Australia sells off farm to feed the world

There are seven billion people on earth, up from two billion at the time of Federation. By the end of the 21st century there is expected to be more than 11 billion. That means an extra four billion mouths to feed. Surely the greatest issue in the 21st century will be food and food production.
Which countries on earth should have a comparative ­advantage in food production? Why, that list would surely ­include Australia. But wait, there’s more.
World grain production, including wheat, barley, rice, corn etc, has scaled up from roughly one billion tonnes in 1960 to 2.5 billion tonnes today. There’s about a third of a tonne of grain per person on the planet today. Not that grain is evenly distributed, of course. But it raises the issue of how much grain will need to be produced to meet human needs by century’s end. I suspect that humanity will require four billion tonnes, or 60 per cent more,­allowing for an overall rise in living and nutrition standards.
Clearly there will be demand to plant out all unused arable land on earth over the course of the next generation. Or more realistically, to plant out whatever unused arable land is left. Or we need to get better productivity out of existing plant stock through genetic modification, the application of fertiliser, or the use of technology, or all of the above.
In fact, in such a clamoured world the wide-open and clean-green spaces of Australia (and possibly also of Canada, Argen­tina, the US, Brazil and South ­Africa) all become resources of global significance. And the Australia people and nation prosper as a consequence of their good fortune and smart application.

Maybe. Maybe not. Depending on how it is measured, agribusiness is worth between 2 and 3 per cent of Australian GDP. It employs 300,000 workers, including perhaps 130,000 farmers and growers, and has been targeted for takeover by foreign businesses, state-owned enterprises and wealth funds.
From the 1990s onwards many of this nation’s secondary food production assets were sold, often willingly by co-operatives, to global interests. This included dairy companies, meat-processing works, fish and canneries, sugar mills and grain businesses.
Consider the ownership of ­agribusinesses in Australia today. The two biggest players in meat processing, JBS and Teys, are connected to agribusiness interests in Brazil and the US. In dairy, global players snapped up local co-operatives, including New Zealand’s Fonterra, the Belgian Parmalat group, the Canadian Saputo and Lion (owned by Kirin) from Japan.
In grain wholesaling the Swiss group Glencore controls almost one-fifth of the Australian market but there is also a sizeable presence from the US’s Cargill group, Japan’s Sumitomo Corporation and The Netherlands’ Louis Dreyfus. There are some remaining Australian-owned agribusiness processing assets ­including the grain-handling co-operative CBH based in Perth, Victoria’s Murray Goulburn dairy products (trading as Devondale), the south coast’s Bega Cheese Limited and others.

In one sense this is merely the globalisation of Australian businesses. Overseas agribusiness conglomerates and pension funds looking for strategic assets in Australia have found their mark in these businesses. The next step in the supply chain might be to control key infrastructure such as the Port of Darwin, for example, and to then also buy up land holdings. I think we are in the key-infrastructure and landholdings purchase phase of the globalisation of agribusiness supply lines.

New Zealand, too, is subject to this avalanche of overseas interests in strategic assets. However, in that country various dairying co-operatives were amalgamated into the Fonterra conglomerate in the late 1970s. Australia’s farming co-operatives were too dispersed and too state-based to concede sovereignty to a single national business. By the 1990s these proudly independent co-ops were snapped up by global agribusiness that could perhaps see the bigger picture of feeding four billion extra mouths this century.

Australia has no big agribusiness business. Why is that? How is it that the New Zealanders can leverage Fonterra on the world stage and we are left with at best regional (meaning state-based) dairy businesses? We have leveraged large mining companies (BHP Billiton), banks (CBA, Westpac, NAB, ANZ), retailers (Woolworths and Wesfarmers or Coles) and even a telco (Telstra) but we cannot deliver a global player of scale in agribusiness. Brazil, New Zealand, Switzerland, Japan, Canada and US interests have taken significant positions in Australian food processing. This would be all very well if Australian agribusinesses took similar positions in food-processing operations in these countries. Or indeed even if non-agribusiness enterprises, such as Macquarie Bank or the super funds, for example, took positions in other ­nation’s food processing operations or in amalgamated land holdings. But I don’t think this is the case. Land held by foreign-owned entities is always a contentious issue and for that reason the Australian government released a report last June showing that 86 per cent of agricultural land is owned by Australians.
The largest foreign ownership is attributed to Britain, the US, The Netherlands, Singapore and China. Although to be fair some of the overseas-held land is either significant and/or iconic such as the Van Diemen’s Land (VDL) company which is a cluster of 25 dairy farms in northwest Tasmania that was sold to Chinese interests for $280 million in 2016.
This raises the question of what is the future for Australian agribusiness? The sector is shedding jobs because of mechanisation which reverberates through rural communities. This makes Australian agribusiness brutally efficient, as well as clean and green. What is now required is the storage and transportation systems to get the product to market. Ports, railways, road transport and logistics centres would be of interest to foreign investors.
I suspect the next generation of farming will see the transition from the family farm to corporate-run (and state-owned or wealth-fund-owned) enterprises. And in such a world plant genetics, drones, mechanised vehicles, big data analytics, livestock wearables (yes, there’s a kind of fit-bit for cows) will all help ­deliver better yield and productivity. This is a very different world to the Soldier Settlement farming that delivered so much energy and hope into the Australian interior. The grazing lands, the wheatbelt, the dairying lands are being scooped up not so much in ownership but in harvesting an Australian bounty for overseas markets. But even so we still produce twice as much food as we eat so necessity is not the concern.
My concern is Australians seem to be complacent about our nation’s resources. Why aren’t we the corporate raiders snapping up Kiwi and Canadian farmlands and dairies and meatworks? The New Zealanders overcame parochialism to forge Fonterra; we wouldn’t let go of our middling co-op empires a generation ago. That thinking willingly delivered bite-sized chunks of prime Australian agribusinesses into the hands of foreign-owned businesses in the 1990s. We never could or never would see the bigger picture of the market for an Australian-owned global enterprise in the agribusiness space.
We are the Australian people and nation in control of one of the largest swathes of arable land on the planet. Sure there’s work to do in enriching soils and in managing water but even with an end-of-century population of 50 million we should show world’s best practice in agribusiness as well as in mining. Perhaps that opportunity will come in agtech or in the new generation of applications making farming more efficient. But in the early decades of the 21st century it can only be concluded entrepreneurial energy in rural Australia is being shared with foreign interests.
Bernard Salt is a KPMG partner and an adjunct professor at Curtin University Business School


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