ABC Background Briefing | 25 July 2010
As the world's available farming land shrinks in the face of population growth, climate change and soil degradation, Australia's vast tracts of land are going to be increasingly important for global food security. Overseas players are already buying up Australian agricultural resources and interest is growing. There are economic benefits but is the sell-off in Australia's long term interests? Reporter, Stephen Crittenden.
See also Selling the Farm - an ABC News Online special
Stephen Crittenden: Hello from Stephen Crittenden. Welcome to Background Briefing on ABC Radio National.
Food and water security is shaping up as one of the hottest issues of the 21st century.
The world's population is exploding, global warming us upon us, and the land and water resources available for farming are shrinking.
These food and water security problems offer valuable opportunities for Australian agriculture in the future because compared to many other countries, Australia has vast tracts of land and very few mouths to feed. Overseas players are already buying up Australian agricultural resources, and questions are being asked about the wisdom of selling off these wealth-creating assets.
Speaker: Senator Heffernan.
Bill Heffernan: Mr President. Tonight I'd like to put on the agenda for all Australians, and begin the debate that will lead to the protection of Australia's sovereignty and food security, both for our great country, the world's luckiest continent, and our role in supporting the global food task. I refer to the urgent need to put agricultural land and our water resources on the radar of the Foreign Investment Review Board.
Stephen Crittenden: New South Wales Liberal Senator, Bill Heffernan is a farmer, and he knows as much about Australian agriculture at the grass roots as any member of the Federal Parliament. He wants to start a debate about what he sees as Australia's increasing vulnerability to foreign companies and even foreign governments buying up prime agricultural land and water rights.
The immediate problem, he says, is that there is no oversight in this area by Australia's foreign investment regulator, the Foreign Investment Review Board.
Senator Heffernan says Australia's political leaders are far too complacent about the global food security outlook and its implications for Australia.
Bill Heffernan: By 2050, Mr President, the world will have 9-billion people. According to the science, 50% of the world's population could be poor for water, a billion people unable to feed themselves, 30% of the productive land of Asia, where two-thirds of the world's population will live, could be out of production due to urbanisation and climate change. The food task could double, will double, and possibly up to 1.6-billion people on the planet out of 9-billion displaced.
Stephen Crittenden: Senator Heffernan says we don't really have a clear picture of just how much of Australia's agricultural land is being purchased by foreign companies, and that's because land is exempt under the Foreign Investment Review Board rules. The FIRB only pays attention to corporate takeovers worth in excess of $230-million.
But there are plenty of land sales going on, as described in a report on the ABC's Asia Focus program early last year.
Asia Focus Reporter: Across Australia's tropical north there are plenty of cattle stations for sale. At least 30 have already sold, totalling over $1-billion. In a world increasingly short of food, these properties are seen as a good long-term investment.
Stephen Crittenden: The CEO of Australia's oldest continuously operating company, the Australian Agricultural Company, which owns 19 cattle stations covering more than 1% of Australia's total land mass, says the Australian public would be very surprised if it knew just how much of our agricultural land is being purchased by overseas investors.
David Farley says that as well as top end cattle properties, sheep and cattle stations further south are changing hands, and many of the buyers are from overseas.
To give just a few examples, the Packer family recently sold the 17 cattle stations that made up its Consolidated Pastoral Company to the British-based private equity company Terrafirma; the largest land sale in Victoria so far this year was Mount Elephant Station, which went to a Swedish buyer. Last year the American company, Westchester, paid $22-million for a cotton property near Moree and $20-million for Glenfine Station in Victoria. Here's David Farley.
David Farley: Australian agriculture is a very attractive investment to a lot of offshore players at the moment, and a very broad reach of players who are from the United States through the United Arab Emirates, right through to China. And I think if sale investments were analysed, there'd be surprise on what size properties are being purchased and by who. Do we run hard data on it? No. We run hard data on large sales, transactions I think over the $200-million mark, but there's a lot happens under that level. And to quantify it into exactly how much would be beyond my reach. But I think evidence, if collected properly, would surprise a lot of people, yes.
Stephen Crittenden: Speaking from his office in Brisbane, David Farley says that while these foreign investments need not be a cause for concern, they should be monitored to ensure that they are in the national interest.
David Farley: First of all, I think the overseas investment is good. It brings capital to the market, and it puts competition and price tension into the purchase of the assets. We need to be aware of what's happening probably at all levels so we can monitor it, and make sure that the investment isn't idle; we need to focus on making sure the investments are productive and are in the national interest of Australia.
Stephen Crittenden: Do we have anything to fear from state-owned companies from Saudi Arabia, or Qatar, or China, investing heavily in buying up agricultural land in Australia?
David Farley: I think the only thing we have to fear is that if we lose the proper governance of that land or those assets, if we lose productivity from those assets, or if they're no longer contributing to our country as far as economic and social good and wellbeing is concerned.
Stephen Crittenden: David Farley, the CEO of the Australian Agricultural Company.
Senator Bill Heffernan says he doesn't have anything against foreign investment either. He says he knows that by raising these questions he may be accused of xenophobia, but he has no interest in foreigner-bashing. What he wants to do is to get Australians to think strategically about the long-term future.
Bill Heffernan: Foreign investment in Australian land has been going on for a long time, back to the days of the Vesteys, I suppose you could say. But what's changed globally is you have this now global snapshot, as it were, with the prediction of 9-billion people by 2050 and 12-billion people by 2070. I just think we need to get past the idea that what's in the fridge is something you take for granted. What's in the fridge in the future is going to be far more important than what's in the garage, and we ought to start now to plan this, and figure out where we're going to be in 50 or 80 years time, and this is not about alarming anyone, and this is not about the next election. It shouldn't be about a political party. But it is about recognising that countries are taking strategic decisions now about what is their strategic reserves, their strategic assets and they are protecting them. And I have to say I think it's critical and I don't think people have been thinking about it.
Stephen Crittenden: At the same time that other countries are thinking strategically, and increasing their long-term investments in agriculture, many Australian farmers are bailing out. It's happening in the cattle industry, the fruit and vegetable industry, and above all, in the dairy industry.
Stephen Crittenden: China was the destination for Tasmanian real estate agent, Betty Kay. She recently travelled form her small dairying community to the World Dairy Expo in the city of Qingdao, searching for potential buyers for dozens of farms that are on the market around Smithton, in north-west Tasmania.
Betty Kay: My motivation for going to China was that I was feeling helpless with not being able to tell the people when they phone me up and ask is there any buyers out there for our property? People have been here and looked. There's been no real interest in buying farms. When they do their budgets, there's no way it's sustainable.
Stephen Crittenden: How many farms would be on the market at the moment in this region?
Betty Kay: There'd be at least 35 farms. I've listed four since we've come back from China from farmers who are just hoping that we might get some buyers or investors some way in the future.
Stephen Crittenden: We'll hear more about the Tasmanian dairy industry and Betty Kay's hopes of attracting Chinese investors, later in the program.
If you want an instant snapshot of just how intense the worldwide competition for food and water will be by the middle of this century, demand for meat is expected to increase by 185-million tonnes per annum. And to grow all the grain to feed all those extra animals the world will need to find the equivalent of three new North Americas. The amount of extra drinking water needed by the growing billions of people on the planet will be equivalent to all the water currently being used by world agriculture.
That daunting picture comes from a new book by Australian science writer, Julian Cribb, entitled The Coming Famine, which is due to be published next week by the CSIRO and the University of California Press.
Here's Julian Cribb.
Julian Cribb: Between now and the 2060s the human population is going to grow to about 11.4-billion, that's the peak currently predicted by the United Nations. The demand for food is going to more than double because many of those people will be living at a higher living standard; they will be able to afford more protein. So basically the world has to find twice as much food as it is producing today.
Stephen Crittenden: But if the global food task is set to double, Julian Cribb says all the things we need to produce the extra food are in increasingly short supply.
Julian Cribb: We are running out of water, mainly because the cities are taking it away from the farmers, we are running out of farm land, mainly because it's either degrading or because the cities are taking it away from farmers. We are running out of mined nutrients that form the basis of our fertilisers; we are running out of oil, which is a major driver of world agriculture. There's been a long-term decline in research and technology flowing through to agriculture; we're seeing world fisheries collapsing around the place. So all of these forces are combining to constrain our ability to double our food supply.
Stephen Crittenden: One nation that knows it will face a particular problem feeding its population from its own resources is China. China has been prone to famine throughout its history, and as recently as 40 years ago experienced a famine that killed 30-million people. Julian Cribb says the most serious problem China faces today is water.
Julian Cribb: The North China plain has been running through the groundwater that it uses largely to support its agriculture, at a frightening rate. The top aquiver is empty, the bottom aquiver is half empty, and when it's emptied it won't refill because the aquifers will collapse. At the same time China has problems from urban sprawl, their cities are spreading out and soaking up a lot of good country that once used to grow rice or vegetables. So really, China has identified food as a risky issue, food security for them in the future.
Stephen Crittenden: Several years ago, when Julian Cribb met with members of the Chinese Academy of Sciences, they made some very stark demographic predictions about whether China's agricultural resources would be sufficient to meet its long-term needs.
Julian Cribb: I asked them what they thought the population of China would ultimately peak out at, and they said about 1.6-billion, which of course contradicted what the Party line was, which was 1.2-billion. But they were just going on the natural increase that was taking place in China. I then said, what in their opinion was the long-term carrying capacity of China? And they said they thought about 640-million people. So in the opinions of Chinese experts, China may end up with nearly three times as many people as the country can carry, in the long run. And that could spell trouble.
Stephen Crittenden: In recent years, a number of countries that are wealthy but land or water poor, or food insecure - China, South Korea, Japan, India, Saudi Arabia and the Gulf States - have been buying up some of the best agricultural land in Third World countries.
Anuradha Mittal is Executive Director of the Oakland Institute, a progressive think-tank based in California which has been trading these developments . She estimates that as much as 50-million hectares of agricultural land in poor countries has been acquired in the past three or four years.
Anuradha Mittal: Where you have countries which are food insecure, they have come up with national plans. For instance, think of South Korea or Japan, which basically depend on 60% of their food coming from abroad, and if you think of South Korea and exclude rice from the picture, nearly 90% of its food is imported. Other countries are China, India, the Gulf states. They have all designed these national policies where the government is working hand in hand with the private sector to be able to secure these lands. And it might seem like an OK idea if they are food insecure countries buying up land in countries which have an abundance of land, but we're really looking at poor countries. You know, for instance, South Korea is acquiring over $1-million hectares in Sudan, in Mongolia, in Indonesia, as well as Argentina. Or you might have the situation where you have a country like Ethiopia which is one of the hungriest countries in the world with more than 13-million people who are in need of food aid, but the government is offering at least 7-1/2-million acres of its most fertile land to rich countries and some of the world's most wealthy individuals so they can export food and biofuels back to their countries.
Stephen Crittenden: There is disagreement about whether these land deals are a good thing or a bad thing for a continent like Africa.
Some see it as a win-win for Africa, providing foreign investment and expertise that will increase yields in a way that African agriculture has not previously been able to achieve.
But the Director-General of the UN Food and Agriculture Organisation, Jacques Diouf, has described it as a form of neo-colonialism that is already causing the displacement of 15-million people a year worldwide.
Saudi Arabia is one of the big players acquiring land in Ethiopia, and its government is being very upfront about its intentions.
Until recently, Saudi Arabia was self-sufficient in wheat production and exported grain and fruit and vegetables to the rest of the Middle East. But in 2008 the Saudi government decided to abandon this approach in order to conserve water. Saudi Arabia has begun to import wheat again and subsidies for domestic agriculture will be phased out by 2016.
And a result, local agribusinesses have been looking for alternative investment opportunities overseas. Julian Cribb.
Julian Cribb: They have plenty of money, plenty of oil, but not enough food production capacity. What are they going to do? They now have to go to places like Darfur and even Eritrea and buy up African farmland to produce their food. It might benefit the Africans and it might not, we don't know at this stage whether this is benign investment or whether it's neo-colonialism, there's a big argument raging on that.
Stephen Crittenden: The Saudi Arabian government seems to be sensitive to the obvious tensions in this approach. In a recent interview, Saudi Arabia's Deputy Agriculture Minister, Dr Abdullah al-Abeid, set out his country's position.
Abdullah al-Abeid [reading]: The food crisis in the spring of 2008 was the warning sign. Saudi Arabia is a net importer of agricultural products, especially rice, corn and soya. And this fact is pushing the State to invest overseas. We've sent government and private sector investigations to Turkey, Ukraine, Egypt, Sudan, Thailand, the Philippines, Vietnam, Ethiopia and Uzbekistan. These delegations have been very warmly received. We want to invest in agriculture abroad, but we don't want to monopolise the entire output for ourselves, quite the reverse. We plan to expand the total area under cultivation and guarantee that a proportion of the harvest will stay in the producer country.
Stephen Crittenden: There have been some ominous warning signs recently about the kind of political instability caused by food insecurity that we may well see more of in the future.
During the global food shortage in 2008 there were food riots in many parts of the world, and in March 2009 there was a sudden military coup in Madagascar.
Reporter: He said he would die rather than be deposed but now it's the end for Madagascan President, Marc Ravalomanana. The military seized the presidential palace in Antananarivo Monday, forcing the president to flee to another compound outside the capital.
Stephen Crittenden: At the time, the causes of the Madagascar coup weren't widely understood by the Western media. The government of President Marc Ravalomanana had just negotiated a deal with South Korea's Daewoo Corporation to hand over half of Madagascar's arable land in a 99-year lease for the production of export-only crops. Anuradha Mittal from the Oakland Institute.
Anuradha Mittal: Definitely what happened in Madagascar was resentment of people and mobilisation, not just against actually the Daewoo deal, which got a lot of exposure, but also one of the Indian companies was buying up huge amounts of land in the country. So that was the reason why the government toppled, where people had had enough.
Stephen Crittenden: In his book The Coming Famine, Julian Cribb describes what he calls 'multiple stress zones', places in the world where competition for dwindling food and water resources is increasingly likely to drive armed conflict.
Julian Cribb: Yes, this is the British Ministry of Defence talking about multiple stress zones, and they're saying there are areas where you're going to have people who are short of food people who are short of water, places where the politics is going to be unstable, where climate change may be starting to bite. And the more of these things that sort of pile up, the less stable that part of the world becomes, the more likely it is to fall to pieces, for governments to collapse, for refugee movements to swamp surrounding countries and so on. In the 1970s an agricultural failure in Bangladesh forced 10-million people to flee into India and caused some terrible tensions and strife. That's the sort of thing we're talking about, very, very large population movements on a scale we've never seen before in human history.
Stephen Crittenden: In a world where agricultural land and water are increasingly scarce and food prices likely to soar, the money we spend on Australian agriculture is actually money spent on Australia's national security, according to the Chief Executive of the Australian Agriculture Company, David Farley.
David Farley: Food supply like energy supply, ultimately will come down to part of our national security program. And if we can participate in producing food at the right price and can ensure nations with supply, with quality supply, it strengthens relationships and then strengthens our security within the region. So we need to be very, very strategic in making people aware of what's happening with our assets, making people aware of what we can do with our assets, and more importantly, I think we should always be monitoring who's buying our assets.
Stephen Crittenden: China is responsible for some of the biggest land buy-ups in the developing world, particularly in Africa. But unlike the Gulf states and South Korea, which have been upfront about their intentions, China's overseas land acquisitions have not been driven by a clearly enunciated policy. Julian Cribb says China is not just being driven by food security concerns, but is also looking for strategic investment opportunities.
Julian Cribb: The other strand in all this is that China is actively pursuing a policy of investment to try to counteract the market power of western multinational companies, and there's a lot that's being done by individual corporations that may or may not be state-owned corporations and what they're doing may or may not be a part of a deliberate state policy, you know what I mean? It's a very complex thing that's going on. But there's no doubt that they bought out the west African fishing industry and that the fish are going back to China and things like that are happening.
Stephen Crittenden: Zhou Zhangyue is Professor in the School of Business at James Cook University. He says China is pursuing an investment strategy that is not ambiguous, so much as multi-pronged.
Zhou Zhangyue: A couple of years ago the government had a clear call to encourage we can say, a kind of agriculture going out policy. Encouraging firms to go overseas to invest is only part of it. There are other components, for example, to boost China's agricultural exports, to encourage the acceptance of China's agricultural technologies overseas, to export some rural workers to overseas, and also to increase China's capability to have the ocean fisheries.
Stephen Crittenden: Are we talking about state-run companies or private companies with state backing, or both?
Zhou Zhangyue: When the government on various occasions talked about encouraging firms to go overseas to invest, chiefly they are talking about encouraging private firms to go overseas to invest.
Stephen Crittenden: Not state-backed companies?
Zhou Zhangyue: That would be harder to probably sometimes distinguish in some cases.
Stephen Crittenden: The Chinese state-owned company Bright Foods has been in Australia this year looking for investment opportunities in sugar, wine and the dairy industry. Owned by the city government of Shanghai, Bright Foods has openly signalled its interest in purchasing 9 or 10 Australian vineyards owned by Fosters, and earlier this year it made a cash offer of $1.65-billion for CSR's sugar subsidiary, Sucrogen. But this month, Bright Foods was outbid for Sucrogen by a Singaporean company, Wilmar International, the world's largest producer of palm oil, which agreed to pay $1.75-billion for the company.
Lynne Wilkinson is the CEO of Ausbuy, a not-for-profit organisation representing Australian-owned companies.
Lynne Wilkinson: When you talk Chinese companies you're talking the Chinese centralised government. They are interested in the vineyards. We also know that is a Saudi company interested in Cubbie Station. And again, you're talking about a country trying to buy some of our assets, and in that case it is a strategic issue. Now I understand most recently, the Government has offered $50-million for the water licence for Cubbie, which may be enough to get them out of trouble and at least keep it in Australian hands. And these are assets which Australians have built. You see, when foreign countries take over our assets, or foreign companies take over, there's no risk; they buy our wealth-creating assets, they buy cash flow and they buy our export markets. It's Australians who have built these assets, and that's what we object to. And a lot of this is happening under the Foreign Investment Review Board benchmarks, and that's a major concern for us.
Bill Heffernan: Righto, we'll hit the road. I declare open this public hearing of the Senate Select Committee on Agricultural and Related Industries. The committee is hearing evidence on the committee's inquiry into food production in Australia and I welcome you all here today.
Stephen Crittenden: The Chairman of the Senate Select Committee on Agriculture, Senator Bill Heffernan. The Committee is inquiring into Australia's food security, and recently turned its attention to whether Australian agricultural assets are vulnerable to being bought up by foreign corporations and even by foreign governments.
As we've heard, the sale of agricultural land is not covered by the rules of the Foreign Investment Review Board, which has as its primary focus the control or ownership of Australian companies.
Patrick Colmer: Thank you, Senator, I'm Patrick Colmer. I'm the General Manager of the Foreign Investment and Trade Policy ...
Stephen Crittenden: The General Manager of the FIRB's Trade Policy Division, Patrick Colmer, gave evidence to the Committee in June. Senator Heffernan was in the Chair, and the other voice you'll hear is that of Tasmanian Labor Senator, Kerry O'Brien. First, here's Patrick Colmer from the FIRB.
Patrick Colmer: The only restrictions that apply are in two circumstances. One is when the land is being purchased through the purchase of an agricultural company which is over the standard threshold of $231-million, or else in the situation where it is being purchased by a foreign government, and we would expect it to be notified. In all other cases, the land is exempt under the legislation.
Bill Heffernan: If you can buy up to $200-million worth of land and not come to anyone's attention, you could buy a bloody lot of land before we knew it was happening.
Kerry O'Brien: It's companies that are limited, land is not limited. If you buy over $200-miollion worth of land, that's not the subject of the FIRB.
Bill Heffernan: It doesn't come on to the radar. Under $230-million of agricultural land does not come under the radar.
Kerry O'Brien: No, the dollar amount does not apply to land Mr Chairman, it only applies to companies.
Bill Heffernan: What I want to take you to now is just say down in Senator O'Brien's Tasmania there are 50 individual farmers who have had enough and they want to sell their dairy farms one-on-one to Joe Bloggs from Switzerland. That wouldn't come on your radar, would it?
Patrick Colmer: Well, unlikely to.
Bill Heffernan: That's right, that's all you need to say.
You could acquire an entire district just farm by farm by farm, with a foreign entity and it would never come on your radar.
Patrick Colmer: That is quite possible.
Bill Heffernan: Excellent, thanks.
Stephen Crittenden: Senator Heffernan says an example of the kind of attention the FIRB should be paying to land acquisitions but isn't, comes from New Zealand.
At the moment, a Chinese company named Natural Dairy Holdings wants to buy 20 dairy farms owned by New Zealand's Crafar family, whose company is in receivership. Although the purchase would not contravene New Zealand's existing foreign investment rules, the sale has been put on hold by the Overseas Investments Office, New Zealand's equivalent of the FIRB. This month, New Zealand's Prime Minister, John Key, said that in his view the sale of 'very large tracts of land' may not be in New Zealand's long-term interests.
A decision is pending, and you can hear more about this story by going to our website and clicking on the link to a special ABC News Online multi-media report.
Australia's Foreign Investment Review Board does currently monitor purchases of Australian agricultural assets by foreign governments. Bill Heffernan says he is concerned that it does not monitor land purchased by companies backed by the sovereign wealth funds of other countries.
Bill Heffernan: And 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.
We need to put all this on a register, we need to lower the trigger point for reporting of foreign sales, and we need to consider as part of our sovereignty, strategic investment in Australia.
Stephen Crittenden: One example of a company with the kind of sovereign backing Bill Heffernan is talking about, is the Hassad Foods Group. It is backed by the Qatar Investment Authority and it has a wholly-owned subsidiary in Australia.
This year, Hassad Foods announced it would be investing $US700-million acquiring agricultural land around the world. The company recently spent $25-million for the Kaladbro sheep station near Mount Gambier, and $18.5-million on Clover Downs, near Cunnamulla in Queensland. A 12,500 square kilometre property, bigger than Qatar itself.
[Please note this is a miscalculation. Clover Downs is 1,250 sq kms, a little over one tenth the size of Qatar]
The ABC invited Hassad Foods to participate in this program but they declined.
You're listening to Background Briefing on ABC Radio National. I'm Stephen Crittenden.
The Federal Assistant Treasurer, Nick Sherry, was interviewed recently by Leon Byner on Adelaide radio station 5AA. Here's what he had to say about the concerns Bill Heffernan is raising.
Nick Sherry: Well firstly, I would say Australia needs foreign investment. It's important for our development, it adds to our economic strength, interestingly, particularly in rural and regional areas.
Leon Byner: But what about a country protecting its bio-security by mothballing land, where they will use it in the future for a purpose when they deem it appropriate, which wires us out of the process entirely?
Nick Sherry: Well I'm actually aware of a specific foreign investment in agricultural land, cattle, by a Middle East company for example. Their interest is not in mothballing the land but they actually want to run the operation and make a profit and contribute to the business and they are exporting the cattle to the Middle East, for example.
Leon Byner: My question is, are you comfortable with the concept of a sovereign country buying into Australian agriculture to protect its bio-security?
Nick Sherry: I'm comfortable with foreign investment flowing into Australia to add to the overall strength of our economy and jobs, because that's what it does.
Stephen Crittenden: Federal Assistant Treasurer, Nick Sherry.
Farmers tractor protest: We went to Hay! We went to Bathurst!
Stephen Crittenden: Richard Bovill is a Tasmanian vegetable grower and farmer activist based in Devonport.
Farmers tractor protest: And we finally arrived here today! Yea!
Stephen Crittenden: In 2005, he led a march of 2000 farmers and 130 tractors from all over south-eastern Australia to Parliament House in Canberra, to draw attention to the plight of Australian farmers. More recently he's been involved in a bitter dispute over the price Tasmanian dairy farmers are receiving for their milk.
Richard Bovill says we need to be careful that we don't just single out Chinese firms that want to buy Australian agricultural assets.
Richard Bovill: I don't think we should necessarily focus on the Chinese. I think we should focus on what's happening across the board. If the Chinese come in and buy businesses in Australia, it wouldn't be any different to what we've seen in the dairy industry, the meat industry, what we're seeing in grain handling; we've already seen one of the major grain handlers taken over by the Canadians. Foreign investment in Australia is an open book. The fact is, the model in Australia allows anybody to come in and acquire our assets. It really doesn't matter whether it's the Chinese, the Canadians, the Americans, the French or the New Zealanders, and they're all in here, and they're all acquiring our value-adding assets. We are quite dumb when it comes to our long-term future.
Stephen Crittenden: Richard Bovill says Australia has had a current account deficit for 20 years, and that's largely because we concentrate on basic commodity production: growing grain, producing milk and mining minerals, but we tend to sell off our opportunities to control the value-adding processes that create real wealth.
Sometimes called 'gateway' assets because farmers are dependent on the link they provide to domestic and overseas markets, they include feedlots and abattoirs, milk processing plants, and even trucking companies.
The Chief Executive of Ausbuy, Lynne Wilkinson, says Australia is not thinking strategically about protecting these key wealth-producing assets, and we are seeing a lot of multinational companies buying them up in order to consolidate their market power.
Lynne Wilkinson: Well certainly our farmers have been subject to not so much foreign takeover of the farms, although that certainly is happening, but what's happened is the channels of distribution of our food industry are being taken over by foreign interests, so the farmers are at the mercy - they become the tenants as the suppliers to the multinational firms, so they're at the mercy of how much they're going to get for their product.
Stephen Crittenden: One industry where this kind of market consolidation has been happening very quickly, is the meat industry. The world's largest meat producer, the Brazilian conglomerate JBS Swift, has been buying up feedlots and abattoirs in south-eastern Australia.
JBS Swift now owns seven beef export plants in Australia, and its latest bid to purchase a large feedlot in Leeton is currently being examined by Australia's competition watchdog, the ACCC.
Cattle farmer and Senator, Bill Heffernan says JBS Swift already has too much market power, and if it wants to buy the Rockdale Feedlot, the company should be forced to divest some of its other assets.
This is what he had to say during the hearings of the Senate Standing Committee on Agriculture, back in June.
Bill Heffernan: JBS Swift which are a Brazilian government guaranteed company that have, along with two other companies, the bulk of the market in the United States. They are being very aggressive here. They have taken Tasman out in Tasmania, they've taken Tatiara out, over towards South Australia there, and they are now looking at Itoham in Leeton, with their abattoir and feedlot, where they'll have the bulk of the growers steer market in Southern Australia tied up. They are also negotiating with Coles. Coles at the present time do their own buying in the meat market, and they are very good and they compete well with people like Woolies and others. JBS Swift are trying to talk Coles out of doing their own buying. They actually want to do their buying and killing to reduce competition in the saleyards, I'd suggest. And so these are all part of the consideration that I'm hoping the ACCC will give to whether JBS Swift ought to be entitled to take over without losing some other feedlot somewhere else.
Stephen Crittenden: Senator Heffernan.
And we did invite John Berry, the Director and Manager of Corporate Affairs for JBS Swift Australia, to take part in this program. John Berry declined to be interviewed because Senator Heffernan was also taking part.
But he did send us a written response to Senator Heffernan's comments. John Berry says JBS Swift's market power has not reached the point where it exceeds the parameters set by the ACCC, and that Senator Heffernan is wrong to suggest that the company is pursuing a strategy of reducing competition in the saleyards. He says JBS Swift purchases the majority of its livestock direct from the producer.
Meanwhile in the dairy industry, farmers say they've been experiencing the market power of multinational companies for several years.
The Japanese company, Kirin, now owns brands like Pura and Dairy Farmers, and controls more than 46% of the milk market. The New Zealand company Fonterra is also a dominant player in Tasmania, where dairy farmers have been locked in a bitter dispute in recent years. They say they're being paid less for their milk than it costs them to produce it.
But it's a dispute in which the farmers have been comprehensively defeated. Farmer advocate, Richard Bovill, says what is happening in the dairy industry is a foretaste of what could happen in Australian agriculture more generally.
Richard Bovill: When the dairy industry was deregulated in Australia, the supermarket chains went out to tender, and they asked for a single tender, the price got slashed, National Foods at that stage, which was an independent company, won most of the contracts. Since then, National Foods have been taken over by Kirin in Japan. Kirin bought those companies with a lot of debt, they need to recover or resurrect their balance sheet, so they actually squeeze the price back on Australian farmers. And the issue around this is, it's very easy for us to pick on a company, the fact is it's our system that allows this to happen. It's actually the Trade Practices Act and the way the ACCC police and allow monopolies through creeping acquisitions to gain huge market share in Australia. Some of that is driven because we've got such a concentration of power with our retailers, but we've still got thousands of farmers supplying one or two suppliers and there is a complete distortion in the marketplace. These farmers used to have viable, profitable businesses. Now basically they're almost back to 200 years ago where they're serfs working for a big landlord, and these people are working 80 hours a week and not making anything like the wages that a normal worker would get for 40 hours a week.
Stephen Crittenden: Background Briefing travelled to Northern Tasmania and met up in a barn on a cold, wet day, with a big group of distressed farmers. This is Jim Hersey.
Jim Hersey: There is people about that go to work for nothing, but I don't know anyone that goes to work and it actually costs them to go to work. It actually costs us to go to work. We're getting paid currently about 31-cents a litre, and it's costing us 38-cents a litre to produce. Now it's not hard to work out the mathematics of that: we're going backwards. So eventually if nothing happens you go backwards that far, you lose it, and it's all gone. When you get to that stage then anyone can come in and take over, even foreign ownership.
Stephen Crittenden: Northern Tasmania boasts some of the richest agricultural land in Australia. But Colleen White says some of these dairy farmers are so hard up they've been receiving food parcels from one of the big dairy companies.
Colleen White: Fonterra actually have been giving out packs of what I call survival packs, and I said to my husband this morning, 'Do not accept it. If I'm not home, we're not accepting it, because it's an insult.'
Stephen Crittenden: What's a survival pack?
Colleen White: It probably consists of probably about a 250 kilo block of cheese, a couple of tubs of yoghurt so we can have one each. And I can't remember what else , because it's so trivial, and it's not what we need. We need money in the bank for what we produce our products for. And they want our products and they're not paying for it. Simple as that.
Stephen Crittenden: Earlier on, we heard from real estate agent Betty Kay. She recently travelled to a dairy expo in China in the hope that she might interest Chinese corporate investors to buy some of the dairy farms that are for sale around the Smithton area.
Betty Kay says although some of the Chinese dairy company executives she spoke to weren't quite sure where Tasmania was, she still encountered a lot of interest from potential investors.
Betty Kay: There's one thing that we shouldn't be perceiving that we're going to be inundated with Chinese or any other country into the area. They would be coming here as investors, they would still get managers for these farms. And there's certainly farmers who've put their hands up that they would be able to manage these farms. That would create employment still in this area, so we're not, under no circumstance, going to see a flood into Tasmania or far North-West Tasmania.
Stephen Crittenden: I hear you've had a few nasty phone calls since the news broke that you've been up in China?
Betty Kay: Look, that's not going to persuade me not to keep pursuing these ideas, because for the farmers of this area that want to get out, then they need to know that they can get out. And some farmers are almost a financial ruin. They don't want to show their faces in town because they can't pay their accounts.
Stephen Crittenden: Well you've said you know people who are finding it even hard to feed themselves and their families.
Betty Kay: Absolutely. I had farmers last year who had never had enough money to buy toilet paper. How ridiculous. I am not kidding, I am not kidding. I took these farmers out and gave them some money my own self.
Stephen Crittenden: So has real estate agent Betty Kay had any serious inquiries from Chinese buyers out of her trip to the dairy expo in China?
Betty Kay: Yes, most definitely. We've got interest in possibly putting a UHT plant or milk factory erected into Circular Head, and this would be a brand-new plant, and that would give competition into the industry. We also need to value-add more to the dairy product. When you see the initiative and how innovative the Chinese are. They value-add to their products. If you could see the products that they produce, what are we doing?
Stephen Crittenden: Smithton Real Estate Agent, Betty Kay.
The Chinese dairy company Fukushoku has its Australian headquarters in Hay in New South Wales, where it is involved in processing and exporting products like milk powder for the Chinese market. Its chief sales representative in Australia is Cheng Xie.
Cheng says he is aware of the dairy farmers for sale in north-west Tasmania and he has also been trying to attract some interest from Chinese investors. He says while his company isn't likely to buy any farms, the interest of the Chinese dairy industry in Australia is real.
Cheng Xie: I'm not sure our company will buy, but I will try to bring some companies from China to Australia to buy farms.
Stephen Crittenden: There certainly seems to be a lot of delegations from big companies coming backwards and forwards with a view to investing. I mean Bright Foods, for example, is here in a big way.
Cheng Xie: Not only Bright Dairy, there are at least another two or three large-sized companies quite interested in investing either in Australia or New Zealand.
Stephen Crittenden: And would they be interested in investing in processing or actual dairy farms?
Cheng Xie: I think they would not only be quite interested in investing in dairy farms as well as cattle farms. Definitely they will buy somewhere in Australia.
Stephen Crittenden: Are Chinese companies investing in places like Australia because of a coming sense that China is going to have a shortage of resources in China to feed its own population, or is it actually just because of investment opportunities?
Cheng Xie: In terms of the population growth, of course, and the people's incomes I would say are much better than before. They are seeking better products. At the moment in the Chinese market, the people are aware that Australian and New Zealand is seeing the highest standard of dairy products they can get from the market. They have the best image in the world, that's why they are seeking investment, and to produce better products from Australia and then bring back to China.
Stephen Crittenden: There's a history of suspicion of China. What kind of response do you get from Australians to the idea of a big increase in Chinese investment in Australia? Is it seen as a positive thing?
Cheng Xie: On this point I don't think people should be too scared about Chinese or American investment. This is the 21st century. Nobody wants to go to war anymore. Everybody just wants a piece of land or whatever, to improve their own living style. I think we have to open the door.
Stephen Crittenden: Cheng Xie of Fukushoku Dairy.
Australian farmers often complain that Australia's strong ideological commitment to the idea of a global free market in agriculture is driving many family farmers to the wall, and may yet prove to be very short-sighted. If food prices soar and global food production systems come under strain in the coming decades, the free market dogma may change.
During the world food crisis in 2008, nationalism took over. Some countries began to reimpose tariffs, and others who had wheat to sell refused to export it for fear that they wouldn't have enough for their own needs. Here's Julian Cribb, the author of The Coming Famine.
Julian Cribb: Basically it is the globalisation of the food business that is in fact undermining the security of the global food supply. It's basically a message that we all need to start paying a bit more money to farmers for their food so they can invest in sustainability. Because if we don't, some of these agricultural systems will collapse.
Stephen Crittenden: I notice that you're saying that there's an imperative in the next decade that we do two things: we need to abolish all trade barriers so food production can go wherever it's most efficient; and we need to pay farmers a fair price. Now aren't those two imperatives contradictory, or at least contradictory under the current trade mechanisms that everything operates under?
Julian Cribb: Yes, they're contradictory under the current trade mechanisms, but the current trade mechanisms date back to the last century and they are completely irrelevant to the needs of the human race in this century. And we need to get rid of a lot of them. So we do need to open up agricultural trade so it can move to wherever it's most efficient. But the other thing is that farmers are not going to do this unless they get the right economic signal. At the moment, the economic signal reaching them, via the supermarkets and the big food companies is Grow less. The very low prices that they're receiving, plus the very high costs of their inputs, is a major disincentive to agriculture worldwide, and that has to change. I mean the food we eat today is one third the price that our grandparents paid for it, and it is half the price that our parents paid for it. So food has become very, very cheap in this country, in America, in Europe and elsewhere. And I think it's too cheap. It is sending this bad signal to farmers not to invest, to scientists not to do research that is necessary, and it's also causing colossal waste of food in our cities where we throw away up to half of everything we produce. That has to stop.
Stephen Crittenden: Background Briefing's Co-ordinating Producer is Linda McGinnis.
Technical production by Phil McKellar.
Research, Anna Whitfeld.
Executive Producer, Chris Bullock.
I'm Stephen Crittenden. And you're listening to ABC Radio National.