Until the recent bid from a Chinese-Japanese consortium Shandong RuYi for megafarm Cubbie Station, it appeared the property would limp along under locally-based administration.
But then the opportunity for the consortium to make a bid was approved by Treasurer Wayne Swan, who said he was convinced that a future sale was in the national interest after being given certain undertakings by the potential purchaser regarding the use of water, the employment of workers and the management of the station.
Should there be any fuss? After all, the government and opposition both welcome foreign investment in Australia. As recently as December last year Peter Costello joined Bob Hawke in a delegation to the Gulf States where both implored countries such as Saudi Arabia and Kuwait to expand their investments in Australian food and agricultural industries.
But Nationals Senator Barnaby Joyce used the National Party federal conference in Canberra this weekend to outline his passionate opposition to the sale, rebuffing claims that his view was based on xenophobia.
In an immediate response to Swan’s announcement, Joyce labelled the Cubbie decision a “bloody disgrace”. Any sale of a property of this size to foreigners will undermine Australia’s ability to determine the use of its own resources into the future, he argued.
While there’s an unhealthy mix of rural populism and anti-Chinese sentiment in some of the complaints about Cubbie, there is no doubt that foreign firms will continue to increase their stake in Australian agriculture.
Cubbie is simply part of a bigger picture. In what has been termed the “financialisation” of farming, sovereign wealth funds, investment houses, private equity consortia and others dealing in financial instruments such as credit default swaps, derivatives, bonds, securities and futures trading have been increasing their investments in agriculture, worldwide.
In some countries this is deemed to be a “land grab” while, for developed nations, this is termed “foreign direct investment” and is welcomed as capital necessary for economic development.
There has been a host of agri-food purchases in Australia during the past two years:
- more than 750,000 hectares of sheep and wheat land has been bought by Hassad Foods of Qatar;
- some 250,000 hectares of Victoria’s western district farmland was purchased by the Alberta Pension Fund;
- CSR Sugar was sold to Wilmar International of Singapore;
- Tully Sugar was sold to China Oil and Fuel;
- Australia’s major grain-trading company, AWB, was acquired by Canada’s Agrium company.
Today, foreign companies control more than half of the Australian wheat export industry, some 60% of raw sugar production, and 40% of lamb and beef processing.
Assets in agriculture
Why would the finance industry be interested in farming?
After all, it is a risky business which has often provided small, if not negative, returns to investment. The answer lies in a combination of factors. When the dot com bubble burst at the turn of the century, followed by collapse of real estate prices after the GFC, the financial sector was looking for a safe haven for investors’ money.
Farmland prices had been rising for a decade on the back of strong demand for food from a growing world population, including millions of new middle class consumers in places such as China, India and Indonesia.
Legislation requiring an ethanol mix for vehicles provided a clear signal to the finance firms that their investments in biofuel production would be secure. Oil-rich but water-poor countries such as Saudi Arabia, Dubai, and Qatar are seeking to guarantee food for the future and have no hesitation in using billions of dollars in sovereign wealth funds to secure lands and water in food-producing regions around the world.
Deregulation of financial markets has also helped facilitate the quick movement of funds from less profitable markets to agriculture. And, of course, there have been opportunities for speculation. Facilitated, in part, by global financial deregulation, traders have been able to manipulate markets for commodities such as corn, wheat and rice, making considerable profits for their investors along the way.
Farmlands are, in this sense, just another “bundle of assets” that can be bought and sold to maximise shareholder profits.
Critics point out that farmland must be viewed as more than a tradable commodity and should be harnessed to provide global food security - not profits for speculators from wealthy nations. But the reality is that it is providing an opportunity for capital accumulation in an era of considerable financial turmoil.
Selling the farm
So, where does this leave Barnaby Joyce and others who have expressed disquiet over the purchase of Cubbie and other Australian properties?
Their protests are unlikely to halt the movement of funds from overseas financial institutions into Australian agri-food industries – especially since Joyce’s own Coalition comrades believe strongly in the virtues of free trade and the desirability (read: necessity) of increased foreign investment.
Will Barnaby resist the pleas by Abbott and Hockey to fall into line with his neoliberal-oriented colleagues and thus continue to rail against the “sale of the farm”?
Whether Joyce falls in step with his Coalition colleagues or not, one thing is for sure: “the farm” is out for tender.