Aussie dairying mat out for Chinese

21-06-2010 | Richard Rennie

Chinese buyers have become a big part of the Australian rural landscape market as New Zealand buyers have faded into the background.

"Chinese buyers have tended to come along and buy on a ‘walk in walk out basis' taking an interest in properties that have the potential to milk around 1000 cows," said Rabobank senior rural manager Daker Pern.

He was part of an Australian Rabobank team at the National Agricultural Fieldays in Hamilton last week presenting farmers options and insights on dairying in Victoria.

The growth in Chinese rural investment in Australia comes as New Zealand grapples with the concept of Chinese interest in dairy land here.

Bloomberg news service reported earlier this year that Chinese investment in Australian farm land had increased tenfold in only six months. This was partly a result of a relaxation of property investment rules there that had seen a surge in house prices through the larger cities.

Chinese buyers were taking a long term view on securing food supply sources had purchased in North Victoria, usually paying above the market average for properties after lengthy negotiation periods, said Pern.

Directors of UBNZ, the Chinese company wanting to invest in dairy land here had expressed frustration at the overseas investment requirements in NZ. They have threatened to take funds elsewhere to invest, including Australia.

Usually after two years of ownership it was not uncommon for Chinese workers to be installed on the properties and a service industry had grown around addressing the needs of the Chinese operators.

Pern and Rabobank colleague Andrew Mann of Shepparton said Australians were generally comfortable with the issue of Chinese ownership, viewing it as simply another wave of foreign investment coming after Japanese interest in real estate and British much earlier than that.

"What is probably a bigger concern for us is the reliance being placed upon China in general as a market," said Mann.

He suspected Australians' comfort with the purchases stemmed from the close ties the country already had through mining activity.

Meanwhile the global credit crunch and commodity downturn had squashed Kiwi interest across the Tasman in dairy properties, but for those wanting to make the move the cash profits were again looking positive.

Extensive rain through much of Victoria and New South Wales had seen significant drops in water right costs, down from a peak of A$1200/megalitre to only $80/megalitre.

Grain prices had also dropped to near record lows to A$160/tonne from a peak of $450/tonne.

Payout was looking positive also with the new season kicking off with companies due to announce their individual advances. These would be from a base of around A$4.50/kgMS.

"Kiwis were basically driving up the market prices a few years back and like here we have seen land values drop back, possibly not as significantly as here," said Mann.

Prices varied depending upon what part of Victoria farms were in, with the cheapest land in North Victoria of A$10,000/ha plus water to A$15,000/ha in the more reliable water catchment of Western Victoria. Tasmanian land around Circular Head was among premium prices at $25,000/ha.

The drought had taken a big chunk out of national production, down to 9 billion litres per annum from a peak in 2002 of 11 billion. The resulting capacity surplus had left farmers in the box seat for choosing payment and supply terms from the six competing processors, said Mann.

  Printable View