Date: August 20 2012
The conventional wisdom of politicians and economists is that the Australian public is only worked up about foreign ownership of agricultural land because the community is misinformed. This view drives the belief that a register of foreign land holdings will calm everyone's anxiety as it will show that foreigners own just 10 per cent of Australia's agricultural land.
Given that Queensland has had such a register for 20 years, and that disquiet about foreign ownership still resoundingly resonates among Queenslanders, this means that something else is at play. And it is that the public does not like foreigners buying agricultural land. In the 2012 Lowy Institute's public opinion survey, 81 per cent of respondents were against the Australian government allowing foreign companies to buy Australian farmland to grow crops or farm livestock. This contrasts to the public's more relaxed view about foreign ownership of other assets. In a 2010 Investor Pulse survey, just 60 per cent of people supported limits to foreign ownership of residential property.
The difference between the concerns about farm and other types of foreign ownership cannot be simply explained as xenophobia, scaremongering or ignorance of foreign investment benefits. For none of these uniquely apply to the issue of ownership of agricultural land. Instead the most likely reason for the very high concern about foreigners owning farms is because control of food production resonates strongly at a cultural and even visceral level. Food is absolutely essential for life, and its quantity and quality drives perceptions of our quality of life. It is not simply a tradable product like iron ore or car parts.
All foreign ownership raises concerns such as the loss of local jobs to imported labour and the decline of regional business caused by the new owners importing all their inputs. However a concern unique to foreigners owning farming land is the fear that Australia could be a massive agricultural producer but this food is all shipped back to the home country to feed their citizens, regardless of the consequences here. Quarantining this food from the agricultural market means not only that Australians are unable to buy this food, but also the total global food market is reduced. This means that small declines in world food production can result in large price swings and food shortages for the poor.
The government's agriculture research body, the Rural Industries Research and Development Corporation, disregards the possibility that countries buy overseas farms as part of their strategy to secure their own food supply. In its 2011 analysis of foreign investment in Australia, the authors assert that it will always be cheaper to purchase food from the world market rather than sourcing supplies from other countries owing to the logistic costs of shipping produce all the way to the home country. To support their argument, they note that for a country to implement such a strategy the land purchases in Australia would have to be vastly increased. The report notes specifically that there is no unambiguous evidence that China is adopting this approach as part of its national food security strategy.
RIRDC's logic is sound, providing governments always make decisions based solely on economics. But they don't. In the case of China, domestic politics and cultural preferences are key reasons why they are likely to make food security decisions for non-economic reasons. China and famines have a long history, with the last great Chinese famine occurring in 1959-1962. This one claimed at least 20 million lives and many Chinese who are today 50 or older have personal experience of starvation. To ensure this never happens again, the Chinese have made increasing food availability and supply stability a national priority. The legacy of this is easily seen today with its grain reserve figures being a national secret but estimated to be 200 million tonnes, more than double the global average per capita.
While the Chinese have not formally articulated a food security strategy based on buying land in other countries, Qatar has. Following the 2008 world food shortages, the Qatar government-owned agricultural development and investment company Hassad Food Company was given the mandate of securing food supply for Qatar. Qatar imports 95 per cent of its food needs, making it very exposed to world food market shocks.
The local subsidiary, Hassad Australia, originally had the goal of purchasing land so that it could supply 30 to 35 per cent of Qatar's food needs. However, since 2008 and coincident with the improvement in world food availability, Hassad Australia shifted direction and now recognises that food security is best achieved from well functioning markets, investing in farm productivity and commercially viable farms. Today it sells the output from its nine Australian farms to both domestic and foreign markets.
Given the predictions that global food shortages will occur over the next year or so, domestic concerns may push some countries to again pursue foreign land purchases to improve food security.
It is not in Australia's or the world's interests to allow this to occur.
What is needed is for the government to pre-empt this and make a strong public statement that this is totally unacceptable.
This not only strengthens global food security by increasing the market-driven nature of food supply, but also addresses the Australian public's deep distrust of foreign agricultural land ownership.
Dr Athol Yates is the executive director of the Australian Security Research Centre.
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