Opinion: Let’s put foreign investment in agricultural land in perspective

Bill Loughnan, Thynne & Macartney*, 17/02/2016

bill-loughnanWE are all aware of the ongoing debate in relation to foreign investment in agricultural land in Australia, and that it is a hot political issue.

Feelings can run high and a large majority (81 percent) of Australians are against the Australian Government allowing foreign investors to buy Australian farmland to grow crops or farm livestock, with 63pc saying they are strongly against.

I was recently asked to comment on Dick Smith’s rejection of foreign investment in agriculture, specifically in S. Kidman & Co Ltd. Mr Smith is one of the Australian Agricultural Company’s biggest shareholders. The question I would pose to Mr Smith is, “would his approach be different if he was a shareholder in S. Kidman & Co?”

About 95pc of the nation’s farms are family owned. Despite adverse conditions that commonly affect regional areas such as droughts, floods and increasing salinity, these family farms demonstrate a remarkable degree of resilience.

However, the reality is that the most productive Australian farms are largely commercial, non-family based farms. The challenge thus facing Australian agriculture is to turn the family farms into more productive and commercially viable units.

It is important to put foreign investment in context.

In 2013, foreign investment in Australia totalled around $170 billion of which only 2.2pc ($3.6 billion) was associated with agriculture. The vast majority was mining ($50 billion), manufacturing ($30 million) and services ($20 billion).

In the five years ending in June 2012, the regulatory authority in Australia, the Foreign Investment Review Board, approved $12.6 billion worth of investment in agriculture which amounted to only about 1.5pc of the $844.8 billion in approved foreign investment in all Australian enterprises.

The countries investing in Australian agricultural land over that period included Canada (25pc), United Kingdom (22pc), US (12pc), UAE (5pc), New Zealand (4pc) and China (less than 1pc).

In recent months, Thynne + Macartney’s Agribusiness Group has been involved in two signature deals in the beef sector involving foreign investment:

  • Wollogorang, situated in the Gulf of Carpentaria in the north of Australia, an area of 709,000 hectares (2700sq m) running about 40,000 head of cattle, bought by a Chinese billionaire Xingfa Ma for A$47 million.  Mr Ma already owns an extensive portfolio of pastoral properties in Australia.
  • Walhallow and Cresswell Downs situated in the Barkly Tablelands in the Northern Territory, an area of 999,000ha (3800 sq m) running 50,000 head of cattle bought by interests associated with Brett Blundy, one of Australia’s richest individuals now living in Singapore for A$100 million.  Again, Mr Blundy has extensive interests in pastoral Australia.  The seller of Walhallow and Cresswell Downs was Paraway Pastoral Co, Macquarie Bank’s rural trust – itself a foreign owned investment vehicle.

Both transactions required the consent of the Foreign Investment Review Board which was obtained without undue delay or hindrance.

While such acquisitions will continue to be monitored by the Federal Government (foreign owners, existing and future, are now required to register their interests) the reality is Australian broadacre agriculture has been and will continue to be largely reliant on foreign investment.


*Bill Loughnan is an Agribusiness Partner with Brisbane-based law firm Thynne + Macartney.





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  1. Katrina Paine, 21/02/2016

    Very interesting discussion. As a general principal I support foreign investment, but I do question whether or not Australia should allow sale of agricultural land to countries that do not allow Australia/Australian investors to purchase land in that particular country eg China – my understanding is that no land in China is sold to foreign investors – is that the case?

  2. Michael Craig, 21/02/2016

    Good discussions …well balanced and well constructed , intelligent discourse ….excellent.

    One little thought….family farming will have a challenge to compete against corporates in terms of risk management. The challenge is to allow smaller scale family farming, which is the back bone to the social fabric of rural Australia and incredible resilient, to improve its efficiency through increasing scale,. So why set the trigger for foreign investment approval so low @ 15m, which may encourage foreign investors to buy smaller parcels which don’t require approval, unless it’s state owned enterprise, that compete directly against smaller operators. Perhaps they should be restricted in buying anything under a certain level, and if so only allowed to buy to 49% control with a domestic partner.
    Get capital in at the right level and let competition for land operate at a like for like level, while trying to maintain the social fabric of agriculture.
    Very idealistic I know, and where do u draw the line ? 20 m. ? What’s corporate and what’s family farming… And what perverse outcomes result ? I would argue the current triggers are the wrong way around and encourage corporate investors to compete directly against smaller scale farming.

  3. Rhonda Price, 21/02/2016

    Very interesting comments I too think foreign investment is the way to go watched carefully by governments BUT would like to see Ausyralian Corporate BODIES SET UP FOR ONLY AUSTRALIAN IMVESTERS TO INVEST IN

  4. Bill Loughnan, 19/02/2016

    Geoff Donovan – the primary focus of our agribusiness group has and will remain the family farm in northern Australia- the more successful of these farmers are taking an increasing sophisticated approach. I can send you an article I wrote some time ago on collaborative farming if you’re interested. As to our interest in acting for foreign buyers, yes – we are in the business of providing legal services to primary producers – domestic and foreign.
    Jack Hewitt – you’re right, to a point. A number of states (including Queensland) had had laws requiring registration of foreign investment for any number of years so some statistics are available if you’re interested.
    Pete Mailler – I agree with much you say – and your comments on viability. Many of Australian farmers are the first to concede they are carrying far too much debt – a subject very dear to my heart. Viability\survival\mental health\environmental and social implications ares therefore crucial issues – have been and will continue to be. Cheers,

  5. Jack Hewitt, 19/02/2016

    I’m not against foreign ownership in any manner, however there are a number of key statistics left out of the article such as:
    1. What % of Australian land is foreign owned and by whom?
    2. What % of the value of Australian ag land is foreign owned and by whom?
    3. How do the answers to questions 1 & 2 compare to other nations?

    The Federal Government’s Agricultural Land Register, currently in development, will hopefully answer some of those questions, Jack. We’ll keep readers posted. Editor

  6. Pete Mailler, 18/02/2016

    There are a few flaws in the generalisations above.

    Bill suggests corporate agriculture is more productive and by inference more profitable. By which measure, in which sectors and on what timeframe are corporates more productive? People who use short term economic indices only to measure performance and productivity are missing the point in relation to assessing the real performance of agricultural enterprises.

    The challenge facing agriculture is that public policy has shifted to such an extent that most family enterprises are struggling to maintain short term competitive capacity particularly in the face or market or production interruptions. Patient money associate with corporate enterprises and particularly foreign investment funds means these enterprises have a distinctly unfair trading advantage. This is particularly true for debt funded family enterprises facing a domestic mortgage default risk.

    The reality is that the best stewards of our land are viable family enterprises that have an emotional connection to the well being of their land and a desire to leave it better than they found it for the next generation. The kind of investors Bill is promoting have little invested in these outcomes.

    In closing I suggest that measures of foreign ownership need to take into account the percentage of production and rather than simplistic measures of area or number of enterprises.

    Australian agriculture is globally significant and we have an obligation to preserve its legacy for the benefit of future generations of Australians rather than rationalise its sale to the highest bidder.

  7. Michael Vail, 18/02/2016

    Also consider why many long-term holders are selling property held like a portfolio. These are experienced players, and very sophisticated investors.

    Ask yourself if they are seeing a toppy market for property and selling something to lock-in capital gain at the top of the market.

    Quality property, that has been well developed and maintained will always sell for a premium; but is 100% a reasonable expectation.

    These sophisticated investors know they will buy back in later, when price is closer to true value.

    This is just rational thinking and logic!

    Just saying …

  8. Michael Vail, 18/02/2016

    ‘Market Forces’ rule …

    The Japanese were here big time in the early 1980’s, and everyone thought they were buying everything and when the bubble burst eventually, which it usually does, with prices reverting to long-term value (mean reversion), and they all went home to Japan, we were left with the holes in the ground on the Gold Coast which may still be seen today; 30-years later.

    I am not going to say, “This time it is different”; because it probably won’t be.

    However, I will say this; in my opinion, and depending upon your investment horizon, and how much you borrow, and how much you pay as a premium to get in, farming, grazing and pastoral enterprises are a good investment ; just not at these prices!

    Why, I hear you ask?

    Because, eventually there will be a market shock, especially in these times of artificial asset prices (the new normal, it is being called), and as agricultural produce is a commodity when dealt with in bulk (and will arguably remain so), there will be a mean reversion to long-term value, and a lot of people may have paid too much.

    The other factor is the direction of interest rates; especially when what ails world markets is continually being kicked down the track. The bad medicine will have to be swallowed eventually, and the pain will be worse.

    I am seeing sales of pastoral zone grazing land and some smaller grazing blocks inside, where the price paid BARE is the same as what rationally should be paid WIWO.

    This is crazy; as you still must buy the cattle and Plant to operate and hope for a profit.

    If you have held land since the bears were bad, then it is a dollar cost averaging exercise; but for the new investors, watch your shirt.

    Something to consider, when taking a long term view.

    Patience may be rewarding.

    Any thoughts out there …

  9. Geoff Donovan, 18/02/2016

    I don’t agree with you Bill. Might your outfit have an interest in foreign rural investment in Australia?

  10. John Stibbs, 18/02/2016

    The problem with the Chinese,they cannot be trusted in my view,our laws ,contracts etc mean nothing to them.

  11. Justin Boshammer, 18/02/2016

    I agree with many of the points raised, however I feel there is a delicate balance to be had, specifically foreign investment into farmland. I believe it’s highly important that young, aspiring farmers also have the opportunity to create wealth in this country. I feel there needs to be some commercial reality around land prices, as it is more often than not the cost of farmland that contributes to the cost of production the most.
    Presently, as someone who leases grazing land, it is difficult to pay any more than 3-4% on the value of the land. Therefore, if this is the current gross return on farmland around Australia, I would question increasing the level of demand for farmland.

  12. Michael Vail, 17/02/2016

    Well said, Bill Loughnan! A very reasoned and seasoned argument. I do not understand the escalation in xenophobia when it comes to Chinese Investment. I think it may have a lot to do with an irrational fear of something that is not understood.

    We welcome the British, the Americans, and the Canadians, because they are ‘just like us’.

    Chinese Investment is only just starting in this country, do get used to it.

    Just remember people, they cannot take any fixed asset with th, and as any investor is entitled to a return on capital employed, I say good luck to them.

    We need their capital to evolve and to reach our full potential. And they are good long term friends to have, particularly in Asia where we live.

    They have plenty of capital looking for a good home, and are very interested in long-term partnerships and JV’s.

    Let us join hands and walk forward together. We have land and they have capital. Sounds like a complimentary relationship to me.

    Food for thought …

  13. David Foote, 17/02/2016

    Good call Bill – I am increasingly concerned that the current emotion is around Chinese investment, not foreign investment, as I don’t recall such emotion when 30% of AA Co was sold to the Joe Lewis (Bahamas tax haven), CPC was purchased by Terra Firma (PE in Gurnsey tax haven), 34% of NAPCo owned by MPEvans (UK listed).

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