Foreign farm invasion may be an exaggeration

IN recent weeks, politicians and the media have raised the alarm on foreign investment in Australian agriculture.
Senator Nick Xenophon told Today Tonight we should “sell the milk, not sell the cow” and is introducing a private members’ bill calling for a tighter register of foreign investment in agriculture.
The Greens made similar calls during the election campaign and the Government announced last week it would commission studies to discover the true extent of foreign investment. The Coalition is also pushing for these studies.
QFF supports some regulation on foreign investment – especially regarding overseas government investment, and particularly when whole supply chains are being monopolised – but we are cautious of populism and unsubstantiated fear entering this debate.
The hype surrounding a ‘foreign invasion’ was based on overseas investment of $2.8 billion into Australian agriculture in 2008-2009.
While this number sounds daunting, it constitutes only two percent of all foreign investment that year and it also occurred at a unique time.
Investors were spooked after the global financial crisis, and since then discussions about global food security and financial uncertainties have made tangible assets like agriculture become more attractive investments than others, such as US treasury bonds.
The height of the drought in 2007 undoubtedly created investment opportunities at discount prices, and foreign powerhouse companies capitalised accordingly.
The result was significant foreign stakes in major companies such as ABB, Dairy Farmers, Queensland Cotton, and AA Co.
Of these, only AA Co is a major landowner and farmer in its own right, and exports were an important part of its production before the ownership changes, just as the domestic market is still an important part of its business today.
None of these takeovers necessarily represents a ‘foreign invasion’ as the headlines suggested, just as a possible sale of AWB will not have an impact on the price of bread in Australia.
The fear of Australia suddenly short of food gained widespread attention, perhaps worsened by the politicians and the media neglecting to note the important difference between agribusiness and agriculture.
The reality is that whether it is the sale of National Foods and Queensland Cotton in 2007, or CSR in 2010, we are talking about publicly listed companies.
The days of regulated markets and grower-owned processing companies are gone.
Today, the boards of agribusiness companies are obliged to act in the interests of their shareholders, and therefore recommend a takeover offer if it constitutes good value, regardless of where the offer came from.
It is then up to the Foreign Investment Review Board (FIRB) to determine whether overseas investments are acceptable, once its powers kick-in and the business is valued at above $231 million.
Farms and agribusinesses under this amount do not undergo scrutiny by the FIRB, which is an area of international investment policy in need of review in our opinion.
Almost all farms are valued under this amount, so at the very least we need some way of measuring and tracking the investments in agricultural land.
I don’t believe there is a foreign invasion occurring quietly in Queensland on farms valued under $231M – but if the issue does arise more broadly in the future then we need to know about it.
At the same time, foreign investment has an important role to play supporting real estate values, which have become as much a part of the farm business model as actual commodity production.
Some would also say that foreign investment is a show of faith in the business model and sustainability of agriculture in Australia.
One could ask if foreign investors find the sector so attractive, is it not a shame we cannot convince more local investors to do the same.
When it comes to overseas agribusiness investment, the real issue is how these companies treat their farmers.
In the dairy industry, for example, farmers’ woes around milk prices stem just as much from Woolworths and Wesfarmers (Australian owned) as they might from the processors Parmalat and National Foods (foreign owned).
It is important that politicians and the media recognise these nuances.
At the same time, the public is justified in having some concerns about our dwindling farming capacity.
However, their real concern should focus on the lack of government policy support for the agricultural sector, as it is these issues that are having a greater crippling affect than foreign investment.