July 11, 2011


Australia's agribusiness sought by international buyers to meet rising demand



Overseas buyers seeking to secure supply to meet surging food demand may boost investment in agriculture assets in Australia.


"We face a realistic prospect that Australian agribusiness may in the near future be run from boardrooms in Singapore, New York and Shanghai," Queensland Sugar Ltd. Chairman Alan Winney wrote in a report for the Australian Farm Institute.


Rising incomes and economic growth in emerging markets including China and India are fueling demand for farm products and helping drive food prices higher, according to the report.


"Asia is seeking out food and energy resources to support this phenomenal growth now and the preferred agribusiness investment locations are Australia, South America and sub- Saharan Africa," Winney said in the report.


"Nations in the southern hemisphere will increasingly need to supply the food imports of the northern hemisphere," Winney said. "Future food demand will be driven by growth in Asia."


World food output will have to soar 70% by 2050 as the global population climbs to 9.2 billion from an estimated 6.9 billion in 2010, the FAO estimates. The price of staple foods including corn will more than double in two decades without action, Oxfam International said in May.


Monthly food prices tracked by the FAO have surged 10 times in the past 12 months, and this month stayed near a record reached in February, on higher sugar, dairy and rice prices. The World Bank estimates higher food prices have pushed 44 million more people into poverty.


Growth in agricultural output will slow to 1.7% a year through 2020, compared with 2.6% in the previous decade, FAO and the Paris-based Organization for Economic Cooperation and Development said in a report last month.


"Food and energy security are driving 25-year forward planning in some nations," Winney said. "Some governments are building strategic food reserves as a counter against food inflation and sovereign funds are investing in productive land at lower returns in order to guarantee supply lines."


Twelve of 23 licensed wheat exporters are Australian-owned, while 60% of the grain storage companies are owned by foreign interests, according to the report.


Australia's biggest wheat exporter is Minneapolis-based Cargill Inc., which operates as Cargill and AWB, Winney said.


In 2009, Viterra Inc., based in Regina, Saskatchewan, Canada, purchased ABB Grain Ltd., Australia's biggest barley exporter.


"In two years it is likely that the majority of Australian wheat will be exported by international companies," said Winney, who is also chairman of grain-marketing company Emerald Group Australia Pty. "It is debatable if there will be a surviving Australian-owned storage business."

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