AT LEAST $4 billion is being raised to buy rural property around Australia, but a Senate inquiry on Wednesday reviewing foreign ownership rules could jeopardise further offshore investment.
With sovereign wealth funds seeking food security, and pension and private funds looking for a safe haven from inflation and dire financial markets, at least 10 funds are trying to attract investment and buy farmland, reports The Australian Financial Review.
The Senate review, launched by the federal opposition after calls from Liberals, Nationals and the Greens for more stringent rules on farm purchases, has caught the eye of Hassad Food – a company backed by the Qatar government which has spent more than $100 million buying farms along Australia's eastern seaboard.
Hassad Australia chief executive Tim McKeon says he supports the examination of the Foreign Investment Review Board's national interest test this week but he foreign investment must continue.
"Foreign investment has always been an important feature of agriculture in Australia and without it Australian agriculture would lose important capital and access to international markets," he says.
A committee of senior Coalition MPs is expected to consider laws such as those in New Zealand which require government approval for land purchases greater than five hectares. The current rules require foreign investors to obtain federal government approval for purchases of more than $231 million.
The number of sovereign wealth funds with an interest in Australian farmland has become more notable since China's largest coal producer, Shenhua, started buying land in northern NSW.
Since then, Qatar's Hassad has moved in, a Middle Eastern sovereign wealth fund has chipped in more than $50 million for listed timber land company TFS Corporation and the Swedish National Pension Fund has teamed up with US institutional investor TIAA-CREF to buy farmland in Australia.
TIAA-CREF has already invested in 180,000 hectares of cropping country in Australia through Westchester Group's $300 million International Agricultural Investors fund, and the Swedish fund is investing about $240 million in a similar vehicle.
Australia's response so far to this sovereign investment came in the form of the country's $73 billion Future Fund in August.
Its guardians formally committed up to $200 million for a rural property fund, managed by listed farm manager PrimeAg, which aims to buy $600 million worth of cropping land.
The Future Fund's decision to proceed was not presented as a defensive political gesture to growing concern about sovereigns securing farmland at any cost.
Instead, fund chairman David Murray pointed to a decision to further reduce exposures to listed equity markets.
Warakirri Asset Management has two funds covering dairy and cropping. Together they are now worth well over $150 million.
Another fund aligned with a major bank has the ultimate aim of managing $1 billion worth of diversified farms. It is biding its time before going public.
And while it may seem like a lot of money for what many agents in the market regard as a shortage of prime agricultural land, there is in fact a great deal of opportunity to invest in billions of dollars worth of farms.
High debts and ageing farmers have placed a generation of farms on the market, including prominent holdings such as the controversial Cubbie Station in south-east Queensland and Carrington Farms in northern NSW. Those two farms alone represent almost $600 million.
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