The Australian | January 31, 2011
Michael Sainsbury, China correspondent
CHINA is gearing up for a multi-billion-dollar investment push into the Australian agricultural sector to secure food supplies after a senior official admitted the country would face pressure supplying farm produce to its 1.3 billion people over the next five years.
The Australian has learned that interest from Chinese buyers across the whole spectrum of Australian agribusiness has stepped up markedly in the past six months, with the sweet spot being in "under the radar" private farms, aggregation and processing businesses worth between $10 million and $200m.
Purchases of businesses within this range would avoid scrutiny by the Foreign Investment Review Board, whose purview is limited to businesses worth more $231m.
Despite high expectations fuelled by two failed multi-billion-dollar bids for Nufarm and CSR's sugar business Sucrogen, China has been slower than expected in broadening its Australian investment strategy outside the mining sector.
Austrade Beijing's senior trade commissioner, Alan Morrell, said Australia was a logical investment destination for China as the nation moved to strengthen food security.
The Chinese have shown particular interest in potential grain, meat and wool purchases.
"Given the growth of the Chinese economy, the changes in consumer demand and the strategic goals of the central government, Chinese agribusiness companies likely will seek overseas investment opportunities to secure access to supplies of commodities, to strengthen research and development capabilities and to gain access to new markets," Mr Morrell said.
"As a result, we expect to see more international investment and M&A in agricultural production, processing, circulation, distribution and other areas in the course of China's agricultural modernisation."
So far investments in Australia's agriculture sector by China have been mainly projects under $40m, with the majority under $10m. Some examples include Beijing Sanyuan Dairy Co's investment in Dairy Farm in WA; Qiantang Group (Zhejiang) in orchard farms in Tasmania; Shan Shan Group (Zhejiang) in wine in NSW; and Shanghai Yanlong International Trade in Tasmanian spring water.
But activity and deal size are on the increase, according to Shanghai-based agribusiness consultant Nick Hunt of Kirribilli Agricultural. One Chinese company, for example, is seeking 5000ha of grain farmland, which would have a value of about $75m, one Beijing consultant said.
A parliamentary inquiry into the foreign ownership of Australian agriculture is now under way.
Among the major state-owned companies looking at Australian assets are Shanghai's Bright Food, which made last year's unsuccessful bid for Sucrogen; China's largest food and drinks wholesaler, Cofco; and private player New Hope, which last year posted sales of $6.5 billion and is executing an ambitious global strategy.
Chinese Agriculture Vice-Minister Chen Xiaohua admitted last week that during the next five years, there would be increased pressure on the agriculture sector. He said that from 2011 to 2015, China would annually consume an extra 4 million tonnes of grain, 800,000 tonnes of vegetable oil and 1 million tonnes of meat.
