Selling the farm

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ABC News Online | 25 July 2010

By Background Briefing's Stephen Crittenden

Part 1: Does Australia risk losing control of its food resources?

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.

"So basically the world has to find twice as much food as it is producing today."

- Author Julian Cribb (
  
)

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.

Keen to sell

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.

Part 2: Does Australia need a food security plan?

Tasmanian Greens Senator Christine Milne says Australia urgently needs a national food security plan because of the growing danger of foreign takeover of key Australian agricultural assets.

Senator Milne says she supports New South Wales Liberal Senator Bill Heffernan's calls to expand the mandate of the Foreign Investment Review Board to cover the sale of agricultural land and associated water rights to overseas investors.

"I think there is a role for the Foreign Investment Review Board to look very carefully at foreign investment in agricultural land. After all, a lot of countries around the world do not allow foreign nationals and foreign corporations to actually buy the land. They allow leasehold arrangements and joint partnerships, but they don't allow outright purchase," Senator Milne said.

But the Greens say the FIRB can't be expected to take a view on whether overseas investment proposals involving Australian agricultural land are in the national interest, in the absence of a national food security plan.

"We have a huge obligation to invest in food security, not only for Australia's sake but for the world's sake, otherwise we will be seeing food riots (and) insecurity right through Asia and our nearest neighbours."

- Greens Senator Christine Milne (

  
)

"That's what the Greens want to see happen," Senator Milne said. "We need to have an assessment of where we are currently growing our food."

Senator Milne says such a plan would take into account the vulnerability of food-growing areas to climate change, the need for more water to go back into river systems to provide ecological sustainability, and investment in agricultural science research.

"We need to look at where we can grow food into the future and protect that land for food production," Senator Milne said. "If we see it go under housing, or if we see it go under fuel crop production, then we are really failing ourselves. But we are also failing the rest of the world, because we do have a capacity to produce more food than we can use."

Senator Milne says Australia is seeing more and more agricultural land across the eastern states being given over to coal mining or coal seam gas.

"At some point someone has to say: ‘Where is the food going to come from?'," she said. "You can't eat coal."

Senator Heffernan says Australia is not keeping up with the fact that national agriculture policies are beginning to change all around the world in response to climate change and population growth.

"We are in transition now, and the transition is being driven by strategic decisions being taken around the world, looking at the science about changes to the planet which obviously require reconfiguration of the way we're doing business, where we can farm, and where we can't farm," he said.

Water rights

Of particular concern to Senator Heffernan is that under current FIRB regulations foreign companies, sometimes with the backing of sovereign wealth funds, are able to buy the permanent water licences associated with agricultural properties.

"At the present time there's no differentiation between private investment and sovereign investment – in other words other countries' sovereign wealth funds buying our sovereign assets and then excluding us from access to them," Senator Heffernan said.

"We want to be able to strategically use our water to the best advantage."

- Liberal Senator Bill Heffernan (
  
)

"We want to be able to strategically use our water to the best advantage."

Senator Heffernan says the FIRB needs to pay close attention to overseas interest in the sale of Cubbie Station, a 93,000-hectare cotton property in southern Queensland.

"I'm not aware of who the owners are for instance of the company that's making a bid for Cubbie Station, which is reliant for a lot of its value on an irrigation water licence that's been issued that's not sustainable.

"It's registered in the Cayman Islands. Well, it would be nice to know who we're dealing with, and at the present time we don't know."

The Federal Government recently offered to buy back part of Cubbie Station's permanent water rights for $50 million.

Last year, Singaporean company Olam International bought almond plantations owned by Timbercorp, which is in receivership. In September, Olam paid $128 million for 8,000 hectares of almond groves at Robinvale that were sold with 41,000 megalitres of permanent water rights. In November the company paid $160 million in cash for a further 3,800 hectares together with 48,000 megalitres.

Olam now controls 45 per cent of the almonds under cultivation in Australia and says it is in the business for the long term.

But Senator Heffernan says the plantations were bought for little more than the value of the water.

"The Singaporean company may do well out of it. I just think we're entitled to know who they are, put it on a register, and take some control of knowledge in the market," he said.

Senator Heffernan says it would be "a serious, serious mistake" if Australia allowed overseas companies to buy up Australian water licences in order to speculate on the water market.

Tasmanian farmer advocate Richard Bovill says Australia has turned water into a tradeable commodity without thinking about the long-term consequences.

"We set water up as an asset class no different to buying gold or buying shares on the stock market."

- Tasmanian farmers advocate Richard Bovill (Play audio)

"The Singaporeans have been clever enough to say, look, let's get in on the ground floor and buy Australian water... because in the longer term this is a commodity that is never going to go backwards."

New Zealand's lead

Senator Heffernan points to New Zealand as an example of the kind of response he'd like to see in Australia.

A Chinese company named Natural Dairy Holdings wants to buy up 16 New Zealand dairy farms owned by the Crafar family, whose company is in receivership.

The proposed sale has been put on hold while New Zealand's foreign investment regulator, the Overseas Investment Office, examines it. New Zealand Prime Minister John Key has said sales of "very large tracts" of agricultural land to overseas interests may not be in New Zealand's national interest.

Bill Ralston, a spokesperson for Natural Dairy Holdings, says if Natural Dairy Holdings were to be allowed to buy the farms it would still only be a very small player in the New Zealand dairy industry.

"We are looking at only a couple of hundred million [dollars] - that is, 16 farms out of a total of more than 2,500 dairy farms in New Zealand. It is baby steps for Natural Dairy at the moment."

Mr Ralston says Natural Dairy Holdings is being unfairly singled out because it is Chinese.

"In the last three years, 13 different applications to acquire land have been approved in NZ mainly from Europe, Australia, the US and Russia – something like $380 million worth of acquisitions, and not a dickey bird! The sudden prominence of Chinese investments and the paranoia has set in."

But the Federated Farmers of New Zealand claim the Crafer farms purchase is just the beginning of a massive spending spree. They say Natural Dairy Holdings has $NZ1.5 billion to spend on farm acquisitions, which would mean they had a strategic stake in the dairy industry.

Federated Farmers president Don Nicolson says the problem is that New Zealand farms can't go to China and buy up land there.

"But if we had this reciprocity with them, it would be so easy to do the exchange of land for money. Freehold title is so paramount in a democracy."

Lachlan McKenzie, also from the Federated Farmers of New Zealand, warns the New Zealand Government needs to be vigilant about China's long-term intentions.

"The Chinese Government has a 100-year timeframe on the horizon. They are looking for long-term food production. They want a supply chain for 100 years."

This is part two of a special report on Australia's food security. See part one.

Related Material

Credits

  • Selling the farm is a special report by Radio National and the ABC News Online Investigations team.
  • Reporter: Stephen Crittenden
  • Additional reporting: Suzanne Smith, Tim Leslie, Andrew Robertson and David Reilly
  • Site design and development: Tim Madden and Ben Spraggon
  • Multimedia production: Eleanor Bell
  • Video production: Tom Hancock
Original source: ABC
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1 Comments


  1. Howard
    20 Sep 2010

    groundless fears!!! Wonder what the reaction would be if British come to buy farm downunder?

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