Back in 2014 China was planning a mass buy up of Australia’s diary farms that were likely to see Chinese state-owned companies taking big stakes in all Australia’s largest dairy farming operations, Now in 2016 Australia’s dairy farmers are being pushed to the wall and loosing their farms.
CHINESE investment is flooding into Australia’s dairy industry, with four multi-million-dollar mega-deals in progress that are likely to see Chinese state-owned companies taking big stakes in all Australia’s largest dairy farming operations.
In western Victorian, about 50 dairy farmers between Colac and Mount Gambier have signed individual option deals to sell their farms, worth a collective $400 million, to a secretive Chinese-dominated dairy conglomerate being put together by Tasmanian-based property developer Troy Harper.
The 50 farms together run 90,000 cows producing 500 million litres of milk a year, about one-twelfth of Victoria’s total milk supply.
The plan is for the newly aggregated farms to boost their milk production by at least 50 per cent, to supply two new consortiums-owned processing plants to be built in western Victoria that would process and export $700m worth of prized infant milk formula into China and other global markets.
Mr Harper, who describes himself as a private equity facilitator through his company Linear Capital, would only reveal that the Chinese part-owner of the massive new dairy venture was a “major dominant state-owned Beijing-based player” in the food industry, with established brands, trading might and retail power.
He declined to name the Chinese company — there is speculation it is the dominant COFCO Group, China’s largest food processing, manufacturer and trader, or its listed subsidiary China Food — or to name the other global and Australian investors who took up the other 49 per cent of the as-yet unnamed new dairy behemoth.
But Mr Harper said the full extent and details of the deal would become clearer in the next two days. “We have partnered with a major group out of China; this is about putting together a new way of doing things, building a global business and getting a better deal for farmers,” he said yesterday.
“They were looking to try and find a piece of the industry and restructure it so it worked for them; we were asked to (assemble an entity) to supply to the scale of 500 million litres of milk a year; it has taken eight months but we have now concluding (buying) our farms.”
The new business will be Australia’s largest dairy farming company, five times bigger than the large Van Diemen’s Land Company (VDL) in northwest Tasmania, which the state-owned Chinese Investment Corporation came close to buying last year for more than $200m.
It was also confirmed this week that VDL is once again in play. The Australian understands Mike Guerin, a former Elders boss and the former chief executive of VDL until he suddenly resigned early this year, is putting together a group of investors with a Chinese company contributing 51 per cent, to buy VDL’s 19,000ha, 25 farms and 18,000 milking dairy cows owned by NZ’s Plymouth District Council.
Mr Guerin would not comment yesterday. Also in Tasmania, Landmark Harcourts has assembled 12 dairy farms around the Smithton area collectively for sale for $120m.
Landmark property director John Hewitt, who returned last week from China where he was marketing the “North West Dairy Aggregation” cluster to potential Chinese bidders, said he had realised last year that no Chinese corporate bidders wanted to talk about property purchases of a scale smaller than $100m.
His cluster of farms, all located close together, runs 12,000 cows producing 60 million litres of milk annually. “The main barrier is not that they are tyre kickers or not interested, but that they only want to spend more than $100m and typically prefer a 51 per cent joint venture deal,” Mr Hewitt said.
Linear Capitals’ Mr Harper said yesterday all his western Victorian farm purchases were locked in, the investment money committed and processing plants already on the drawing board.
He also confirmed the company is also in discussions with the state government to lease the 120-bed former Glenormiston agricultural college at Mortlake as part of the deal, to use as a dairy training and educational facility.
But Farmer Power, the western Victorian rebel dairy group, fears the plan is to fly in Chinese dairy workers on low wages and 457 visas, use Glenormiston as their training and accommodation base before being dispatched to work on the outlying southwest Victorian farms.
Mr Harper promised that local farmers would be the beneficiaries of the Chinese conglomerate deal, as the new company seeks to improve productivity on its farms and builds two new processing facilities.
But for rival dairy processors with factories in the area such as Saputo-owned Warrnambool Cheese & Butter factory at Allendale, Murray Goulburn’s dairy processing plant at Koroit and Fonterra’s Cobden plant, the locking up of the 50 farms with their 500 million litres of annual milk production by the Chinese corporation would lead to a drastic shortage of milk supply.
“I wouldn’t call it a disruption, but a redistribution of milk supply; western Victoria was the only place we could aggregate this number of farms together for the amount of milk needed,” Mr Harper said.