Chinese group vying for Australian farm project

Wall Street Journal | 2 November 2012
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Irrigation canals for the Ord East Kimberley Expansion Project.

By Caroline Henshaw

A Chinese conglomerate and Australia’s largest beef producer are amongst contenders vying for rights to farm an agricultural area equal in size to 21,000 soccer pitches in Western Australia.

Results of the bidding process to develop the 15,000-hectare parcel of land at Ord River, near the border between Western Australia and Northern Territory states, are expected towards the end of the month. Federal and regional governments have committed to spend 415 million Australian dollars (US$432 million) on infrastructure for the Ord East Kimberley Expansion Project, which is seen as a key step in opening up the agricultural potential of Australia’s north west.

Larry Yan, Vice President of Shanghai Zhongfu, told Deal Journal Australia on Friday that the Chinese property developer has put in a bid to grow sugar crops across the area of land Australian Agricultural CompanyLtd., Australia’s oldest company with 600,000 cattle across more than 7.2 million hectares of land in Queensland and the Northern Territory, has put in a bid to grow cotton and feed crops on the development, according to a person familiar with the matter.

Developing farmland in the north of Australia has been touted by politicians as key to turning the country into Asia’s breadbasket. Last year, Australia and China set up a joint study on how to attract billions of dollars of investment into northern Australia in a plan designed to help feed China’s 1.3 billion citizens and tap the region’s vast agricultural potential.

Peter Stubbs, director of the Ord East Kimberley Expansion Project, said it was “quite likely” that the new development would end up growing either sugar or cotton crops, which are suited to the region’s soils and particularly attractive for Asian markets. The project’s distance from Australia’s populated areas, which has been one of the main barriers to the region’s development in the past, could actually make it more attractive to Asian investors, he added.

He estimates that the region currently fulfills around a fifth of its farming potential, but he hopes to more-than double that by 2020 with this and several other new developments in the coming years.

“We’re closer to those large Asian markets than to Sydney, Melbourne and Perth,” he said in an interview. “If we end up growing sugar or cotton on this new development–which is quite likely–the bulk will go for export.”

Analysts estimate foreign capital will be key to providing the up to A$1 trillion of investment Australia needs by 2050 to fulfill its agricultural potential and meet booming world food demand, which the United Nations forecasts will double over the next four decades.

Opponents, however, fear that overseas buyers of Australian land and agricultural companies may end up squandering local resources and have little regard for the impact of their activities on Australia’s ecology. The debate has become so heated since Treasurer Wayne Swan approved the sale of the country’s largest cotton farm, known as Cubbie Station, to a Chinese-led consortium in September that the government has said it will set up a register of foreign land holdings.
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