Article – China free trade agreement expected to tip billions into Australian farms, dairy industry to be popular with investors

1 September 2015
Dylan Welch and Jeanavive McGregor
ABC News

From vast Central Australian cattle stations to the smallest southern Victorian dairy farms, the Australian agriculture sector is expecting a transformation later this year, with food-hungry Chinese companies in negotiations worth billions.

The deals are the result of a recently signed free trade agreement which has removed trade tariffs and lowered barriers to investment in Australia for a mix of private firms and sovereign wealth funds from China.

One investment fund, a joint venture between the Chinese government-owned Beijing Capital Group and Australian-based businessman Huang Changran and his company Yuhu, is expected to tip as much as $3 billion into the Australian agriculture sector on its own.

While the Yuhu and Beijing Capital fund has yet to make its first purchase, it is in negotiations with Australia cattle companies and plans to create a supply chain stretching from Australian cattle stations to Chinese supermarkets.

“The Chinese/Australia FTA will increase the interest in Chinese companies to start looking at these Australian companies and start looking at them because the FTA opens up those channels so those companies can sell back into the Chinese market,” Dr Jeffrey Wilson of Murdoch University told 7.30.

One area expected to be popular is the dairy industry.

“China is interested in everybody’s dairy products,” Dr Wilson said.

“This is partially driven by Chinese consumers, where there have been concerns over the safety of Chinese dairy in recent years, and also the rapid expansion of an urban population in China with a much increased demand for dairy products that the Chinese cannot meet.”

Last year Chinese company Ningbo Dairy bought a pair of adjacent farms in the farming hamlet of Kernot in south-eastern Victoria. Ningbo combined the two properties and named them Yo You Dairy.

Initially the locals welcomed the investment, but in late January Ningbo unveiled plans to radically alter the farm. It wanted to double the herd size and build a bottling plant and other industrial-sized sheds.

Locals were horrified, saying the effluent run-off would be toxic to the local area and it would be an eyesore in an area known for its tourism.

“Their [planned] shed, where they were housing the dairy cattle, was basically 2,409 metres long, by 40 metres wide, by 14 metres high — so over four acres of land,” Kernot local Lisa McPherson said, adding that the shed would have been “bigger than a shopping mall”.

PHOTO: John Versteden says he felt for a Chinese company that sparked outrage with plans to alter a Victorian farm.

Not all local farmers were as outraged.

“I sort of feel for Yo You a little bit,” said John Versteden, who runs a dairy 45 minutes north of Kernot.

“There’s been a lot of talk around the industry but not a lot of action and they have been the ones that’ve taken the big risk.”

Last month the local council scotched the Yo You plans, though the company can still appeal against the decision.

The tensions created in Kernot by the Yo You dairy, though small in scale, may become more common given the flood of Chinese money about to hit the Australian agricultural sector.

“Neither side wants this to fail,” said Martine Letts, the head of the Australia China Business Council.

“Australia needs investment, China needs our product. We have wonderful clean, green food to sell … and provided that it is managed in the appropriate way, it’s really win-win.”

PHOTO: The dairy industry is expected to be popular with investors

Courtesy of ABC News

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