1. Derek Byerlee (Georgetown U) Will Masters (Tufts U) Daniel Robinson (Tufts U) 25 th March, 2015 1

2.  Transformative role of investment in land development (LD) overlooked in recent debates  Large investments per ha that greatly increase the productivity and value of land (e.g., irrigation)  Often significant economies of scale in development phase  But not usually economies of scale in farm operation phase  LD often subsidized/managed by the state but lack of resources and capacity  Historically successful private sector examples  Invested in land development but operated by family farms 2

3.  1. Medium to large-scale irrigation  Economies of scale in building infrastructure  2. Some types of frontier expansion  Land clearing, soil amendments, pioneering experimentation, transactions cost for land acquisition, environmental compliance  3. Some types of plantations  Bulky products with quick processing require investments in roads and a mill  All with high upfront capital costs 3

4. 4 Investor (few crops) Investor (few crops) Land Development Phase (Economies of scale) Farm Operation Phase (Few economies of scale ) Family farms Hybrids (Nucleus- outgrower Global capital and knowledge

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6.  Late 19 th century development of irrigation in US, Australia, Thailand Private land & water development Concessions often stipulated max size family farm operations  Investor profits based on land sales 6 Development of Renmark Irrigation Scheme, Australia,1890s

7.  Brazil, Peru, Australia  High investment costs—often > $10,000/ha  Less focus now on family farms  However, Chinese investment in Oz negotiated with indigenous groups ($50 M)  Africa  Sugarcane with outgrowers  Rice but most large-scale operations  PPPs with smallholders (Zambia) 7

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9.  Land development and settlement North Parana Land Co (1.25 Mha)-1932-67 Colonization companies for the Cerrado in 1970s & 80s 9  AMP Land Development, Sth Aust, 1949-64 340K ha of infertile soils Investment in soil amendments, land clearing and improved pastures Objective to create family farms  6% return to company

10. BRAZILSAVANNAH AREAS, AFRICA  Large land development companies in Brazil BrasilAgro SLC LandCo  Capital and knowledge for LD $2,000-4,000/ha for LD Purely market based and results in more unequal land ownership  Infrastructural corridors searching for a model for private investment in land development Inclusive of in situ smallholders? Potential for in-migrant settlement of smallholders in low density areas 10

11.  Private land development often more successful than state schemes  Clear economies of scale in LD  Many have been transformative—vibrant family farm agriculture  But significant risks to investors and farmers  Creates an immobile asset  Regulatory role of the state critical to create family farm agrarian structure  But often high costs to indigenous groups 11

12.  Recognize that much land unproductive without significant investment  Won’t happen without private K  Recognize economies of scale for LD but not for farm operation  Design contracts and business models to focus on investment in LD & turn over to smallholders  Balance deals with in situ smallholders with potential for in-migrant smallholders 12

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14. Increase in land productivity from land development High Low Products suitable for family farm operation (most) Land development Investor Family farms Farm operations Family farm in situ & settlers Nucleus-outgrower Family farms Products suitable for large farm operation (e.g., s/cane, oil palm) Land development Investor Not applicable Farm operations Investor Nucleus-outgrower, contract Extensive cattle operations 14