Cargill Australia managing director Phillipa Purser says foreign investment globally is important
- From: The Weekly Times
- May 26, 2014
“WE can have a nice debate about foreign investment here in Australia, but in the global context it isn’t a discussion about whether it is nice to have, we need it, we absolutely need it.”
With those comments Phillipa Purser clearly demonstrates which side of the fence she sits on when it comes to foreign investment in agriculture.
The Cargill Australia managing director reckons there’s no two ways about it: to feed the hungry world foreign investment in agribusiness and farmland is vital.
“When you get down to individual countries, particularly in the developed world, we can have different kinds of discussions, but at a global level if we don’t get more investment into ag and agribusiness we will not be able to feed the world going forward,” Ms Purser said.
With headquarters in the US, Cargill is a multinational and foreign investor on the pointy end of the scale — employing more than 140,000 people in 66 countries. The Australian arm of the business, established in 1967, has a strong focus on the local grain and oilseed industry while also operating joint ventures in beef processing and flour milling.
Addressing a foreign investment forum at Marcus Oldham College near Geelong this month, Ms Purser said globally, across all sectors, agribusiness accounted for about 5 per cent of the foreign investment pie, with farmland accounting for about 0.5 per cent.
She acknowledged that while that was a small percentage, agribusiness was growing, being almost non-existent a decade ago, and only fuelled by a spike in world food prices in 2007 and 2008. About $13-$25 billion is invested in global agriculture each year by foreign entities, she said, with 70 per cent of that invested in just 11 countries; seven in Africa: Sudan, Ethiopia, Zambia, Mozambique, Tanzania, Madagascar and Congo; two in South America: Brazil and Argentina; and two in Asia: Indonesia and the Philippines.
Ms Purser said the importance of Africa could not be underestimated when talking about feeding the world and therefore its ability to benefit from foreign investment.
Africa was “a piece of the answer” despite it not contributing much so far due to issues associated with land rights, water management, political instability and financing.
“When you look at available land that isn’t today being used by agriculture, but could be, a lot of it is in Africa — places like Sudan, Zimbabwe, Zambia,” she said.
“We do need to sort some of those issues to be able to make them productive, but you’re starting to see the investment there and it really does need to come from foreign investment because locals and local governments don’t have the money.”
Ms Purser said most investment in agriculture globally came from local farmers.
“That’s true today, been true in the past and going to be true in the future,” she said.
Ms Purser said most foreign investment in African farmland originated from the Middle East, China and parts of South East Asia, while investment in Brazil and Argentina was coming from North America and Europe.
She said the greatest investment, 83 per cent, related to broadacre farms, 13 per cent to livestock and 4 per cent in other crops such as viticulture and sugar.
Investment mostly came from large agricultural companies “who see commercial opportunities”, energy companies, sovereign wealth funds and hedge funds.
She acknowledged the issue had exploded since the 2007-08 food price spike “really scared a lot of governments”.
“A lot of countries put export bans on.
“They weren’t sure where the supplies were coming from and if they were going to be reliable and they weren’t sure about the prices because they went strongly up and then came down,” she said.
“A lot of countries at that point said ‘we need to do more to manage our self-sufficiency’.
“You started to see a lot more foreign investment coming in as people tried to secure those chains.”
Ms Purser said this forced many countries to introduce bans or restrictions on foreign investment in agriculture.
While the UK and Ireland have no restrictions, regional restrictions existed in Canada, Zambia and the US, where, “in large parts of the mid-west you’re not allowed to sell land to foreign investors but you can lease it”.
There were tighter rules in Australia, New Zealand, France, Mozambique, Tanzania, Hungary, Russia, Poland, Romania, Argentina, Brazil and Uruguay, with blanket bans on foreign investment in farmland existing in China, Ukraine and Belarus.
Ms Purser said foreign investment worked well from an infrastructure, technology, food safety and economic perspective. She cited Brazil as an example: “a huge country with a very underdeveloped road system”.
“Unless you cannot only grow the crops but get them to market then it doesn’t work because the price that the farmer gets is too low and/or you lose too much in the transport,” she said.
Ms Purser said Australia was in a fortunate position to be able to grow “pretty much everything we want to eat here, and still have an exportable surplus that we can sell, particularly in wheat and beef and another products”.
“Even so, the issue of foreign investment is a highly emotive one. But it comes a lot more emotive if you are actually in deficit,” she said.
● Next week: The Australian story