Stopping the sale of agricultural land and agri-business

Written By: - Date published: 7:30 am, July 29th, 2016 - 26 comments
Categories: australian politics, capitalism, Economy, farming, International, overseas investment, Privatisation - Tags:

I often think we let ownership of Silver Fern Farms go to foreigners too quickly.

Australia now has new rules specifically for regulating the sale of agricultural land and agri-business.

Last year, the S. Kidman and Co property portfolio, Australia’s largest private landholding, went up for sale. That was 100,000 square kilometres, roughly. It went across four states. One of the farms, Anna Creek, is the world’s largest cattle farm.

Treasurer Scott Morrison blocked the 100% sale, saying: “… it would be contrary to Australia’s national interest for a foreign person to acquire S. Kidman and Co in its current form.” The size was of concern, and the form of the transaction was as well.

Despite a whole new consortium deal in which a Chinese-owned firm had 80% and an Australian firm had 20%, in April 2016 the Australian Treasurer still blocked it. Perhaps the decision had something to do with the July Federal election, who knows.

Some uncertainties came out of it. For example, the Treasurer got the ACCC in to make sure Australian bidders had a real chance. In future that will leave open to political judgement when the locals were simply outbid, or poorly structured, or simply didn’t get themselves together in time.

The Treasurer also stated in his decision how important it was that the Australian public maintained confidence in government regulation of foreign investment, and in foreign investment full stop. That’s new.

So now the Australian Federal Government has come up with some much clearer rules about how much agricultural land, and agricultural business, foreigners can actually buy. Their Foreign Investment Review Board now has much clearer triggers for both.

The national interest test that Australia uses is deliberately vague. This gives the Australian government flexibility to block sales or impose conditions. The Kidman example highlights that clearly.

It’s also illogical that the FIRB rules don’t apply to state or territory assets like ports or airports. There should be equal accountability between public and private asset vendors.

But the rules are much clearer. New Zealand could take lessons. We need a complete overhaul of how all kinds of agricultural land and agribusiness are considered to be sold to foreigners of any kind. We need to favour locals over foreigners.

Both Christchurch and Auckland Councils will be under renewed pressure to sell assets. Dairy farms will come under pressure to sell due to the long dairy commodity bust. More foreign-owned dairy factories will set up in our fields and literally cream it.

New Zealand needs a stronger set of rules to stop our best land and agribusiness being sold off to foreigners.

26 comments on “Stopping the sale of agricultural land and agri-business ”

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  2. srylands 2
    29 July 2016 at 9:31 am

    This is complete bullshit.

    New Zealand should abolish the FDI restrictions already in place.

    New Zealand should be neutral between overseas and domestic investors. We should be strongly advocating all countries to do the same.

    If you don’t want FDI you had better all start saving and investing more. I don’t see that happening.

    Apart from the lack of any economic justification for FDI restrictions, the tenor of this article is that you think it is fine to interfere with private property rights.

    • Ad 2.1
      29 July 2016 at 10:12 am

      Check out the new Australian rules in the link and see what you think.

      If you think there is no reason for restricting foreign direct investment into agricultural land and agricultural businesses, I think you’re at a fairly extreme end of the spectrum in this debate. The current government have stopped a couple of big ones themselves.

      What are your reasons for having no restrictions on FDI?

      • srylands 2.1.1
        29 July 2016 at 11:04 am

        There is no downside to FDI. I suggest you read the “Open for Business” series by the New Zealand Initiative. It concludes that the current New Zealand regime is far too restrictive. Sorry can’t post link. Google it.

        • Robert Guyton 2.1.1.1
          29 July 2016 at 11:08 am

          ” I suggest you read the “Open for Business” series by the New Zealand Initiative.”

          I see a red light.

        • DH 2.1.1.2
          29 July 2016 at 11:58 am

          “There is no downside to FDI.”

          Now THAT is bullshit. FDI creates an increased demand for finite land and resources, an increase which can only result in higher prices for the land. A higher price for productive land translates directly into a higher cost of production which in turn makes NZ less competitive in world markets.

          One of NZs major competitive advantages in the primary industries is our low population density and permitting foreigners to freely buy our land negates that advantage. IMO it’s tantamount to economic sabotage.

        • One Anonymous Bloke 2.1.1.3
          29 July 2016 at 4:51 pm

          The Business Roundtable has no credibility, which is why they had to change their name, and they still have no credibility. The main problem is that none of the policies they promote have ever led to the outcomes they assert anywhere they’ve been tried in the world, ever.

          In fact the opposite is true: if you want increased morbidity on a steeper social gradient, they’ve got that covered.

          Is a partisan pack of proven failure the best you can do? Sad. Still, it explains your continued employment: sophistry costs money.

        • Draco T Bastard 2.1.1.4
          29 July 2016 at 5:51 pm

          There is always a downside to FDI and that’s mostly in that our wealth is taken from us for magic beans.

    • Stuart Munro 2.2
      29 July 2016 at 12:00 pm

      Nope – NZ should drive foreign investors into the sea and take our country back.

    • Draco T Bastard 2.3
      29 July 2016 at 5:48 pm

      Why do we need foreign money to utilise our own resources?

  3. adam 3
    29 July 2016 at 10:40 am

    Thanks for the post Advantage.

    What has always confuses me on this. But, why invest in someplace you don’t want to live in? Is the place you live not worth your time, effort and money? Would it not be better to invest into your people and place to produce a fulsome outcome for all?

    • Ad 3.1
      29 July 2016 at 10:47 am

      Indeed.
      But capitalism needs land, and more and more of it, so it goes and searches the world for the land it needs. Agri-business in particular needs lots of land, because extensive pastoralism needs thousands upon thousands of acres of grass.

    • srylands 3.2
      29 July 2016 at 10:57 am

      You invest where you can maximise risk adjusted returns.

  4. Leftie 4
    29 July 2016 at 10:50 am

    “New Zealand needs a stronger set of rules to stop our best land and agribusiness being sold off to foreigners.”

    Absolutely correct. It’s insanity for a country like New Zealand to sell it’s core business to it’s foreign competitors.

  5. Nova Scotia 5
    29 July 2016 at 11:22 am

    http://www.stuff.co.nz/business/farming/82568204/chinese-company-majority-investor-in-200m-southland-dairy-plant

    What is interesting about this investment is the complete lack of understanding of the implications that it and others like it will have for future dairy payouts in NZ and the subsequent decrease in land values, which will be snapped up by foreign investors who control the processing plant.
    At a time of declining or flat line production in the NZ dairy industry, additional investment in plant is adding more production capability which is decreasing productivity and efficiency of existing plant, which is primarily owned by Fonterra. This means the cost of production per kgMS will increase for Fonterra, and therefore its payout will decrease. Eventually, with increasing new investment in plant by foreign investors at a time of static supply, Fonterra will slide into an irreversible cycle of lower production volumes, higher costs per kgMS, lower payout, less suppliers and so on.
    Now you might say this is competition and market forces at play, and the demise of Fonterra is no bad thing, but the reality is that most industry payouts available to dairy farmers are currently pegged to the Fonterra payout (as suppliers always have the option of moving back to Fonterra) and land prices reflect that.
    But when you remove Fonterra from the equation, payouts will become at the discretion of the privately owned dairy manufacturers.
    So, irrespective of global markets, dairy payouts will decrease in NZ as foreign ownership of dairy manufacturers increases and Fonterra’s production and payout decrease.
    I hope farmers and those saying foreign investment is good for NZ know exactly what the consequences of this foreign investment will be for themselves, for land prices, for the banks and for eventual control of NZ farm land. Because it isn’t pretty.

    • Pat 5.1
      29 July 2016 at 12:14 pm

      +1

      it isn’t necessarily misunderstood, but it is ignored within the short term horizons of everyone involved….am trying to recall that other sector bedeviled by short-termism recently…..

    • Ad 5.2
      29 July 2016 at 2:24 pm

      It’s a little strange to be in full agreement with Federated Farmers’ spokesperson who is quoted as very cautious about the proposal saying:

      “I’m concerned about the high level of offshore investment, I would have preferred to see it sourced more from local funding.”

      There was also “plenty of stainless steel” in Southland, with Fonterra’s Edendale drying plant not working to full capacity.

      Whereas the local politician doesn’t care where the capital or the ownership comes from, simply saying the plant was “massive” for the district, and would inject an estimated $90m into the local economy.

      “It’s fantastic to see this investment opportunity come to fruition. We haven’t seen that kind of investment here for a very long time,” he said.

      So not only is the meat processing going to the Chinese, so is much of the southland dairy processing.

      This comes to a very practical point: you get rich on the processing, value-added products, and retailing. Not on the commodity production. Ownership of agricultural land and agri-business is the most important way to get and stay rich in New Zealand.

      New Zealanders should be the ones to get rich first.

  6. Draco T Bastard 6
    29 July 2016 at 5:47 pm

    New Zealand needs a stronger set of rules to stop our best land and agribusiness being sold off to foreigners.

    Yes, we do. We need a complete ban on offshore ownership.

    • weka 6.1
      29 July 2016 at 8:02 pm

      The thing I find interesting is that we (NZ) can conceive of restricting house sales, but rural land sales have gone through a similar price spike and have affected NZers ability to buy and work the land. Which then begs the question of why it’s taboo to talk about banning, and do we really believe the NZers can’t be good land custodians? I get that the hardcore neoliberals don’t know how to run the economy without overseas investors, but that’s just money grubbing. Not sure why NZ culturally is hesitant about a ban though.

      • Draco T Bastard 6.1.1
        29 July 2016 at 9:40 pm

        The thing I find interesting is that we (NZ) can conceive of restricting house sales, but rural land sales have gone through a similar price spike and have affected NZers ability to buy and work the land.

        Actually, IIRC, Labour jumped at the restricting rural sales first.

        Not sure why NZ culturally is hesitant about a ban though.

        I don’t think that NZers are. It’s the politicians playing nice to rich people rather than doing what’s right for their nation.