Do Global Commodity Prices Drive the Proliferation of Large-Scale Land Acquisition in the Global South?

Following the 2007/2008 global food price crisis, large-scale land acquisitions (LSLAs) proliferated across the Global South. However, empirical evidence investigating the role of rising prices in this proliferation remains lacking. This study provides the first empirical estimates of the relationship between agriculture commodity price dynamics and LSLAs. We constructed a unique bilateral panel data across 82 investor and 80 recipient countries between 2000 and 2020 and estimated a bilateral panel gravity model using two-way fixed effects and Poisson pseudo-maximum likelihood (PPML) estimator. The findings reveal that agricultural producer prices in recipient countries are primary drivers of LSLAs. Specifically, we find a negative relationship between these prices and LSLAs which indicate that investors target regions with lower producer prices. This suggests that the food independence motive outweighs the profit maximization motive in these investment decisions. Furthermore, the effect of investor-country food prices on LSLA flows is heterogeneous and depends on deal size. We find a positive association for the flow of smaller LSLA deals, suggesting smaller deals are driven by the food independence motive. However, this relationship becomes insignificant for larger deals, indicating that extensive acquisitions are less sensitive to food prices and are likely driven by other factors such as speculation, biofuel production, or financial diversification motives. These results contribute empirical evidence to the debate in the drivers of LSLAs. The study recommends that recipient countries implement targeted land governance policies to mitigate speculation and mandate produce for local markets. JEL Classifications: Q1, F2.