By James Wellstead
Foreign ownership of agricultural land has
become a subject of national debate in Australia as the country’s soft
commodities sector attempts to meet world markets’ growing demand for food
production.
The dialogue began in earnest following are port that
Australia and China planned to release a joint study supporting Chinese
development of farming land in Australia’s sprawling northern region.
The same resource boom that has taken hold of
Australia’s coal and iron ore industries is also
responsible for boosting investment in its agricultural sector, and
international companies have made some big moves into Australia’s agricultural
land and food supply chains.
Foreign investment made significant press
when the Qatari government bought large agriculture properties to ensure food
security for the small, oil-rich Arab nation. The issue continues to be a
tense point for some Australians as the prospect of helping feed its biggest
trading partner, China, is creating concern over national food security.
False advertising
Despite fears of a massive onslaught of
foreign investment, the story is more nuanced.
A recent survey by the Australian Bureau of
Statistics shows that foreign ownership has increased from 5.9 percent in 1984
to 6.0 percent in 2010. Federal Agriculture Minister Joe
Ludwig holds that the overemphasis on foreign takeovers is misplaced,
noting “the levels of foreign investment in the agricultural sector have
remained relatively stable for the last 30 years.”
Critics disagree with those figures. Liberal
senator Bill Heffernan said that the surveys are based on a flawed
data set that includes any business with a registration number associated with
agriculture.
According to a federal survey conducted in
January, foreign firms account for about half of Australia’s wheat, dairy,
sugar, and red meat sectors, but ownership of land itself is about 11 percent.
In fact, it appears foreign ownership is
mixed across the country. In the southwestern provinces of New South Wales,
Victoria, and Tasmania, offshore ownership was less than five percent. However,
foreign investment in the Northern Territory has jumped from 8 to 23
percent in the past 20 years.
Investment needed
Despite political sensitivities over land
ownership, there is clear interest in bringing investment into Australia’s
agriculture sector.
”Demand [from Chinese investors] is huge and
it’s across the board,” rural property specialist Chris Meares
was reported as saying in the Sydney Morning Herald.
”At my second meeting, one bloke was talking
about fruit and veg; in the next meeting it was aquaculture. There’s an
emphasis on food as against fibre and grain.”
Meares also mentioned that Chinese investors
want to learn from Australian farm technology, commenting, “[t]hey don’t want
to take over the supply chain but they want to buy in, on the basis that they
can add value from the demand side.”
Tom McKeon, the Australian boss of the Qatari
government’s Hassad Food, said the real investment action is off-farm in
rural supply chains, where overseas ownership is now prominent in the grain
handling, sugar milling, commodity marketing, and crop protection sectors.
“Australia is actually at an increasing
competitive disadvantage,” McKeon said. The country is still in recovery
from 10-plus years of drought and is facing an aging workforce, a slump in
productivity improvement spending, and falling investment in agricultural
education, research, and development.
While disagreeing on the nationality
issue, Australian Agriculture Company CEO David Farley agrees in
principle that Australia’s agricultural sector is ripe for investment and
restructuring.
“I do think it’s something we should explore”
Farley told The Australian. “You’ve got a whole host of components that could
be broken down and turned into annuity assets.”
Providing a vehicle
Last week the Australian Securities Exchange
launched ten new exchange-traded commodities by ETF
Securities to help investors, foreigners, and nationals alike play into
Australian markets.
The ETF vehicles will allow investors to buy
diversified exposure to agriculture and grains while offering more focusing
vehicles for corn, wheat, and others. Australia’s current AU$5
billion ETF industry is still modest in size compared to Canada’s $50 billion
ETF market, a relatively comparably-sized economy.
Nigel Phelan, head of sales for ETF
Securities, maintains that “[w]hat is taking place in global markets is unique,
particularly in Europe, but the fundamentals do not lie. There is a very, very
strong case for these products going forward as part of a long-term investment
strategy regardless of what the markets are doing.”
Provided that the investment dollars are
there, Australia may be the next market to reflect those growing food
fundamentals.
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