Land rush

THIS country was built on foreign investment, but should Australia be selling off any more of the farm?

Michael Clift

TO the locals, it is has been a land lottery. The world's biggest coal miner, Chinese government-controlled Shenhua Watermark Coal, has been paying a reputed 10 times the going rate for farms near the NSW township of Gunnedah. It plans to mine for coal on them.

The cashed-up foreign miner has splurged $213 million buying 43 farms on the Liverpool Plains wheatbelt in the past two years. For the owners, the offers have been too good to refuse: a 206ha farm at Curlewis that changed hands for $275,000 in 2005 was sold to Shenhua last year for a $3.5m jackpot, a 12-fold profit in just five years.

"For the owners who have sold out to Shenhua, they've won Lotto," Gunnedah land agent George Avard tells Inquirer. "Some of those people were on unviable farms, what we call starvation blocks. So for Shenhua to come in and offer them $4m or $5m, you can't blame them for selling out."

Sixth-generation farmer Michael Clift, a holdout whose neighbours on both sides have sold to the Chinese miner, believes land should be leased to foreigners, not sold. "We are losing some of Australia's best farming country to overseas interests," he says. "When freehold land is sold, you can't get it back."

Shenhua's perfectly legal land grab for mining exploration, revealed by The Australian this week, has lit the fuse on the political dynamite of foreign investment in Australia.

It raises questions about Australia's sovereignty and its food security in a more populous world, and its control over the agricultural supply chain. Should Australia be - quite literally - selling the farm?

Offshore companies now dominate Australia's meat industry and its wheat, dairy and sugar processing sectors. Foreign investment in Australian agriculture has exploded since the global financial crisis. Overseas buyers have sought approval from the federal government's Foreign Investment Review Board to buy agriculture, forestry and fishing assets worth an average of $2.5 billion in the past three years. This figure is 250 times higher than the value of applications in 2005-06, when applications totalled just $10m.

"We should be selling the food, not the farm," argues independent senator Nick Xenophon of South Australia, who is co-sponsoring a private member's bill with the Greens to lower the trigger threshold for FIRB's oversight of agricultural land sales from the usual $231m to just $5m. The legislation was inspired by New Zealand, which vets all foreign land acquisitions of more than 5ha.

"We need to ensure the long-term food security of Australia isn't compromised," Xenophon says. "If the long-term aim [of foreign investors] is to ensure a steady supply back to the country of ownership, we need to know about that."

Even Assistant Treasurer Bill Shorten says he is concerned about the "information vacuum". The Labor government has little idea about who owns what, because neither the FIRB nor the Australian Bureau of Statistics collects information about the nationality of land buyers.

Julia Gillard has ordered a stocktake of foreign ownership, with results due back in October.

"I was surprised that you can't just press a button to find out who owns what in Australia," says Shorten, who has briefed the chief statistician on what is needed. "Hopefully we will get a more timely snapshot of what's happening. Then we will know, are we jumping at shadows? Or do these things challenge our national interest? Do we control our food?

"There are concerns about food security," Shorten says.

"Because of high commodity prices there's now competition between farming and mining and that's happening regardless of foreign investment."

Xenophon says Australia is "a mug" because nations such as China do not offer reciprocity. "If you want to try to buy prime agricultural land in China, good luck to you. In China the threshold [for foreign investment review] is $1," he says.

The argument holds no truck with Shorten: "If we demand every nation be identical to Australia in governance, does that mean we just talk to New Zealand?" he retorts. "Where do we draw the line on that?"

Shorten also questions whether British or American companies buying Australian farms would attract the same "hysteria" as the Chinese government's Shenhua acquisitions.

"Somehow the ethnic identity of a foreign investor causes some angst in the minds of some, not the federal government," he says.

"Some countries have sovereign wealth funds, so it will be inevitable they go hunting for bargains," he adds. "The best thing we can do is identify what is actually happening."

So who owns Australia? This much we know. Of the $139bn in foreign investment approved in 2009-10, about 58 per cent poured into the resources sector, 14 per cent into real estate and 12 per cent into manufacturing. Agriculture made up merely about 2 per cent of the total. The biggest investors were the British and Americans, each investing about $29bn, followed by China's $16.3bn and $6bn each from Japan and Switzerland.

With no national register of land ownership, the only data available comes from Queensland, the only state or territory to record the nationality of land buyers. There, the area of land owned by foreigners has almost trebled in the past seven years to 4.44 million ha, 2.56 per cent of the state's land area.

British and American investors own half the land, with German, Dutch, Swiss and Hong Kong buyers sharing most of the rest.

But Asian purchasers overtook the Europeans and Americans as the biggest buyers during 2009-10, when they splurged $581m on real estate and rural land. The biggest spenders among them were South Korea, with $217m, Singapore with $213m and China with $150m, dwarfing Britain's $112m.

The foreign buyers included Hong Kong-linked Eastern Australia Agriculture, which has snapped up a string of properties in the cotton-growing district of St George, on the Queensland-NSW border.

It spent $7m last year for a 30,700ha sheep station, after paying $61m for the Kia Ora sheep station in 2008 and converting it to wheat growing, and $27m for a cotton and cattle station in 2007.

The Cayman Islands-based company is also bidding to buy Australia's biggest irrigator, the sprawling Cubbie Station, which fell into receivership during the drought.

The company is backed by Hong Kong-based Pacific Alliance Group, as well as British investors. Its director, Angus Taylor, says none of the sales so far have been submitted to the FIRB because its approval has not been required.

Foreign purchases of less than $231m fly under the FIRB radar unless they are in sensitive areas such as media, communications or residential property.

But agriculture is not regarded as a sensitive sector and, as Nationals federal leader Warren Truss points out, it is easier for a foreigner to buy a huge cattle station or a large agribusiness than to buy a suburban home.

"Decisions about what crops will be grown in Australia, what prices will be paid to Australian farmers and what factories will remain open in Australia are now overwhelmingly being taken in boardrooms in other parts of the world," Truss told the Senate in May. His speech cemented an unconventional political alliance of the conservative Nationals and the left-wing Greens, who are leading the charge against mining profits heading offshore.

But Taylor argues Australian agriculture needs a shot of foreign capital if it is to cash in on the opportunities of Asia's growing hunger for Australian food and agricultural resources.

"The flipside of foreign investment is if it is from the wrong source, and for the wrong objective," he says.

"For me, the wrong objective is when they try to consolidate the supply chain in a way they can monopolise it. I think that's a big deal for farmers.

"The right motive is to help the productivity and growth of the agricultural sector. You have to try to make money by growing the sector, rather than monopolising it."

Liberal senator Bill Heffernan of NSW, himself a farmer, is concerned about the long-term strategies of government-controlled companies and sovereign wealth funds looking to secure a permanent stake in Australian agriculture to feed their own populations.

"This is all about sovereignty," he says. "Who owns you? If you allow other foreign powers to buy your assets and, in some cases, exclude you from using the product, you'll lose control of your own destiny. They don't need any army or a navy or an air force any more."

Heffernan points to China's "go global" policy, which has sent the world's second economic superpower on a shopping spree for farmland in Africa, Asia and Australia. "They are buying some of the prime agricultural land in poorer countries, not to feed the poor in those countries but to feed their population at home," Heffernan says. "You have to look at where we will be in 50 or 80 years. You can't blame the farmer for wanting to get the maximum price for his farm [but] there has got to be no-go zones."

Qatar has a similar strategy to China's and now owns more Australian land than the entire 11,000sqkm area of the Gulf state. Its government-backed Hassad Food spent $39m in a swoop on seven farms in Victoria's prime central-west grazing land last year, including the prized Kaladbro Estate close to Portland, an ideal base from which to ship livestock to the Middle East. Hassad is backed by the Qatar government's investment authority.

A Canadian company, Viterra, owns the nation's biggest agribusiness, ABB Grain, which it bought for $1.6 billion in 2009. A rival Canadian agribusiness, Agrium, owned the Australian Wheat Board until it received FIRB clearance in May to on-sell the grains distribution business to American food giant Cargill.

Japanese brewer Kirin now owns National Foods, which controls milk processors Dairy Farmers and Pura, as well as the Berri and Coon brands. Its rival, Pauls, is owned by Italian dairy giant Parmalat. New Zealand dairy king Fonterra has taken control of Australia's Bonlac Foods.

Singapore-based Olam International now controls almost 45 per cent of Australia's almond plantations.

Another Singaporean agribusiness, Wilmar International, took over CSR Limited's sugar business, Sucrogen, last year for $1.75bn.

Japanese, Brazilian and American interests dominate Australia's beef sector. JBS Swift is owned by the world's biggest meat company, based in Brazil.

The company stood down 940 staff in the flood-ravaged Queensland city of Toowoomba this week, blaming its temporary closure on falling sales from Japan.

Foreign investors from various countries control the Australian Agricultural Company, the nation's biggest beef producer, which owns 1.1 per cent of the Australian continent.

AAco's chief executive David Farley worries about sovereign companies controlling the "gateways" for exports.

"The world is changing and a lot of our port facilities, silos, sugar mills and cotton gins are being sold to foreign companies," he says. "Our processing and gateway assets are being lost offshore and those companies ... have got the right to look after one country's food security, in preference to another."

Farley says Australia is highly attractive to countries such as China, with booming populations and limits to their own food production. "Globally, they don't make any more land," he says.

"We're a low-cost producer of high-quality clean food in Australia, and we produce it in a different seasonal zone. I don't think there should be restrictions, but we've got to make sure we know who is buying and why."

Economist John Larum has analysed China's investment strategy in Australia, the country that tops China's global shopping list. In a paper written for the Lowy Institute for International Policy, he notes our biggest trading partner feels discriminated against. "This is the next big issue for Australia and China to resolve," Larum tells Inquirer. "There has been a general feeling by Chinese investors that there's been some discrimination. Most investment in Australia from China is through state-owned enterprises, and the effect is a disproportionate impact upon Chinese investment in Australia."

Larum says China's interest in Australia took off during the GFC, when China's cashed-up foreign reserves coincided with Australia's need to sell assets.

"There is nothing sinister here," he says. "China will look to grow its offshore foreign direct investment and Australia is seen as a safe place to invest. It is an attractive place to acquire national resources.

"The Chinese will be looking to increase food security. Australia is an obvious target, and beneficiary, of that approach."

China's biggest agribusiness, the state-sponsored COFCO Corporation, is looking to buy agribusinesses in Australia and is leading the bid to take over the Tully Sugar Mill.

Last month it appointed an Australian to its board: former Queensland Labor treasurer Keith De Lacy, who is now the company's vice-chairman. De Lacy is also chairman of Australia's biggest cotton farm, Cubbie Station, which is likely to be sold to foreign interests this year.

He scoffs at any criticism of foreign investment, pointing to the public panic over Japan's foray into the tourist industry in the 1980s.

"We had Japanese investment in resorts and golf courses all throughout Queensland," he says. "Now, to a great degree, all the Japanese investors have gone but we still have all those great investments. They were never going to take their golf courses back to Japan."

De Lacy says foreign investment in agriculture is "all in Australia's favour".

"It is better to have investment than debt," he says. "[Foreign owners] have got to abide by Australian laws, employ Australian people, pay Australian taxes. What's the difference if the investor is Chinese or Australian?"

De Lacy argues that the Chinese government is a "good shareholder" on the grounds it is not out to make a quick buck. "They've got a long-term investment horizon and they're not looking for instant returns on shareholder price," he says. "Chinese companies recognise that the next big boom is going to be in soft agricultural commodities and they see Australia as a desirable area in which to invest. There's nothing sinister in that investment."

What De Lacy does support, though, is quarantining prime agricultural land from mining, a policy being adopted by the Queensland government in response to growing public anger over the miners' encroachment on to farmland and rural towns.

"I think that feeding a hungry world is going to be one of the great challenges of the future and we need to be careful we don't alienate agricultural land through mining," he says.

The conflict over miners' forays into the food bowl has created some unexpected political bedfellows: the Greens, the Nationals and federal independents Xenophon and Tony Windsor are all singing from the same songsheet.

Windsor wants to introduce a private member's bill to shield sensitive farmland from coal seam mining projects, even though he has sold his own farm to a coal miner.

And the NSW government is now demanding that the federal government review the sale of agricultural land to foreigners, even though it took $300m from Shenhua for an exploration licence over the very farmland it has been buying.

Gunnedah farmer Tim Duddy argues that a foreign miner that will suck profits out of Australia should not be allowed to displace "175 years of investment in agriculture". "They think that waving a chequebook just fixes everything," he says. "But to allow a mining company to come into agriculture, be it foreign or not, and destroy that investment is not acceptable."