think maybe the important thing to know about the 90s, the 80s, and 90s, generally is, you know, there, there were these, these folks who got kind of farmland investment capacity in the 80s. But it’s still it’s not… and it becomes less controversial over the course of the 80s and 90s, which I think have a lot of a lot to do with changing mindsets about financialization, like that Ag Land Trust episode, in a way was kind of right at a turning point where people were beginning to get more comfortable with finance being involved in every part of their lives. So over the 80s and 90s, you know, I think there’s just a growing comfort level with finance being all up in our business all the time. But I think that also, you know, this is also a time where we’re seeing that financial deregulation that I talked about, including deregulation of agricultural commodity trading. So you have these derivative markets, these markets for agricultural commodity derivatives, so things like, you know, corn futures, and it had previously been the case since I think the 1930s. So these markets have existed for a long time. You’ve been able to buy corn futures since the Chicago Board of Trade was created in 1848, I think, a long, long time. This is not a new thing, right. But since about the 30s, they… it had been very regulated, the involvement of speculators in these markets had been very regulated. So the markets, these kinds of markets were dominated by what was known as commercial traders. So they were actually farmers or food processors, folks who needed to buy corn futures, for instance. Because it actually was a way that they were hedging their business risks, like they actually needed to know the price that they’d be able to sell their corn for, buy corn for, you know, in the future. And there were strict rules about how much… about the participation of what was known as noncommercial traders, basically speculators. So there were folks in that market, investing just for profit, not because they needed to for their business. But there were limits on… position limits they’re called, on how much how many of these derivatives they could own. And that began to be dismantled in the 90s and early 2000s. We see the CFTC starting to make it so that these noncommercial speculative actors are allowed to just basically invest in derivative markets, you see the creation of index funds that have all of these commodity derivatives in them, and they’re just this huge increase in big sort of institutional investors and individuals like me, I’m sure I own my retirement account is in these derivatives for sure. I’d be worried if it wasn’t because it’s, you know, it’s part of these diversification strategies. And so we see, we see just this massive explosion, billions of dollars flowing into essentially, grain and commodity markets. So things like grain and cotton and orange juice concentrate, pork bellies, and whatnot. That really kind of, you know, it changes now. Investors are, are more attuned to investing in agriculture in general. It also changes what happens in agriculture and sort of in food in that a lot of people had concerns that this influx of financial capital was one of the contributing factors in the 2008 price food price crisis globally. So I think that’s another kind of important thing that’s sort of laying the groundwork for investors then becoming interested in actually buying the farms.

James Connolly  30:08  

Yeah, I find it very interesting that the level of sea change that kind of happened within the 90s, just in terms of going into, you know, because you have that you have the fall of the Berlin Wall, you know, the opening up of markets that a lot of these commodity dealers had spent a lot of time actually working with Russia and China, but you really saw this massive shift in terms of providing everything from minerals and mining, to copper ore to aluminum, bauxite to, you know, every single agricultural commodity to, to the growth of the industry in China. And really kind of go into these grain markets, that, you know, you’d have a guy with a briefcase kind of showing up in distant parts of the planet, essentially brokering deals. It’s, it’s a really interesting timeframe because you have, you’ll have, like Glencore going into South Africa during the apartheid, restrictions on oil and gas, selling oil and gas to South Africa. So these guys had, you know, for them, profit was the only motivator. Nationalistic pressures or anything like that didn’t seem to really matter to them all that much. Everything was a new market, you can kind of see what we’re seeing now. I interviewed somebody from Kazakhstan, who was seeing a lot of like, Cargill, going into Kazakhstan and transforming a lot of what would be traditional sort of prairie grounds into corn, wheat, and soy markets. Any place that you could mechanize we see it in Brazil, as well, all over the place, any place that has the perfect conditions for mechanization for these commodities, who these companies are going into. And I find that absolutely, like fascinating, just the level at which these guys are sort of brokering massive deals, you know, across like geopolitical boundaries that have absolutely no relationship. With, you know, with governments or anything like that. The tech industry has a term for it. It’s like ‘break rules and ask for forgiveness later.’ Yeah, so I mean, that’ll lead into the financial crisis in 2007-2008. So what is happening here? I ended up watching the Last Supper for Malthus, which is, you can find it on YouTube, I think it’s divided into three parts. Part one, two, and three, It’s about an hour-long documentary. Can you tell the story of how you became familiar with Last Supper for Malthus, and then, you know, lead into that?

Madeleine Fairbairn  32:45  

Interesting. Yeah. In the book that I… I attended a farmland investment or an agricultural investment conference where everybody was given copies of this DVD, which I think it’s a French documentary about sort of food crisis. And it’s, it’s set up as a sort of a debate between the ghosts of Thomas Malthus and David Ricardo. And Malthus is arguing that you know, the population is just growing and everyone’s going to be hungry and starve. And Ricardo is kind of arguing No, no, it’s okay, we can invest and grow more food basically. And it’s, it’s more nuanced than that. They interview some interesting people, you know, it was kind of was sort of given out at this, this major agricultural investment conference and sort of a way of, I think the subtext was you can save the world, you know, if you invest capital in agriculture, you will be part of this feeding the planet. Which there are all kinds of critiques that we could make of that sort of direct line between hunger and lack of food availability, which it’s complicated. But so we reached this moment where a lot of the same factors that were in play in the 1970s kind of come back where you have suddenly there’s a food crisis, there’s droughts in certain places, there’s this growing financial interest in agricultural commodity derivatives. There’s just a lot of kind of a perfect storm of factors leads to a variety of crop prices beginning to go up. So farm incomes are doing well. And at the same time, you have the financial crisis happen, which makes it so that you know, everybody’s mortgage-backed securities are going up in a puff of smoke and, and all sorts of investments are doing terribly. And so the thing about investors who are looking at farmland as a financial investment, is that they’re just comparing it to other financial investments. So when investments you know, if you’re not owning farmland because it’s your family’s farmland or something, you are thinking about what kind of returns is it going to produce and how does that compare to other investments I might be making at this time. And so at a time when the stock market was doing abysmally, and farm incomes were going up, farmland started to look pretty darn attractive to a lot of people. Well, so we start to see because of the food price crisis that was going on. So food prices really spiked in 2008. And then they were high and volatile for a while, they really spiked again in 2011. So we started seeing these governments getting involved. Also, some governments like Argentina and maybe Vietnam actually restricted exports of their crops. So some people, some government started to panic that like, they might not, you know… food-importing government started to panic, that they might not be able to get the staple crops they needed at any price, possibly. So hence land acquisitions. But investors were just looking at this and saying, you know, I need a safe haven for my capital. Land has a lot of attributes that are different than stocks. It’s actually… it behaves it… lands often does very well at times that the stock market is doing really badly. And land also is benefited greatly by low-interest rates. And so when fixed income securities bonds and things are doing badly, land is doing well. And so investors started saying this land looks like a really great way to diversify our portfolio and make it so that we keep making money even when other things are going down the tubes. So you start to see various types of investors. But what particularly interested me was financial institutions. So institutional investors might include pension funds, hedge funds, university endowments, foundations, etc. These organizations that manage large pools of capital, starting to get serious about buying farmland and starting to allocate portions of their portfolio to farmland. And I think that that’s important that that group of actors was really interesting to me because they just have so much capital, you know, that… I keep picking on TIAA in this interview because they’re just kind of…

James Connolly  36:35  

Well, we could pick on Harvard.

Madeleine Fairbairn  36:38  

So okay, so Harvard, I think has 40 billion for the Harvard Management Company, which manages the Harvard endowment has about $40 billion. TIAA has well over a trillion at this point. So even if they just allocate a tiny fraction of their portfolio to farmland, half a percent or less, that is, that is so much farmland. Like, is it worlds… it’s different worlds… it’s just completely… I can’t even think about how much money that is. I can’t even understand it. So these institutional investors start seeing farmland as a potentially interesting and profitable diversification strategy as a way to protect the value of their wealth. They start putting, for them very small amounts of money into farmland markets. But for the countries, places where they’re investing, it’s not necessarily small. And in tandem with this, and there’s no longer that kind of backlash that we saw in the 70s, at least not much. There’s some resistance to this among social movement actors. But you also start seeing this like kind of institutionalization of farmland as an asset class. So this whole industry started springing up offering different kinds of investment vehicles. Coming up with ways to sort of depict graphics and indices and things to kind of explain and depict farmland as an asset class to investors who never would have thought about investing in it before. So that’s what starts happening around then.

James Connolly  37:58  

Yeah, and one of the things I find sort of interesting is, we can maybe talk a little bit about a California that sort of how almonds are pretty much in everything nowadays, almond flour. The sort of growth for that I find is actually kind of really interesting. Because it takes a few, it takes many years in order for an almond grower to be able to get to the point where it’s actually producing. But then at that point, it’s just a high-value commodity. I mean, it just produces and produces. But it requires an enormous amount of water. It’s, you know, it’s about a gallon per almond, I think. And so what we’re seeing now, with the California drought, we’re actually seeing a lot of these farms that are pulling up a lot of the almond trees and their investments. But one of the things I sort of found interesting about the sort of Harvard paradigm was how much water had become a commodity that was worthy of investment, and how much they were going into agricultural communities, because of deepwater aquifers, and essentially buying land above deepwater aquifers and, you know, all this other stuff. So I mean, California is just such a behemoth. And just so many different levels, like growing carrots in the desert… strawberries, you know, it just every single aspect of California. Do you want to talk a little bit about that? Or?

Madeleine Fairbairn  39:19  

Sure. Yeah, I would. Yeah, where to start? So I’ve done a little bit of research on one of the places where Harvard Management Company bought land in California, which is a place called the Cuyama Valley. It’s sort of near Santa Barbara inland. And it is particularly known for actually growing organic vegetables, particularly carrots there… a couple of huge organic carrot growers there. Essentially it has very little rainfall. Pretty little rainfall and very little surface water at the best of times. And so the growers there are mostly already very dependent on pumping groundwater in order to irrigate their crops. And to the point where there was a USGS study a couple of years ago that said they were already withdrawing water at twice the rate of recharge. And in this context in this dry, dry place, in 2014, Harvard Management Company made an investment through some other companies in an 8000, roughly area of dry rangeland and began converting a portion of that into an irrigated vineyard. And this is 2014 is also the height of our last drought. We’re now in a drought again, but our last drought in California, and I mean, it had been several years of drought, people were really freaking out to the extent that same year, the state government created systematic regulations of groundwater withdrawal for the first time. This law called SIGMA, Sustainable Groundwater Management Act. And so you have the situation where there’s finally such profound acknowledgment of how problematic the groundwater crisis is in California that the state is finally regulating it after, you know, centuries of not doing anything about it. And these investors are coming in and buying land in this very water-strapped place and using it for… to create… to put in permanent irrigated crops. That’s sort of demand hardening like this, that water demand is for those… If you want to keep those vines alive, you have to keep watering them. That’s going to be the demand that’s going to stay there. And it’s, it has it’s gotten a lot of resistance from the from the local community because there’s been a certain amount of big investors slightly kind of throwing their weight around, participating in the rulemaking process for SIGMA, kind of making arguments that they should be allowed to draw down the water in their region of the aquifer, the water basin, much more deeply than their neighbors would like. The neighbors are freaked out because of course, the vineyard has much deeper wells than they do. And so if they’re pumping out the water really fast, their wells could go dry. You know, people there can’t necessarily afford the 10s of 1000s of dollars to deepen their wells. And, you know, it’s just it really, but then if you go to the Harvard Management Company website, you see that they think of themselves as a long-term investor focused on ESG factors: environmental and social governance. So they’re really positioning themselves as this, you know, environmentally friendly investor. And it really raises questions for me at least about what, what does that mean for them? If you can go in at the height of a drought to this dry place where groundwater has already been withdrawn at twice the rate of recharge, and drill a bunch of new wells for a new vineyard by any meaningful definition of sustainable environmentally sustainable like that’s not it. I guess it may be economically sustainable for them, I’m sure that they will be able to sell the vineyard for a lot more than they could have sold the dry rangeland. But it definitely raises questions.

James Connolly  42:45  

Yeah. And you know, I think that when you look at groundwater depletion, especially for marginalized communities, agricultural workers, what happens with the concentration of toxins that are in that water? And I think we’re starting to see a lot of sort of sky-high rates of cancer and heavy metal toxicity and arsenic poisoning and all this stuff within these communities. So it’s so interesting to me to have this conversation. But also know that they have to know that too. These universities have to know that as well. I mean, this is this is… if you’re planning 20 years out, obviously, you’re going to have people who have a proper understanding of what you’re doing. You know who we’re talking about this and discussing it in meetings. I find it pretty…, really hard to sleep at night, when I think of all of that stuff.

Madeleine Fairbairn  43:35  

It does definitely make you wonder, yeah.

James Connolly  43:39  

Tom Philpott wrote a book that came out about last year, it’s called Perilous Bounty, it goes really deeply into a lot of the sort of ag investment, especially for groundwater aquifers.

Madeleine Fairbairn  43:52  

Yeah, I haven’t read it yet. I’ve been very excited to read it.

James Connolly  43:55  

Oh, I mean, is… can we tangent for a second. He’s got this whole chapter there in the beginning, where he talks about these sort of deluges that have occurred in California, especially in the valley that are, you know, 100… 100 plus years. Every 100 years or so there’s enough water to kind of bury the valley in about 20 feet of water. It’s about 20 years overdue. And so he paints this real sort of Holocaust. You know, I mean, it’s really like you can see it in 20 feet of water. Is it the… I think the last time it happened was like in the 1840s or 50s. And he has letters coming back from somebody who had just moved into California who it was just like, oh, it started raining and 40 days later, it’s still raining. And just, you know, the natives knew about this. They understood these things over glacial time periods. And so they would move to higher grounds and you know, had an understanding of how these ecological events would affect that but you just think about the scale at which California has grown and 150 years and you’re just like, What can we possibly do? It’s amazing. This is all really fascinating to me, because it, for me the gaps, I never, I never really understood the 80s farm crisis. I think that there are too many factors at play. So it’s a lot easier to kind of blame one thing or governmental regulations or anything like that. But there always seems to be a sort of panoply of things that kind of, you know, spark, the too many issues that are… and too many structural changes, and too many people whose hand is in the basket at the same time. I mean, do you feel like any of this is sort of happening now in the 2020s? What do you feel like is, is happening, maybe we’ll kind of try to, we’ll end on a lighter note. But like, I mean, I’m, I’m looking into, you know, even Last Supper for Malthus, he talks about Saudi Arabia buying huge tracts of land in Ethiopia for crop production, because they had attempted to use groundwater aquifers to grow their own wheat production. And within 20 years, they’ve completely depleted their aquifers. And so what we’re seeing now is we’re seeing huge investments in Africa, from China, Russia, especially the state’s new investments in palm oil production, deforestation in the Congo, we’re seeing, especially the Congo might God I mean, it’s such a mineral-rich, such an amazing country that has so much wealth, and it’s just been extracted for 100 plus years. So we’re seeing a functional change, but the 20, the 2020s, especially around COVID, it’s kind of hard because we’re hyper-focused on, you know, a very specific thing. And in order to keep like, the ground moving on just COVID protocols, and you know, whatever, insurrections in the capital, any number of different things we’re seeing. I would love for you… What is your research saying now that it’s kind of happening in agricultural production in the 2020s? Give me one year like 2020, what do you think’s going on?

Madeleine Fairbairn  47:04  

I mean, one thing, so to bring it back to the investment landscape, one thing that I am starting to see, but haven’t really delved into very deeply, but I think it’s fascinating is this, I think, growing idea, as ESG type investing is becoming more popular as this kind of socially responsible investing is becoming much more mainstream, as it has, in the last few years, much more mainstream. Like index funds, socially responsible index funds are just booming. We’re starting to see a movement among agricultural investors to be very certain that their kind of investing will be classed kind of officially as ESG as environmentally and socially responsible. And so you’re seeing kind of efforts to ensure that ways of classifying and sort of how much carbon you’re getting into your soil how, you know, if you check, if you do certain practices, like if you do cover cropping, etc, then you will get kind of get a certain amount of credit for being a for carbon farming, basically. And I am watching that trend. I’m sort of interested in where that trend is going in that I think that is going to be…  that could potentially… and I’m all about, you know, I think regenerative agriculture is great. I’m all about genuinely, you know, diversified farming systems, generally regenerative farming systems, agroecological practices. But I think that we will be seeing big investors and big agricultural producers working very hard to position themselves as inherently a good investment that is battling climate change so that big institutions can kind of put some of their money in that and say, Hey, I did my ESG investing. And I think the case of Harvard’s investments in California really goes to show you just you can’t just say, Oh, just because it’s agriculture, it must be helping with climate change. And it must be, you know, feeding the world. It must inherently be responsible investing because there are just a lot of different ways you can do agriculture. You know, I think a certain… I mean, cover cropping is great. That’s great if more people want to cover crop, but there are gonna be certain cover cropping and minimum tillage and things that get adopted really easily. And if that’s the kind of bar we’re setting of, like, ‘Great, now you’re fighting climate change.’ I think I would, I’m going to be cautious about giving investors that much credit.

James Connolly  49:27  

Yeah, and I have been paying attention to what I would consider is sort of, to borrow your phraseology, of financialization of environmental sustainability goals. I was recently reading an article about a lot of institutional investors buying up huge tracts of land in Scotland for reforestation, you know, and I think that we’ve, we’ve found reforestation, in places that are ecologically fragile, doesn’t work, you know. So we seem to always want to find these like one metric that we’re going to do. We have to start to think about these things psychologically. I remember looking into China, the Laos Valley. Have you ever seen it? And there’s really just, a buildup of just enormous tracts of land with what I wouldn’t even consider agriculture. It’s not even agriculture. It’s just bringing, like native crops back onto native plant species back onto the land, building small cooperative communities around creating these places that are agroecological sort of paradises. I’ll send you a video. It’s really, really beautiful to see a transformation like that. But we’ve also seen it kind of really backfire. I’m worried about Ethiopia’s reforestation projects. A million trees. Just because I think that’s what we want to do, we want to commodify something. We want to make it as simplistic as possible. You know, I think the carbon credits problem, from my perspective, is that the fossil fuel industry is already like writing the rules for a lot of that stuff. And so, yeah, I just think it’s very important that we pay attention to a lot of this, especially, I think, what is happening in Africa.

Madeleine Fairbairn  51:10  

Yeah, absolutely.

James Connolly  51:12  

So I mean, first of all, this has been wonderful. You know this is your first podcast. So I think you’re wonderful on podcasts. And how would people reach you?

Madeleine Fairbairn  51:23  

The first thing I would say, which we haven’t mentioned, which is very important to me, is that the book is free. So you can open access. So I felt it was quite important for a book that’s basically about you know, ongoing enclosure of natural resources to do my best to at least have it be part of the Knowledge Commons. So Cornell University Press has made it open access and you can just download the whole book for free in all the normal places. And yeah, I mean, my I certainly feel free to email me. My email is on the internet. Yeah. 

James Connolly  52:00  

Yeah, it’s a… The book is called Fields of Gold: Financing the Global Land Rush, and it’s Madeline Fairbairn.

Closing  52:13  

Thanks so much for joining us on the sustainable dish podcast. If you like the show, please leave us a review on iTunes, and don’t forget to sign up for our newsletter at Sacred Cow dot info. See you next time. Thanks for listening.