Foreign investors chasing Australian agribusiness and agriculture

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by Duncan B.  (June 2014)

Australian agribusiness is becoming increasingly attractive to foreign investors. Private equity investors have been involved in some big purchases recently.

European firm R&R, which is owned by French private equity firm PAI Partners, recently bought Australian ice cream maker Peters in A $400 million deal.

US private equity firm Kohlberg Kravis Roberts tried a $3.05 billion take-over bid for Treasury Wine Estates, the makers of Penfolds.

In June 2013, TPG Capital bought Ingham Enterprises, one of Australia’s biggest poultry producers for $880 million.

There have several other deals as private equity buyers target packaged foods and meats, companies with strong brands that can be used to improve their own portfolios and food distribution businesses. 

Most of Australia’s grain trading firms are now foreign-owned.

Large, well developed farms in the Riverina, northern NSW and southern Queensland have become targets for foreign investors. Large properties suited to grains and oils, cotton, irrigated cropping and edible nuts are in strong demand.

The source of funds for foreign investors include pension funds, insurance funds, endowment funds sovereign wealth funds, ultra high net worth individuals and families and trading houses and corporates. All of these represent different forms of finance capital, the most rapacious and best organised section of capital in the era of imperialism.

Some foreign investors are seeking joint ventures with Australian farmers and companies. This could be more beneficial to Australian farmers and agribusinesses than direct take-overs.

For example, West Australian biggest meat processor, the Walsh family has signed a $1 billion partnership deal with Grand Farm, one of China’s biggest food companies, for 500,000 lambs and 30,000 cattle to be processed in Australia and shipped to China.

The joint venture includes a $200 million investment in WA and the provision of expertise in livestock production and sheep genetics by Walsh as part of $800 million being spent on the development of farms in Inner Mongolia.

Nevertheless, joint ventures between partners of unequal strength can have serious shortcomings. These can include an imbalance in levels of expertise, investment or assets brought into the venture by the different partners.  Such an imbalance has the potential to allow the stronger partner to dominate the weaker.

Capitalism is not a system that manages the contradictions between “partners” to ensure equality.

In that sense, joint ventures may represent the foot in the door that leads to a complete takeover of the weaker by the stronger.

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