Agri firms urged to grow some Asian roots

Australian companies should con­sider investing in the growing Asian food market — not just ­export to it.

Patrick Vizzone, ANZ’s head of food, beverage and agribusiness international. Picture: Patrick Leung.

Australian companies should con­sider investing in the growing Asian food market — not just ­export to it, says ANZ’s newly ­appointed head of international agribusiness based in Hong Kong, Patrick Vizzone.

While Australia has become a major exporter of food to Asia, Mr Vizzone argues that Australian companies should consider buying into Asian food business as there are better profits to be made.

“Australian companies have been very comfortable exporting food and agricultural products to Asia,” he said in an interview with The Australian. “But the level of investment has not really followed suit.

“It has been outweighed many times by Asian companies making investments in Australia. Australian companies should look to invest overseas because the closer you get to the consumer, the better the margins are.”

Mr Vizzone said Asian investors in agribusiness were looking to “shore up their supply chain” by buying into the food industry in Australia.

He said the demand in Asia for the high-quality food Australia produced would continue to rise, given the growing Asian middle class.

“The trends are very clear,” he said. “Asian demand will continue to increase, aspirational consumption will continue to ­increase, and therein lies the ­opportunity for Australia.

“When you look at the ­incremental global food demand over the next generation, it is overwhelmingly going to come from Asia, and China is going to be the bulk of it.

“In many respects we are only just scratching the surface in terms of demand uplift. There is still a very long way to go. There is a clear play for greater exports into Asia.”

But Mr Vizzone said Australian companies should look at ­investments in the food supply chain in Asia, where there were higher margins to be made than from exports.

“I would challenge the industry to see how it can get a larger slice of the downstream pie. How can we take a larger slice of the margins that are being made offshore? It is not easy, but it is something that Australia needs to focus on.”

Mr Vizzone said Australian agricultural exports to China had expanded from a base of wheat and wool products into beef and other products.

He said there was significant potential for the export of more fresh food into Asia, such as fruit and vegetables to China.

He said this has been helped by moves by China to open markets for fruit and vegetables, ­including the China-Australia Free Trade Agreement.

“The fruit and vegetable industry probably represents one of our best future opportunities for agribusiness exports into China. We have seen an enormous growth in fruit exports into China. China grows and consumes half the world’s production of veg­e­tables and 21 per cent of the world’s fruit.

“Fruit is a far more aspirational category when it comes to consumption.”

Mr Vizzone said the different seasons meant that Australian fruit could be exported to China at times when it might be less available there.

He also said it had been shown that the Chinese preferred the taste of Australian fruit despite the availability of cheaper produce from other countries.

“Chinese and other Asian consumers prefer the taste attributes of Australian fruit,” he said.

Mr Vizzone knows the fresh produce business very well.

He grew up following his Italian father around the fruit and vegetable stalls at Paddy’s Market in Sydney’s inner west.

It was his father’s decision to try farming in China that took him to Asia.

“We had a business in Australia exporting vegetables to Asia in the 1990s,” he said.

“This was a time when there were only two Australian airlines flying into Asia and it was difficult to get cargo space. My father had the idea to take the business he was doing in Australia and move it to China.

“So we found ourselves in China opening a farm in Jinshan, near Shanghai, where we started growing vegetables.”

The business went well, selling vegetables in China and exporting to Hong Kong, Japan and Singapore.

“We started exporting broccoli to Japan in a big way,” he said.

Their success soon saw Chinese farmers enter the vegetable export market, but their produce was not of the same quality and gave the Chinese product a poor reputation, which hit the Vizzones’ business, prompting him to consider getting out of farming.

“It became very challenging,” he said. “I decided the business was not for me.

“I have always had a passion for food and I have always had a passion for agribusiness. I thought my skills were better served working in another ­capacity, which is when I went into agribanking.”

Mr Vizzone is now on the board of China Agri-Industries, the listed subsidiary of China’s largest food and agribusiness, the COFCO Group, and has been chairman of the international ­advisory board of the Produce Marketing Association.

He is also on the advisory board of the San Francisco-based venture capital business, AgFunder, which invests in agrifood tech companies.

He is now closely watching the impact of last weekend’s truce in the trade war between US President Donald Trump and China’s Xi Jinping.

Under the deal announced last weekend, China has agreed to step up its imports of agricultural products from the US.

Mr Vizzone said Australia did not produce much of the two main agricultural products that the US exported to China: pork and soybeans.

He said Mr Trump’s trade war with China had had unintended consequences for US farmers, whose exports of soybeans to China were hit by higher tariffs ­imposed in retaliation for higher US tariffs on Chinese imports.

He said the imposition of tariffs by China on US agricultural imports had had a pronounced ­effect on the soybean-growing ­regions of the US, which had seen exports to China plummet.

“Soybeans are especially ­important as they historically represent two-thirds of all US agrifood exports to China,” he said.

“It’s evident that many US farmers have been hurting,” Mr Vizzone said, particularly after the US Department of Agriculture said it would not extend a $US12 billion ($17bn) aid package into next year.

This could change if China drops its tariffs on US soybean ­imports and steps up its pur­chases of agricultural products from the US.

But so far no details of the agreement have been released.

Regardless of any new trade deal between China and the US, Mr Vizzone said the demand in China for Australian food products would remain strong.

“There is a continued growth in food demand in China, with a significant amount of that being satisfied by imports. Australia’s clean and green image, counter-seasonal supply and geographic proximity are all points of competitive advantage.”