The recent purchase of Cubby Station by foreign interests clearly illuminates just who is gaining control of Australian agricultural production.
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The recent purchase of Cubby Station by foreign interests
clearly illuminates just who is gaining control Australian agricultural production.
And control is the key. The basic statistics around land and water ownership, while sobering, do not clearly reflect that foreign purchases have disproportionately been focused on key upstream components of the business of agriculture.
Basically, it’s not just at the farm gate where concern should lie, but also in who controls the further processing and distribution of agricultural products.
In 2010, 11.3 per cent of Australian agricultural land had some level of foreign ownership. This amounted to 45 million hectares out of a total 398 million. And it is particularly telling that foreigners owned just 5.9 per cent of available agricultural land in 1984.
It is also concerning that 9.1 per cent of water entitlements have some level of foreign ownership.
But the devil is in the detail.
And the detail is what is patently missing from much of the national debate. I spoke to Jock Laurie, the President of the National Farmers Federation (NFF) and gained an interesting perspective on the complexity of this issue.
Clearly organisations like the NFF see continuing foreign investment in Australian agriculture as critical to the health of the sector. However, without a clear understanding of just how far and specifically where foreign ownership lies, the end result is that constructing policy in Australia’s best interest is particularly difficult.
Which is why, the NFF has been lobbying for a foreign investment register for some time.
“Of course, it is essential that we keep in mind that foreign investment has traditionally been very positive for Australian agriculture. It is very important that we do not deter foreign investment, but as we have been saying for months, we do want to see greater transparency around investment to ensure that the motivations behind this investment are clear.”
The establishment of a register was announced in October 2012 and submissions to a newly formed working group closed last month.
Despite the current lack of specific data, enough information is available to indicate that foreign ownership of agribusiness is clearly clustered around a number of strategic areas. The extent of which is partially masked by nationally aggregated figures.
A bit of digging raises some eye watering statistics. For instance the Northern Territory has 20 businesses, wholly or partly under foreign ownership, that between them account for 23.8 per cent of all agricultural land.
And in Western Australia the story is becoming increasingly similar, as it was reported late last year when the Shanghai Zhongfu Group, a Chinese state backed company, was granted the sole right to develop the Ord River Stage 2 development.
Yet the real story is about how the output of agricultural production is funnelled through processing pathways that are dominated by foreign owned firms.
Half of the 23 licensed wheat exporters operating in 2011 were foreign owned. Just three foreign companies, Fonterra, Lion and Parmalat, process half of Australia’s milk. While Finasucre of Belgium, Sucrogen of Malaysia and Chinese state owned COFO Corporation account for almost 60 per cent of raw sugar production.
And even our much lauded Aussie beef has not escaped this trend. It is estimated that around 40 per cent of Australia’s red meat production is processed by foreign owned firms. And it is no secret that Brazilian owned JBS Australia is the largest single meat processing company.
According to the Foreign Investment Review Board (FIRB, proposed investment in agriculture, forestry and fishing sector increased in value from $1.4 billion in 2010-11 to $3.6 billion in 2011-12.
However FIRB approval for foreign agricultural investment only applies to activities where the total assets of a business exceed $248 million ($1,078 million for US investors). Available data suggests that a large number of smaller investments are flying under the government and public’s radar.
While all foreign government investors must notify the FIRB, this data does not need to be disclosed to the public.
To complicate matters further we have also seen the concept of sovereign food security creep into the public’s perception. Basically sovereign food security is where foreign state controlled or state funded entities buy up prime agricultural land and agricultural operations in the territory of other countries.
This is done in order to secure the long term supply of food and other agricultural materials. China in particular has been active in this sphere. This is particularly the case since 2010, when it overtook the US as the world’s largest importer of food.
And China has shown a clear and continuing interest in Australian agricultural investments.
For instance in September of 2012, the AFR reported that China Investment Corp, China’s giant sovereign wealth fund was investigating the purchase of more than $200 million worth of Tasmanian dairy production.
Yet China is not alone in having an active interest in Australian agriculture. An example of another state based actor is the Qatari government owned investment company, Hassad Australia. Hassad is reportedly purchasing large tracts of South Australian agricultural land and has already spent $500 million buying 40 farms covering 250,000 hectares of land in Western Australia and the eastern states.
And the biggest game changer behind sovereign agricultural investment is that these investments are not necessarily driven by traditional investment imperatives. The threat being, that via aggressive vertical integration, key agricultural capabilities can be purchased at prices that push commercial entities out of contention.
Which could mean that locals are increasingly cut out of direct employment and other related commercial opportunities. And in a time where food becomes an increasingly strategic item, some or much of a local government’s flexibility to respond to challenges may be restricted.
Be it commercial investors or sovereign wealth funds, you don’t have to own the farm to control agriculture in Australia, although it certainly helps.
And at the end of the day, the very serious question of what lies in the national interest has to be raised.
