Selling the Farm

Reposted in full from ABC News, July 2010

'Foreign interests including state-owned companies from China and the Middle East are increasingly looking to Australia to secure their food production by purchasing key agricultural assets.

The sale of agricultural land is exempt under Foreign Investment Review Board regulations and the FIRB’s attention is usually triggered only by the sale of companies whose assets exceed a $231 million threshold.

In recent years, and especially since the global food shortage in 2008, China, South Korea, Japan, India, Saudi Arabia and the Gulf states have all been engaged in massive agricultural purchases around the world and in Australia - as outlined in these maps of Australia and the globe.

New South Wales Liberal Senator Bill Heffernan says Australia risks losing control of its wealth-creating agricultural assets. He believes the Federal Government is not paying sufficient attention to the issue of global food security.

"I would like to put on the agenda... the urgent need to put agricultural land and our water resources on the radar of the Foreign Investment Review board."
- Liberal Senator Bill Heffernan

"This is not about alarming anyone but it is about recognising that countries are taking strategic decisions now," Senator Heffernan said.

Senator Heffernan says the Foreign Investment Review Board does not monitor foreign acquisitions of Australian farming land and Australia is being complacent about the fact that a number of wealthy nations that face future food security concerns are now investing strategically in agricultural property overseas.

China has been particularly active in Africa; Saudi Arabia has acquired large amounts of land in Ethiopia, Sudan and Pakistan to grow wheat; and South Korea is buying up land in South America.

Anuhrada Mittal, the executive director of the Oakland Institute, a California-based think tank, estimates that as much as 50 million hectares worldwide has been purchased in this way. In some cases, she says, food land is being diverted to grow biofuels.

In a new book, The Coming Famine, by University of California Press and the CSIRO, Australian science writer Julian Cribb raises major concerns about how the world will feed itself.

"Between now and the 2060s, the human population is going to grow to about 11.4 billion people... So basically the world has to find twice as much food as it is producing today."

Cribb believes China will only be able to feed a population of 640 million people in decades to come, however the projections for its population growth stretch beyond 1.6 billion.

All the resources needed to produce that extra food will be in increasingly short supply, including arable land, water, fertilisers and oil.

Cribb says the British Ministry of Defence has identified large regions of the globe that it describes as multiple stress zones, where climate change, population growth and political instability are more likely to contribute to armed conflict over food and water in the future.

During Senate committee hearings into food security issues last month, the general manager of the FIRB’s trade policy division, Patrick Colmer, conceded that under existing investment regulations it would be possible for an overseas company to buy up an entire district, farm by farm, without ever coming to the attention of the FIRB.

Senator Heffernan says there is no monitoring of purchases by the sovereign wealth funds of other countries.

"At the present time there is no differentiation between private investment and sovereign investment," Senator Heffernan said. "We need to put all of this on a register, we need to lower the trigger point for reporting foreign asset sales, and we need as part of our sovereignty to consider [our own] strategic investment in Australia."

One example of a company backed by a sovereign wealth fund buying agricultural land in Australia is the Qatar-based Hassad Foods group, which is backed by the Qatar Investment Authority.

Hassad Foods has invested more than $40 million in Australian properties this year, including Clover Downs in Queensland - a property which is bigger than Qatar itself.

David Farley, chief executive officer of the Australian Agricultural Company, says the Australian public would be surprised if it knew the full extent of foreign purchases of cattle properties in Australia’s top end, and sheep and cattle properties further south.

"Australian agriculture is a very attractive investment to a lot of offshore players at the moment and I think if the sale investments were analysed there would be a lot of surprise about what size properties are being purchased and by who."

Mr Farley says while overseas investment in Australian agriculture is a good thing, Australia needs to be careful that it doesn’t allow monopolies and duopolies to limit its ability to be a substantial and profitable international player in the world food market.

"We need to focus on making sure the investments are productive and are in the national interests of Australia."

At the moment the Chinese state-owned company Bright Foods is in the market for Australian dairy, wine and sugar assets.

Earlier this month it was outbid for CSR’s sugar subsidiary Sucrogen by a Singaporean company, Wilmar International, but it has also expressed interest in purchasing a number of vineyards in south-eastern Australia owned by Foster’s. In the cattle industry, the giant Brazilian conglomerate JBS Swift is rapidly buying up abattoirs and feedlots in Australia’s south-east.

North-western Tasmania represents a microcosm of some the issues being played out globally. Many dairy farmers are trying to bail out, after being comprehensively defeated in a long and bitter dispute over milk prices. Many say they would welcome overseas investors.

"It actually costs us to go to work," said dairy farmer Jim Hersey from Smithton. "We’re currently getting paid 31 cents a litre, and it costs us about 38 cents a litre to produce."

Tasmanian real estate agent Betty Kay has just returned from the World Dairy Expo in the Chinese city of Qingdao, where she found genuine interest in the 25 dairy farms she has on the market. She says some dairy farmers are so hard up they can’t afford to buy toilet paper.

"[Chinese buyers] would come here as investors, they would still get managers for these farms, and there’s certainly farmers who have put their hands up," Ms Kay said.

Tasmanian farmer advocate Richard Bovill says many of the state’s smallholder dairy farmers stand to become either managers or labourers on farms they used to own.

"The model in Australia allows anybody to come in and acquire our assets."
- Farmer advocate Richard Bovill

"These farmers used to have viable, profitable businesses. Now they’re almost back to 200 years ago where they’re serfs working for a big landlord," he said.

In 2005, Mr Bovill led a march of 2000 farmers and 130 tractors to Parliament House in Canberra to draw attention to the plight of Australia’s farmers. He says Australia desperately needs to create a mechanism that will make Australian farming economically sustainable.

One Chinese businessman who sees a bright future for greater Chinese investment in Australia is Mr Cheng Xie, from Fukushoku Dairy Pty Ltd, based at Hay in NSW. The company exports processed milk powder to China.

Mr Cheng says in China, Australian and New Zealand dairy products are viewed as the best in the world.

He says a number of large Chinese dairy companies are seriously interested in investing here, and that Australians should not be concerned.

"This is the 21st century. No-one wants to go to war any more. Everybody just wants a piece of land or whatever to improve their lifestyle. I think we should open the door."

Does Australia need a national food security plan? See part two of this special report tomorrow.'