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AGRO-ECOLOGICAL BLOGAvoid Risk - Get EcologicalIn the most recent Agro-Ecological Investment Insight (March 2011) we touched on the subject of risk and the fact that we were not convinced that agriculture/farmland investors were fully cognisant of the risks associated with this asset class. In particular, we were thinking about risk in terms of on farm enterprise and genetic diversity - or material lack thereof - in crops and livestock. As mentioned there, we may well explore this in more detail through a research paper. We also felt however that risk was worth addressing more immediately, if in slightly less depth, through the medium of a blog. Political, climatic and water risk seem to be reasonably well understood although those trumpeting their holding of water rights begs the question: great to have the piece of paper but is there any actual water? This brings to mind the 10,000ha ‘olive grove’ deal we were shown in Australia with an enormous 100+ page report attached; designed to intimidate rather than be read I felt. We did read it however and the phrase/paragraph which stood out most clearly was the one which referred to there being no issue with water/irrigation once rain and river flows returned to normal, i.e. once the multi-year extreme drought conditions were over. Well that’s ok then! It is fair to say that was not my reaction and that we took our interest no further. After all what exactly is normal? It is the real ‘dirt under the fingernails’ nitty gritty risk involved in production, its components and those macro factors (climate) that interconnect and impact upon the production factors that are, in our view, neglected and/or not recognised. In some ways it is not surprising because they are not particularly well recognised at the farm gate level either. These themes or areas of risk are similar to the themes identified in so many excellent studies produced in the last few years such as that by the IAASTD. The key message being business as usual is no longer an option. The types of system that farmland investors are generally gaining exposure to at the operational level are inherently unstable and lacking in resilience. But as they are the norm this is not appreciated or considered. Monoculture however is an ecological non sequitur. Monoculture can only exist through massive and expensive (increasingly so) intervention. The cost factor alone emphasises why this particular model is so entirely inappropriate in developing countries and why it has generated such material social failure, e.g. developing world farmer suicides. It also emphasises the exposure to rising input costs and the inability of that system to survive without those inputs, i.e. inherent and inescapable risk within what is the ‘normal’ farmland investment offer. On this theme of ‘the normal’, I was once told that organic lamb production was cruel as they were not drenched (treated) for worms (internal parasites). This is one of the finer examples of totally missing the point and also failing to understand risk and how best to manage that risk at the paddock level that I have ever encountered. The question we would ask from an ecological perspective would be why are you suffering from an internal parasite problem in the first place? Are you overstocked? Do you have simplistic and therefore vulnerable pasture mixtures (‘lamb food’) susceptible to infestation? Are you selecting your animals for health, resilience and resistance to these pests? There are more questions but in general terms they are all asking the following question: Are you creating the optimal agro-ecosystem for animals (this also applies to crops) to thrive and perform and therefore generate positive financial performance without recourse (exposure) to external props? The ecological approach internalises risk, i.e. places it into the control of the asset/farm manager and not into those selling the inputs. It is this understanding and the ability to craft a resilient, ecologically functional agro-ecosystem (one that is not reliant on costly external inputs) that so strengthens the ecological approach from a risk management perspective as well as the profit margin perspective. This production-level/farm operation-level risk, and the stability and resilience in farmland systems (or the absence of it) is fundamental to their on-going performance and therefore the underlying strength of their investment credentials.
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