Last week’s sale of Temora agribusiness, BFB, to Canadian super fund, PSP, has fanned concerns around whether Australian bidders are competing on a level playing field, despite the foreign investment rules.
Those concerns are two-fold: firstly, are the rules allowing Australian investors to be shut of the market to favour bigger overseas investors? And secondly, are some of these land parcels making less per hectare than if they were offered in smaller lots?
As more farms are consolidated, agriculture nudges toward a situation where we have more large land parcels being offered and these larger parcels are more attractive to big business – including foreign investors.
Foreign investors do prefer to be able to walk in and buy larger operations as a neat job lot.
However, this locks more land into fewer transactions and each of these parcels require more capital to purchase due to their sheer size.
The cost of finance also varies, especially in other situations where a bidder may have government backing. But it is not always as straight froward as who is the highest bidder.
Agrinova reportedly put $62 million more on the table than PSP, but the sale is still going offshore.
So where does this shift towards creating corporate-sized parcels leave the family farmer, and likewise, Australian corporates?
We already see these bidding opportunities dominated by foreign players. The current Ceres sale process has attracted 70 per cent offshore interest.
A Sydney Morning Herald report in September last year also said “in Tasmania, where farmland is often highly sought after because of fertile soils and good rainfall, 24.3 per cent (or about 354,000 hectares) of agricultural land is foreign owned”.
While the $15m land assets value is a good start for where to begin scrutiny, we also need a cap on ownership in key regions – like Tassie – and we need reform to help locals compete on an even footing with the bid process.
The offshore dollar helps add value to the market overall, and can bring useful capital.
But right now, a lot of those dollars are being sunk into already highly developed areas that Aussie players are being increasingly locked out of, while other areas remain less developed.
The argument therefore that we need these foreign dollars to develop infrastructure has its limits.
