Australia agriculture seen luring foreign buyers on demand
2014-09-10 11:28:19
Overseas investment in agricultural assets in Australia, the world’s third-biggest beef and sugar exporter, is set to expand as countries outside of China step up their push to secure access to farms and food supplies.
There’s no shortage of money interested in investing in Australian agriculture and food, said David Williams, managing director of corporate adviser Kidder Williams Ltd. Investment in the grain industry will continue until there aren’t any assets left to buy, according to John Murray, managing director at Emerald Grain Pty, a Melbourne-based grain handler.
Overseas investors are boosting their presence in Australia to meet rising demand for food, spurring concern about levels of foreign ownership. While Prime Minister Tony Abbott vowed after his election win last year that the country is open for business, during the campaign he promised to lower the threshold for review of land deals. The government last year blocked the sale of GrainCorp Ltd. (GNC), eastern Australia’s biggest grain handler, to Illinois-based Archer-Daniels-Midland Co.
“The importance of China is really overestimated in terms of where the investment is coming from,” Williams said yesterday at Bloomberg’s “Beyond the Boom: Mining to Dining” seminar in Melbourne. The Chinese are “interested and they’re kicking tires but they’re not doing the transactions. The money is coming from everywhere and not all of it is China-driven.”
Foreign Ownership
About 87.5 percent of agricultural land is Australian owned, according to the Australian Bureau of Statistics. China may own less than 1 percent of Australian farmland, according to a report by KPMG and the University of Sydney’s China Studies Centre in October 2013.
Saputo Inc. (SAP), Canada’s biggest milk processor, won control of Warrnambool Cheese & Butter Factory Co. this year and Japan’s Sumitomo Corp. gained full control of Emerald Grain. Noble Group Ltd. (NOBL), Glencore Plc and Bunge Ltd. are investing in grain handling and export facilities on Australia’s east coast. Singapore-based Wilmar International Ltd. (WIL) and Thailand’s Mitr Phol Sugar Corp. own Australian sugar assets
“Most of them believe that unless you’ve got physical assets attached to their trading business, in the long run they won’t be sustainable,” said Emerald’s Murray, referring to grain investors. “Most of the buyers of the assets of grain in Australia will invest where it’s sensible.”
Wheat futures dropped 13 percent in Chicago this year on expectations that global production will climb to a record. Australia, the fifth-biggest wheat exporter, is set to harvest 24.2 million metric tons, the government forecasts. Raw sugar declined 9.3 percent and cotton tumbled 22 percent in New York on signs of ample global supplies.