THE complexities of balancing the economic benefits of overseas investment in beef operations with perceived concentration risks has become even more evident in the wake of fresh new data on the ownership of agricultural land.
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Industry feedback on the first report from the federal government’s new register of foreign ownership of agricultural land points to a lack of detail.
The report shows 13.6 per cent, or 52.1 million hectares, of Australia’s total agricultural land is foreign owned, with livestock production the highest use at 88pc.
More specific information on the proportion of land either partially or wholly owned by foreign government investors is desperately needed to underpin discussion on appropriate policy settings for foreign investment, according to the Cattle Council of Australia (CCA).
Investment industry reaction has been diverse, with some saying the register is providing a good starting point for developing management strategies and others saying this type of data is unnecessary.
Merger and acquisition specialist David Williams, head of investment bank Kidder Williams, says the beef industry needs to be less concerned with managing foreign investment and more concerned with attracting it.
Opportunities for growth were going begging amid our obsession with keeping cattle country solely in Australian hands, he said.
CCA chief executive officer Jed Matz agreed the foreign investment ownership debate was emotive.
CCA, the peak producer representative group, has been a vocal supporter of foreign investment in agriculture, particularly in regards to supporting the beef industry.
“There are obvious economic benefits to be had, however Australia’s relationship with the bush means the idea of it not being Australian owned can be quite powerful,” Mr Matz said.
“The more information and data regarding foreign investment that is available, the greater the transparency about what investments are being made and by whom.
“This helps to ensure that any discussions about the appropriate policy settings for foreign investment are based on factual information.”
CCA wants more clarity on the Foreign Investment Review Board approval process, including the national interest test.
That would help attract future foreign investors into the Australian beef industry and provide peace of mind for the wider community, it argues.
Mr Matz said CCA did not hold a view on which areas or parts of the supply chain required investment.
“Market forces will ensure the money flows to the most appropriate areas provided our foreign investment policies are not so restrictive as to create a barrier for investors,” he said.
Doug Ferguson, from international financial and business advisory services firm KPMG, said the registry provided ‘much more information that what we had before’ and served its purpose in establishing the breakdowns by country.
The United Kingdom was the leading source country for foreign investment, with China, whose beef buy- ups have garnered a lot of attention and controversy in recent years, placed fifth.
“The registry has shown the views around Chinese investment are overstated,” he said.
“Let’s not succumb to fear and emotion when it’s not necessary.”
He said one of the challenges of obtaining more detailed information was it required a degree of voluntary disclosure.
“This is the starting point for analysing changes in ownership demographics going forward, to enable governments and industry to assess concentration risk and meet the need for assurance our assets are being properly managed for the long-term benefit of industry,” he said.
“Many people argue the best model is a partnership, with Australian management of the operation and a foreign capital investor who has a right to offtake at market prices.”
However, Mr Williams believes the registry has so far not provided ‘any information at all that we can action.’
“Nobody knows who the owners of small percentages of beef holdings are and frankly we don’t need that information,” he said.
“This is just messing around the edges.
“Let’s say Chinese ownership in beef was actually double what the register is showing - it doesn’t make any difference.”
Mr Williams said no one was arguing that in the past two years there had been a large number of beef properties sold to foreign interests, particularly Chinese.
One of the criticisms had been that not all were well-founded investments made by people with knowledge of the industry, he said.
“That is true - many buyers are not looking at agronomic advice or how many animals are being run - they are indeed trophy properties,” he said.
“However, what they are doing now is spending capital on properties that haven’t had money spent on them in decades and that is a good thing.
“I don’t think we need proof they know what they are talking about when they are creating jobs, new industries and talking the beef industry forward.
“If someone wants to spend $700m of their own money, and they are breeding new life into country going barren, what is the problem?”
Mr Williams said the onus was on individuals in the beef industry to put together investment propositions.
“Too many people in this industry are pushing the same 20,000 head around the same bit of ground that they have been for 200 years,” he said.
“So many operations could be significantly improved by changing management practices, thinking outside the square and having the money to put the infrastructure in.
“Get off your bums, package things up and see what people out there will pay for it.”
China money put in context
WHILE there had been a substantial lift in actual or planned Chinese direct investment in Australian beef since late 2014, it had to be put in context, according to researchers with the University of Queensland’s China Agricultural Economics Group.
CAEG has been investigating the Chinese beef industry and other ruminant livestock industries in China for more than 20 years and has just released a report called The Sino-Australian Cattle and Beef Relationship.
The report says companies with diverse backgrounds had looked to Australia as part of a
Chinese movement to ‘go out and diversify’, secure supply of raw materials and capitalise on high consumption and prices for beef in China.
Senior researcher and one of the report’s authors Dr Scott Waldron said it was hard to see a pattern in what Chinese investment in the Australian beef industry looked like, with interest in everything from cattle stations to feedlots, processing facilities and integrated operations.
However, one common thread was that very few investors had a background in cattle in China and so needed substantial support in Australia, he said.
The other thing to keep in context, according to the report, was the fact the timing and scale of Chinese investment was recent and small compared to other foreign investment and also compared to Chinese investment in other non-agricultural industries.
The university researchers also point out the investment links in Australia are most likely to lead back to China and increase integration into the Chinese market.
“China is not a huge source of investment in Australian beef yet but the potential is there,” Dr Waldron said.
“The pressure to look for foreign investment has reduced with rain and good cattle prices but there are still big companies looking for equity partners.”
