Farmers fear Indonesian takeover of giant fertiliser supplier

There is increasing alarm that Incitec Pivot, Australia’s largest fertiliser supplier, will fall into foreign hands, potentially threatening national food security.

Farmers are increasingly alarmed Australia’s largest fertiliser supplier will fall into foreign hands, potentially threatening national food security.

Incitec Pivot, which operates the huge Phosphate Hill project in North Queensland, says it has been approached by several suitors interested in buying its fertiliser business.

Among the interested parties is reportedly Indonesian state-owned company Pupuk Kaltim, one of the biggest fertiliser producers in the Asia Pacific, which is believed to be prepared to pay up to $1.5bn for the asset. The deal is shaping up to be a major political test for the Albanese government, which has been attempting to improve ties with Jakarta. Treasurer Jim Chalmers has been asked to comment.

GrainGrowers chair Rhys Turton said there was genuine concern fertiliser needed for Australian farms could be moved offshore, affecting longer-term food security, reducing supply and adding to costs for farmers.

“Access to Australian assets and resources must not be allowed to come at the expense of Australian producers,” Mr Turton said.

Given the size of the deal, it likely will be subject to scrutiny by the Foreign Investment Review Board (FIRB).

“Ultimately, however it will be up to the government to ensure that any sale is in the national interest and to include growers and industry in those discussions,” Mr Turton said. “The guarantees that we need to see in place cover the ongoing and uninterrupted supply of fertiliser products, no long-term impact on Australian food security and the future development of fertiliser assets such as Phosphate Hill.

“Growers are concerned and need answers about a sale that can potentially seriously impact on their business operations.”

In 2013, the Abbott government rejected the $2.8bn takeover of GrainCorp by US agribusiness giant Archer Daniels Midland on national security grounds.

Nationals leader David Littleproud has already foreshadowed a Senate inquiry to investigate any foreign bid for the fertiliser business

Incitec Pivot's ammonium phosphate plant at Phosphate Hill, south of Mount Isa.

Mr Littleproud said the concern was the concentration of supply in one company and the risk to national food supply.

“We are holding a watching brief,” said Mr Littleproud, adding the previous Coalition government had lowered the FIRB review threshold for takeovers of agricultural assets given their importance to the nation. He said following Covid-19, farmers were facing higher costs for energy and fertiliser.

The argument being made by opponents of any deal is that given its critical importance to the food chain, Australia can’t let major fertiliser assets be owned by another country, which would divert production away from Australian farmers and food providers.

Pupuk Kaltim is on an expansion trail with the Kalimantan-based firm announcing in March that it was planning to invest at least US$1bn to increase capacity and set up a soda ash plant. It is also planning a domestic initial public offering which could raise about $500m, sources told Reuters in January.

Pivot Limited and Incitec Fertilisers merged in 2003 to create IPL, later more than doubling its fertiliser capacity with the purchase of Southern Cross Fertilisers, operator of Australia’s largest ammonium phosphate fertiliser operation at Phosphate Hill. Incitec’s Asia Pacific fertiliser business generated earnings of $614m last year.

Incitec Pivot said its board is assessing the “potential sale” and will “continually assess all options to ensure shareholder value is maximised”.

“Discussions are incomplete and there is no certainty that any agreement will be reached or that any sale will occur,” an ASX statement from Incitec said last month.

Originally published as Farmers fear Indonesian takeover of giant fertiliser supplier