A game changing decade of farm foreign investment fever

Foreign investment in ag makes its mark

Agribusiness
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Bullish agricultural export returns, surging farmland values and a flush of overseas capital created a decade which changed farm sector ownership in a big way

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Despite many contentious land sales and agribusiness takeovers, and many deals which flopped or fell short of expectations, foreign investment has just notched up a game-changing decade with the farm sector.

More than any period in recent generations, overseas spenders have targeted Australia's farms, farm products and the farm services sectors with new-found zeal.

A steady run of bullish export returns, notably from meat, dairy, wine, horticultural and fibre products, and surging farmland values have combined with a flush of fresh capital from the northern hemisphere looking for investment diversification to lure big spenders into agriculture.

"It's been a watershed decade for new investment attitudes and activity - probably the biggest period of change in the market in five decades," said agricultural investment fund principal, David Bryant at Rural Funds Management.

David Bryant

David Bryant

"The availability of money from institutional investors and pension funds is now far better organised and they're far more aware of agriculture here than they've probably ever been."

He noted how real assets had emerged as a new investor asset class to accommodate agricultural land investment, enabling the advance of North American and European pension funds into Australian farmland and supply chain businesses.

At the same time, the market saw a surge in local and overseas-backed corporate farming aggregations, and more local producers leasing foreign-owned farms to increase their own output.

Australia's agricultural capacity attracted intense new interest from Asia, particularly as China rapidly emerged as a hungry, cashed-up food consumer and our biggest farm export buyer, leaping from absorbing $4 billion in sales in 2010 to more than $12b last financial year.

Purchases and partnerships involving Chinese companies and wealthy individuals started modestly, but grew fast.

In 2012 the 93,000-hectare cotton giant Cubbie Station on the Queensland-NSW border hit the headlines when bought for $232 million by Chinese-Japanese textile partnership Shandong RuYi with 20pc local partner, Lempriere Group.

A few months later Kimberley Agricultural Investment, owned by Shanghai Zhongfu, leased an initial 13,400ha of Top End Crown land for up to 50 years to build a $250m sugar mill and grow cane.

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By 2015 Chinese investors were really busy, estimated to be buying sizeable beef properties almost fortnightly, including the 705,700ha Gulf stations Wollogorang and Wentworth for $47m, Singleton Station (294,000ha) north of Alice Springs for $10m, Glenrock Station (30,868ha) in NSW's Hunter Valley, Woodlands (31,000ha) at St George, Qld, for $28m, and nearby Hollymount and Mt Driven (50,000ha) for $41m.

In 2017 Hong Kong's Hui family paid more than $100m for 51pc of northern NSW meat processor, lot feeder and marketer, Bindaree Beef - one of many abattoirs bought by Chinese buyers in the decade.

China milks dairy sector

China's thirst for healthy, western-style protein also triggered an obsession with milk processors and dairy farms, including Australia's biggest dairy farming outfit, the Van Diemen's Land Company bought by Moon Lake Investments for $280m in 2015.

Western China food giant, New Hope, which had bought into Kilcoy abattoir in 2013, teamed with local milk processor, Freedom Foods, and the Perich and Moxey farming families, to form Australian Fresh Milk Holdings, while Inner Mongolia's Mengniu Dairy Company bought 79pc of Victorian processor, Burra Foods, in 2016, then during 2019 paid $1.5b for the Bellamy's Organic dairy formula business and $600m for Lion's dairy division.

While China's spending has recently been moderated, somewhat by Australian seasonal realities and capital constraints set by Beijing, it has grown into Australia's second biggest agricultural landholder with 9.1m hectares or 2.3 per cent of our total farmland.

That's slightly behind long-time leader Britain, with 2.6pc, and well ahead of the next biggest offshore buying base, the US with 0.7pc, according to 2018's national farmland register of foreign ownership.

The US investment model of buying land and leasing gives farmers access to more country without having to find all the capital they'd require to buy their own place - Chris Meares, Mears and Associates

In total 13.4pc of Australian farmland (52.6m ha) had some level of foreign ownership interest.

NSW had 2213 properties with offshore investor involvement, or 13.6pc of the state's total farms, ahead of Victoria with 1889 (9.4pc) and Queensland with 1477 (8.9pc).

Chris Meares

Chris Meares

"Agriculture today is very much a global product, and Australian agriculture is very much part of that global market in some way," said Sydney rural property specialist, Chris Meares, at Meares and Associates.

About 20pc of his firm's business now involved overseas investors. At the height of China's buying boom it was 25pc.

Credible investment class

"Asset allocators now regard agribusiness as a bona-fide asset class, and many look to Australia with long term investment horizons," he said.

The Chinese were notable for not expecting immediate returns on capital or production income, while overseas pension funds and private wealth investors had also shown more patience with ag's highs and lows than most Australian institutions.

"I think agriculture's attitude to overseas ownership is also more mature than it was, with greater recognition of foreign investment as a good thing," he said.

"You can certainly argue the US investment model of buying land and leasing gives farmers access to more country without having to find all the capital they'd require to buy their own place."

Regardless of whether they're owned by overseas entities or Australians, corporate farms look and feel different these days - Richard Heath, Australian Farm Institute

Yet, Australian Farm Institute executive director, Richard Heath, still doubted if most farmers actively believed Australia needed more foreign investment.

Still to be convinced

"The figures suggest capital from overseas has been very important, but the commentary is taking its time to be accepted," he said.

He noted there had actually been no real increase in farmland in foreign hands since 2015, despite the buying activity of late.

Richard Heath

Richard Heath

Probably more obvious was foreign investment's more even spread through the supply chain, while corporate-style ownership of aggregations in conventional family farming districts was more visible, too.

"Regardless of whether they're owned by overseas entities or Australians, corporate farms look and feel different these days," he said.

"They often aggregate numerous family units to focus on specific commodities and scale - grain or dairy, or beef cattle or almonds."

Not so valuable

Rabobank research analyst, Wes Lefroy, said overseas investment in farmland also looked more significant in NSW, Victoria and South Australia, than it was in value terms.

In fact, nationally, in value terms, foreigners held just 7pc our farmland.

He said focusing on the 13pc of land area owned by foreigners tended to inflate the significance of overseas investment.

While Victoria had the second largest number of foreign owned farms, it had the smallest percentage of foreign-owned agricultural land by value (2pc).

Foreign ownership in NSW and South Australia was below 10pc on a value basis.

Wes Lefroy

Wes Lefroy

Tasmania had the highest foreign farmland ownership by value at 40pc, Northern Territory 29pc, and Queensland and WA were just over 10pc, while across the industry overseas buyers were most prevalent in horticulture, accounting for 36pc of the sector.

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Snapshot of foreign affairs which shaped ag's decade

  • 2009: Britain's Terra Firma Capital Partners buys Consolidated Pastoral Company's 5.6m hectare northern beef estate for $425m.
  • Canadian grain group Viterra buys ABB Grain for $1.4b.
  • 2010: Canadian crop inputs company, Agrium, buys AWB-Landmark for $1.2b, on-selling AWB's grain assets to Cargill.
  • Qatari sovereign wealth investment businesses Hassad Food starts its 300,000ha buying spree in Australia with 2632ha Kaladbro Station, Victoria.
  • SunRice shareholders narrowly reject $610m takeover bid by Spanish rice and pasta giant, Ebro Foods.
  • 2012: Cotton's big Cubbie Group sold to consortium led by China's Shandong RuYi Scientific and Technological Group.
  • 2013: A year-long, $2.7b bid by US grain giant Archer Daniels Midland for GrainCorp declared by federal government as against the national interest.
  • 2015: Historic Kidman and Company's 11 stations, feedlot and 200,000 cattle put up for sale. Bids by Chinese parties twice rejected.
  • 2016: Two thirds of Kidman and Co sold to Gina Rinehart's Hancock Agriculture-led Australian Outback Beef partnership with China's Shanghai Cred for $365m
  • Hassad Australia sells Kaladbro Station, to South Australia's Brinkworth family.
  • 2017: Canada's public sector pension fund, PSP, buys majority stake in nut farmer and processor, Stahmann Farms. PSP joint venture Daybreak Cropping buys Glencore's 12,500ha NSW farming assets.
  • 2018: Canadian cheese giant, Saputo Inc, takes over Murray Goulburn dairy business after paying $1.29b.
  • Macquarie Bank's agriculture division buys the last 100,000ha tranche of Hassad's farmland portfolio for about $300m.
  • 2019: Shandon RuYi trims its 80pc stake in Cubbie Station and Macquarie Bank takes 49pc share.
  • After selling down 30pc of its portfolio, Consolidated Pastoral Company sells the rest to its own management team, backed by fresh UK funds, for about $600m.
  • Canada's PSP pays $200m-plus for NSW farming and logistics business BFB, launches takeover bid for the nut and broadacre farmer, Webster, and pays $490m for Olam's high security water.
  • Landmark, owned by Canadian giant, Nutrien, buys Ruralco's farm services business for $469m.

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The story A game changing decade of farm foreign investment fever first appeared on Farm Online.

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