Georgian state of mind

The challenges of feeding the world won’t be ultimately affected by productivity...

FOREIGN investment in Australia continues to be a hot topic, attracting comments with some decidedly Georgian undertones.

And by Georgian I don’t mean the Georgian era of British history that spanned from the early 18th Century into the 19th Century. It was a time when mercantilism was imposed by Britain on its colonies to ensure the government and merchants became partners and others were kept out by trade barriers, regulations, and subsidies to domestic industries to maximise exports and minimise imports.

Rather, I mean Georgian as in Georgia the country - that disparaged dollop of land between Russia and Turkey. It was reported in May this year, following outcry from residents, that a bill was drafted by some experts in the agricultural sector. It was for the Law of Georgia on the Ownership of Agricultural Land and states foreign citizens or companies can buy only 2.5 hectares of agricultural land, only to be used for agricultural purposes and must correspond to Georgian social and economic interests. Additionally, foreigners must only own 49 per cent share of the land, while the rest should be acquired by a Georgian citizen.

It’s a rather short-sighted attitude from a country that boasts a gross domestic product (GDP) of US$5929 per capita compared to Australia’s US$67,722 per capita.

I’m not sure where this narrow-minded insecurity comes from in some Australians. Our ridiculously exorbitant cost of living here will see us protected from a huge part of the struggle for farmland by some of the world’s most rich and powerful in years to come.

The challenges of feeding the world won’t be ultimately affected by productivity but not having enough land to farm, globally. Of course our government will always allow foreign investment into agriculture, we need it to. And although we get patriotically protective and proud of our dirt, like our biggest agricultural export, wheat, it will make up an important, but relatively small component of the global picture.

A year ago, an agribusiness adviser Philippe de Laperouse from HighQuest Partners based in the US was quoted as saying: “With rising demand for high protein food from developing countries, pressure is on production, we've made estimates and we think that anywhere between 65-80 million hectares of additional land is going to have to be brought into production within the next 10 years in order to meet future projected demand for food crops. There's about 1.5 billion hectares currently in production."

With that sort of demand, foreign investment is inevitable.

He also said eyes are on the former Soviet Union, Ukraine, Kazakhstan, and of course Africa. According to HighQuest research, around $40 billion is invested in agriculture, globally, every year, and many investors have Australia on their radar. It’s not absurd to think there may be a race from countries to own as much as they can to preferentially feed their own people.

It will be interesting to see China grow really hungry, but the Arab countries will be the most entertaining. They’re among the most agriculturally un-productive in the world yet have strong and steady growing populations and are home to some of the richest people in the world. I’m sure when it comes crunch time, blokes like Sheikh Khalifa - who is President of the United Arab Emirates - will buy, trade and use his AU$21 billion to, let’s face it, do what he wants.

As mentioned, eyes are also on Kazakhstan, which is home to the world’s biggest crop farmers. The second largest farmer, Nurlan Tleubayev, grew up farming with his old man and seven siblings. After a few years in the military and university he capitalised on buying up farm companies after the collapse of Soviet rule. By 1999 he had nearly 100,000 acres and now owns 1.9 million acres. He supposedly spent $78 million in orders for US and Canadian farm equipment in 2008 and just to name a few, owns 51 John Deere and 72 Case IH combines, 114 grain carts, 129 John Deere and Case IH tractors and seeders, and 98 sprayers. He averages 1.1 tonnes per hectare and with low production costs his gross profit per acre totalled around $855 million in 2007.

Grain aside, the beef industry will share similar demand, hence any federal governments want to push live export. When we look at increasing demand then look north to Indonesia’s growing appetite for beef, plus its expected population growth of five million per year, we’re an obvious supplier.

It will be an amazing spectacle to watch from Down Under. What’s more, to put it in perspective I can’t help but smirk when I hear of people switching to vegetarianism because they believe not eating ruminants lessens the contribution to greenhouse gas emissions. It begs the question, what planet are they living on?

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FarmOnline
Sam Trethewey

Sam Trethewey

grew up farming down south and now commentates on agriculture across Australia
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READER COMMENTS

ecnerwal
3/09/2013 6:08:22 AM

On the surface, allowing sale of Australian farming (or residential) land seems quite simple. That is, let it happen because it helps landowners get a better price when they sell. As Abbott says, foreigners cant take our land away. However, is there a point at which foreign ownership of our land is too much? What if it gets to 60, 70 or 80%? The same with Aust commerce what if foreign ownership of business gets to those levels? Does this mean our Govt has the wrong policies that are disadvantaging its own people resulting in O/S Govts policies trumping us to get control over us? I think so.
Consolidated
3/09/2013 6:21:06 AM

And where do the xenophobes think the estimated $66 billion of Australian farm debt comes from? Without foreign money we all go back to clover and ground lice and land values will collapse.
Briggscomms
3/09/2013 6:52:33 AM

Sam, Terrific article. Some real though provoking statements. Still not sold on the upside of foreign investment. We are witnessing a boom in developments in the CBD, mostly funded by foreign investors. Sound healthy until you drill down to find they have no intention of actually occupying the property. We could potentially have a ghost city, multiple high rise towers vacant. Mixed ownership of farming land seems a good compromise. Cheers, Allan
cmt
3/09/2013 7:03:10 AM

Some argue that foreign money is financing Australian ownership so what is different if foreigners own us. That is like saying our home is financed by offshore funds so why not live in a home we do not own. There is a big difference between renting and owning our home isn't there.
Deregul8
3/09/2013 7:06:13 AM

'Mixed ownership of farming land seems a good compromise'. Ummm ... and how do you propose we 'effect' this result in the marketplace. And by the way, foreigners are only buying because Australians are selling. Why are they selling? Because they racked up too much debt. You can hardly expect capitalism and then when it fails the individual have the losses socialised. Oh I forgot, thats why most knuckledraggers vote for the Nationals - agrarian socialists.
ME Again
3/09/2013 7:19:17 AM

Land is the small beer issue here. Commonwealth Government Securities are 80% owned by foreigners. Funding the ALP's profligacy will hit $300B by the end of this year, or which about $240B will be foreign owned. That's about 100 years of foreign investment in farmland at the rate which has prevailed over the last 10 years. That's a $10K+ debt owed by every man, woman and child in Australia to people overseas...and as the Greeks and the Cypriots will attest, these chaps WILL get their money back.
Goatybull
3/09/2013 9:09:21 AM

Nil foreign investment = dark ages for Australia.
R
3/09/2013 3:48:30 PM

The banks especially, like foreign land buyers, as they know that if they foreclose on some large enterprise that is battling there is likely to be a buyer pull the bank out of the poo.
Ted O'Brien.
3/09/2013 9:06:29 PM

They can't take our land away? Tony's in for a shock. We can't take their money "away" either. Throughout history wars have started over less. ME again. It was ever the intention of the Rudd/Gillard/Brown government that the $240 billion would be funded by capital items, including land, not by production. As for feeding the world. Much of the social upheaval that we have seen in recent times, e.g. the removal of the Soeharto government, the genocide in Rwanda, the current problems in Egypt, all resulted from food shortages. One day some calamity will reduce the numbers.
qlander
4/09/2013 5:24:36 AM

All the wishful thinking in the world is not going to turn a one party superpower into a capitalist democracy. R. Has nailed the true underlying push here. The banks are in a major panic that Australian farm land values will settle back to their actual earning value.
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Get MuddyTo think clearly in farming and about farming, you need to get muddy - commit, roll up your sleeves and get involved. SAM TRETHEWEY gets stuck into some of the issues facing those on the land.

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