Selling off the farm?

There is nothing new about foreign investment in Australian agribusiness. It's been going on for over 200 years. Many investors create something new, something not tried before. It may be a different approach to management, the use of new technology or crop varieties, better handling of produce, consolidation of smaller properties and larger scale operations or new markets and new competition.

These are the ingredients which improve agribusinesses. Australians are quick to learn and apply new ideas and new ways. Those that don't either get out or are pushed out of business because they find it less profitable or impossible to compete with successful innovations. Other are only too happy to sell their land, especially at above market price.

Some farmers can become set in their ways and unwilling to change. Others may resent and resist foreign investment, declaring that we are selling off the farm. They call on government to protect the national interest by limiting and imposing greater control on foreigners buying up agricultural and pastoral land. Warding off competition some may say, but when their calls are echoed by farmers who have no intention of leaving the land, we should at least have a look at what is going on.

What we find is that a number of things are happening which have not occurred before. Land and established agribusinesses are now being purchased to:

• Strengthen food supply, particularly for China.

• Consolidate agricultural land holdings for mining.

• Control processing of farm produce by purchasing infrastructure.

These are acceptable practices because they are either condoned or approved by government. Whether they meet with public approval is quite another matter.

Food Supply

China is actively purchasing agricultural land in a number of countries, including Australia, seemingly to ensure a food supply for its large (1.2bn) and growing population. It is said this measure is made necessary because of expected effects of climate change on its own agriculture.

Those effects are predicted to include reduced water flows for agriculture due to melting of glaciers which feed its major rivers. They also include reduced rainfall over significant parts of China where crops are grown for domestic consumption and loss of agricultural land due to inundation from rising sea levels later this century. Combined, these are expected to significantly reduce China's capacity to produce food or feed its population by 2100.

China is unique among foreign investors in Australian agriculture in that land purchases are being made by Chinese government controlled organizations, not by the private sector. This means that the Chinese government is able to (and will) determine how the land is to be managed, the crops which are to be produced, to whom they are to be sold and, if to China, at what price.

The government of China will no doubt have been advised that it is not buying any kind of sovereign right over its land acquisitions. They remain an integral part of the State in which they are located and use of the land is subject to compliance with State and Federal laws. Any dispute in these matters would of course be settled in our courts. There is no indication that China does not recognize this or that it would seek by other means to enforce any ideas of sovereignty over its land acquisitions.

China may feel that the use of its land is first and foremost to supply its home market with food, rather than meet any food shortages in Australia. China may also feel that it has the right to export food grown on its land at a price determined by it. This would enable their farms to set export prices at cost of production while charging market prices in China – in other words price transfer enabling their Australian farms to operate without paying tax in Australia.