Who invest in farming and what do they value?
Authors: Martin Thorsøe and Egon Noe
In the past 20 years the European farming sector has witnessed a gradual market deregulation and liberalization, a continuous structural development and an increasing average age of farmers. Denmark stand out as a place where these tendencies are particularly pronounced due to a high reliance on the world market, a capital intensive mode of production and a dedication to economies of scale. Therefore, there is much to be learned concerning the effects of this development and the perspectives of future forms of finance from the Danish case study.
Currently, Danish farming undergoes a fundamental restructuration. Traditionally, personal ownership has been the dominant enterprise form, however, today the structural development have resulted in farms sizes too big for personal ownership as it is difficult to attract venture capital, manage volatile market conditions and attract successors. Previously, the agricultural law, which outline the legal basis for owning a farm, protected personal ownership, however, this law was revised in 2012 and 2015 where restrictions to ownership were abandoned.
Currently, a number of alternative enterprise forms, based on different investors and ownership models are tested. However, at present it is uncertain which one will form the basis of the future Danish farming sector and which implications this has for the farmers. In a debate organized by the Danish team of the SUFISA project a range of stakeholders invited to explore and discuss the implications of four different investment rationales that were identified in the emerging landscape of farm business:
1. Family business. Continuing private ownership, for instance by converting the farm to a foundation or a family owned Liability Company with a CEO, to maintain control within the farming family.
2. Investment object. In recent years we have seen a rising interest in Danish farmland from private entrepreneurs, foreign and domestic investment- and pension funds, who invest in farming to generate a yield.
3. Local sustainability. A number of initiatives in which consumers collectively invest in farms and farmland to ensure the preservation of particular values in the agricultural production, such as local organic production.
4. Vertical integration. Investors downstream in the value chain increasingly invest in farms and farmland to ensure the production of particular product qualities, ensure continuous supply of primary produce or quality assurance.
These different investment rationales imply very different developmental pathways for farmers, but also implies a fundamental change in the identity of the farmer, particularly concerning traditional fundamental values such as independence and private ownership. However, the debate also raise a political question concerning which developmental pathway to prioritize in the conditions that influence the development in the sector. The debate is complex, but important in order to ensure a long-term sustainable development of the farming industry, not only in financial terms, but also socially and ecologically.
For more information on the meeting, please follow this link (in Danish).