Analysis: What's eating Australia? Foreign buyers at the farm gate

Sun Oct 28, 2012 3:05pm EDT
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By Lincoln Feast and James Grubel

SYDNEY/CANBERRA (Reuters) - Australia risks losing an opportunity to become a farmyard for Asia, as growing unease over foreigners buying rural land threatens to provoke protectionist policies that may deter much needed investment in agriculture.

With its vast landmass, abundant natural resources and stable government, Australia has relied on foreign farm investments for more than 100 years, with interest set to grow as the world looks to dramatically boost food production to feed Asia's booming middle class over the next 40 years.

"I think we are going to see a continued interest. The soft commodities boom around the world and the demand for food will continue to drive that interest," said Jock Laurie, head of Australia's top farming lobby, the National Farmers' Federation.

The latest wave of interest in Australian agriculture has seen a number of high-profile deals involving Chinese investors, including the purchase of the country's biggest cotton farm, as well as foreign takeovers in its deregulated wheat industry. U.S. firm Archer Daniels Midland is bidding $2.8 billion for Australia's dominant grain handling company, GrainCorp.

But the growing interest has ignited a political debate and raised the risk of tighter foreign investment rules in a country generally seen as more open to investment than farming rivals Canada and New Zealand.

"We know foreign investment is important to Australia. But we need to make sure we're not selling the cow along with the milk," said independent Senator Nick Xenophon.

The issue is a sensitive one in mostly conservative rural communities, particularly for a government struggling in opinion polls and facing elections in late 2013.

A poll by the Lowy Institute think tank this year found four out of five Australians opposed the government allowing foreign companies to buy Australian farmland. Some 63 percent were "strongly against" such sales.   Continued...