FOREIGN investments represent 13.8% of Australia’s farmland and in 2019-2020, the Foreign Investment Review Board (FIRB) approved 174 applications in the agriculture, forestry and fisheries sectors, according to the annual report. 2019-2020 of the FIRB.
These requests totaled $ 8.3 billion in capital investment.
These figures indicate that although the number of approvals has decreased each year since 2016-2017 (223 approvals), the proposed investment has increased each year ($ 7 billion in 2016-2017), except in 2018-2019.
Compared to other industries, agriculture, forestry and fishing had the lowest proposed level of investment, with the service sector ($ 73.6 billion), commercial real estate (38.8 billion billion), manufacturing, electricity and gas ($ 33 billion), finance and insurance ($ 13.6b), and mining exploration and development ($ 11.2 billion).
The main source countries of value investment in agriculture, forestry and fisheries by value were Canada ($ 2.55 billion) and Singapore ($ 1.37 billion), the United States ($ 716 billion) dollars) and the Netherlands ($ 496 million).
Based on the latest figures from the Australian Taxation Office, foreign investment has grown slowly, rising 1.7% in the 12 months to June 30, 2020.
Since June 30, 2016, foreign investment in Australian farmland has increased by 1.6 pc.
Coorow farmer and Catalina Farms managing director Rod Birch said foreign capital plays an important role in all Australian capital markets, including agriculture.
“My point of view is that agriculture is just another asset class that will be looked at and analyzed as a valid investment opportunity for the deployment of foreign capital,” Mr. Birch said.
“I do not see this as a threat in any way; on the contrary, investing foreign capital in Australian agriculture is a recognition that our industry demonstrates a positive climate for returns and confidence in our economic and politically stable environment.
“This therefore strengthens our industry capital base, increasing the number of participants and ensuring the achievement of stronger and more realistic values.”
Just as foreign investment has played a key role in the mining and resource sector, Mr Birch said agriculture should be given the same opportunity.
“Any industry achieves a higher ‘health point’ when it is not starved or limited by capital resources, so I think it is essential to have an investment market open to foreign capital resources. “, did he declare.
Federal Liberal Party member for O’Connor, Rick Wilson, said much of Australian agriculture has been built on the backs of foreign capital for decades.
“I am a strong supporter of foreign investment in agriculture,” Wilson said.
“Australian agriculture was built on foreign investment, as regions like Esperance would probably not have been developed as much as they are today without the investment of the United States in the 1960s. .
“Now, more recently, we are seeing increased interest in Australian agriculture from some foreign sovereign wealth funds as well as pension funds.
“Agriculture has been a great investment and some of the smartest investment funds have made significant investments in Australian agriculture and that’s a good thing.
“We have the potential to produce much more intensively if we have the capital investments in industry to increase our production intensity.”
Mr Wilson said one of the more recent foreign investments in agriculture that caught his attention was the purchase by the Saudi Agricultural and Livestock Investment Co (SALIC Australia) of several mixed farming properties in the wheat belt. Oriental by John Nicoletti in 2019.
With Saudi Arabia now the world’s largest feed barley market after dramatically increasing imports last year when China imposed an 80% tariff on Australian barley, Wilson said “foreign investments in agricultural land and trade go hand in hand”.
“If a country has an understanding and an interest in Australian agriculture, then I think our opportunities to do business with them are greatly improved, so I think it’s a really positive relationship where countries that have large investments Agriculture in Australia are also strong Australian trading partners, ”he said.
Wilson has said through the Australian Live Exporters Council that he will meet with the Saudi Arabian ambassador during the next parliamentary sitting week to discuss agricultural trade.
“This meeting will discuss reopening the live animal export trade to Saudi Arabia, which is the largest market (in the Middle East and North Africa) for live sheep of around eight million. head per year, whereas our largest market today is Kuwait which is about 1 m head.
“So I look forward to having productive discussions on opening and expanding these particular business opportunities through the significant investment the Saudis have made in our agricultural sector.”
Rural Bank WA – South Regional Manager John Reilly said foreign investment could be one of the reasons for the rise in Australian farmland prices.
“For the record, I think foreign investment has contributed to the rise in land prices,” Mr. Reilly said.
“There was price pressure because foreign investors came in with a lot of money to buy a good property and were willing to pay for it.
“They have always demanded a reasonable 4-5% return on capital.”
Australian agriculture attracts foreign investors because of Australia’s “stable political environment and green image”, according to Reilly.
“Global demand for Australian products is strong, which underlies an intrinsic value of the earth’s capital,” he said.
“Australian interest rates are probably not a big factor, as our rates have consistently held just above the rest of the western world.
“People are comfortable investing here because the capital risk is relatively low and they know they can withdraw their money whenever they want.”
Foreign purchases require FIRB approval before acquiring farmland and business assets when the cumulative value of their farmland exceeds (or would exceed with the proposed investment) $ 15 million.
Foreign government investors must obtain approval for all agricultural land acquisitions, regardless of their cumulative holdings or consideration of the proposed investment.
Mr. Birch believed that the regulations in place through the FIRB provided adequate control over foreign purchases.
“An important function for our agricultural industry is knowing that there is an accurate record of foreign land ownership and what title it is operated on – if we can measure it, we can manage it,” he said.
Along with the increase in foreign investment, the number of Australian farm businesses has declined, as the Australian Bureau of Agricultural and Resource Economics (ABARES) reported in its Industry Snapshot 2021 that the number of farm businesses has increased. from about 120,000 in 1978-79 to less than 60,000 in 2018-19.
Mr Reilly felt that the two changes were probably unrelated and that the consolidation of the industry was due to the fact that farm businesses had to realize economies of scale.
“It mostly comes down to farmers who are trying to achieve economies of scale,” he said.
“Base costs continue to rise – there are many items of expense that go into overhead that farmers have limited ability to control.
“The search for efficiency is probably what created the fewest farming businesses.
Mr. Birch said foreign capital was a “healthy competitor” in the industry.
“The foreign capital element, I think, adds a healthy competitor to the financial market and as such rivals traditional sources of finance, keeping rates tighter while boosting the value of rural land,” he said. declared.
“Any strong market has a better basis for discovering growth and opportunities, so my belief is that foreign agricultural investment has an important role to play.
“Their participation is a vote of confidence and therefore recognition of the future of our agricultural industry. “
The presence of foreign investment in the industry is a topic which, according to Mr. Birch, is regularly discussed within his own group of companies, a larger agricultural network and also an urban network.
“I share their concern that Australian farmland is falling into the hands of foreign investors,” he said.
“Australia’s sourcing and sustainability to provide fresh food for its own people is a sensitive and emotional topic and as such is subject to further scrutiny by any idea of ownership challenge. of foreign agricultural land.
“This is unlike any idea of foreign investment in the mining industry, where notions of food safety and security are far removed from most day-to-day lives – however, agricultural products have come under people’s noses on a daily basis at the table. to eat.
“Of course, this sets the scene for the ‘family farm’ in direct competition with agribusiness.
In the shootout however, the agro-industrial principles of return on investment, economies of scale, adoption and use of technology, etc., must all fulfill the objectives of any business plan and philosophy for any entity.
“The contribution of large-scale entities to the fabric of local community participation is often a topic of discussion and it would appear that the results are extremely variable; some for the better, others for the worse,” Mr. Birch said.