Xenophobia robs opportunities

The Australian government has warned that a “xenophobic campaign” would rob farmers of opportunities presented by the increasing demand from Asian countries for secure food supplies.

Just 1 per cent of agricultural businesses by number, 11.3 per cent of farmland and 9 per cent of water entitlements have some foreign ownership, a report released yesterday says, according to The Australian Financial Review.

Assistant Treasurer Mark Arbib said foreign investment had significant benefits and that there were already rigorous controls.

However, the Coalition said the report relied on faulty data and the National Farmers’ Federation called for the threshold at which the Foreign Investment Review Board must examine foreign investment in agriculture to be slashed to about $23 million from $231 million.

The Australian Bureau of Agricultural and Resource Economics and Sciences’ report acknowledges growing public concerns but cautions against bowing to them.

“Concessions to concerns about sovereignty, distrust or fear of foreigners are likely to come at an economic cost to countries that restrict the inflow of foreign capital,” it said.

Trade Minister Craig Emerson echoed this, warning Australia could pay a high price for “Hansonite” opposition to foreign investment in agriculture.

“Pessimists and political opportunists see the desire for food security of major emerging countries as a threat. In truth, it is an unsurpassed opportunity for Australian farmers,” Dr Emerson said.

The growing demand for safe, high quality food is also an opportunity for New Zealand farmers and the wider economy.

Some see that threatened by foreign ownership of land and that is partly what is behind the opposition to the proposed acquisition of the Crafar farms by the Chinese company Penqxin.

But as Fran O’Sullivan says:

I don’t believe it is in New Zealand’s long-term economic interest to allow xenophobia, whipped up by a rival (late-comer) bid, to damage a relationship cemented by years of diplomacy by officials in this country and China.

There will be more to the OIO decision than mere political cosmetics. Penqxin will have made sure that its business plan includes processing milk powder from the Crafar farms within New Zealand and to export branded high-value products back to China. Thus it ought to pass the OIO’s muster.

That is also where the value proposition for New Zealand-sourced dairy production lies. Not simply in exporting vast quantities of milk powder to Fonterra’s customers and competitors offshore (including within China) for them to refine. This will lead to more jobs in New Zealand – not fewer.

Appealing to xenophobia in their increasingly vehement opposition to the Penqxin bid does the consortium led by Sir Michael Fay no credit.

The receivers are duty-bound to get the best return for the farms and it appears the New Zealand bid is well short of the Chinese one.

If it wasn’t for the relatively new markets for our primary produce in Asia, particularly in China, New Zealand’s economic position would be in a very dire position.

It is in our mutual interest to further trade and other relationships.

Providing safe-guards are in place to ensure farms aren’t mined and produce meets the high standards on which our reputation is based we have more to gain than lose from foreign investment.

11 Responses to Xenophobia robs opportunities

  1. Meg says:

    I personally am opposed to the sale of the crafar farms to this group not for reasons of xenophobia at all, I think this issue is far more complex than people like to think. Without implying that foreign investors are bad farmers or anything like that (god knows we have bad New Zealand farmers too) I do worry that overseas owners may not have the same connectedness to the land as a New Zealand owner might have, your first sentence in your closing remarks leans itself to this concern ‘providing safe guards are in place to ensure famrs aren’t mined and produce meets the high standards which our reputation is based’ My concern is that these safe guards are not in place. There is nothing to stop this from happening. An overseas investor could set up their own company and compete with a New Zealand owned company quite easily. Furthermore with dairy that new company could claim millions of litres of milk from fonterra under the raw milk regulations set out in the DIRA at farm gate price, so New Zealand farmers would effectively be subsidising their competitors. Personally I think it is crazy that we are required by legislation to do this. With regard to the comment about farms being mined and not looked after and farmed in a way which is sustainable may I suggest a model like that of the pastoral leases for farms which are owned by foreign investors, that way any activities taking place on the farms are above board and monitored. You could argue the added regulation would turn off foreign investors, and yes it likely could, but if an investor is going to farm the land correctly and has no intentions of doing otherwise then there shouldn’t be a problem complying with this. I’d also like to point out another argument I have heard time and time again in the rural community and that is why should we allow investors from country’s that don’t allow us to purchase land to purchase land here? Surely that’s only fair?

    That aside, My main concern is as a young farmer who dreams of owning their own farm one day. With the average age of the farmer creeping up and up every year there is real and warranted concern about the future of our agriculture industry. With many farmers ageing and succession planning lacking with fewer instances of children returning to family farms more farms will be coming on to the market in the future.

    Who is going to take on these farms?

    If foreign investors are allowed to continue to buy up large in New Zealand,tell me how are the young farmers that we do have supposed to reach their goals of owning their own farm?

    Realistically we simply can not compete with the $ that these investors have to offer for our land.

    This is a sentiment echoed all over young farmers clubs, over smokos at shearing, as the vat wash is being put through and by students at Lincoln and Massey. We are seriously concerned that we are not going to have the opportunity to be anything more than farm managers employed by someone else rather than being able to own our own farm businesses and land.
    Furthermore, with agriculture making up a huge part of our economy we need young people to take agriculture seriously as a career choice, industry organisations are frantically offering scholarships and promoting the industry in an attempt to fill the gap that is widening. One of the biggest pull factors to the dairy industry is that it is a relatively progressive one, it is easy to see clear paths of moving from farm worker through to farm owner, it’s not easy to get there but there is an opportunity there if you do the hard yakka.

    If these opportunities lessen or disappear on account of farm ownership no longer being a realistic goal, why would any young person wish to move into a career in the industry?

    Opposition to foreign investment in farms is not all about xenophobia, it’s also about concern that our future goals and aspirations are disappearing before our eyes, and that our land which is the foundation for our rural culture and lifestyle may not be cared for in a manner that allows for generations to come to continue to farm it.

  2. Andrei says:

    It is in our mutual interest to further trade and other relationships.

    Absolutely

    Xenophobia is a big word but is it really a good move to hand over the control of wealth and resources to people who do not share your culture and values?

    Just because scenes like this are not in your recent past does not mean they are not in your future – perhaps you think “I’ll be dead before the darkness falls so it doesn’t matter”?

  3. Gravedodger says:

    Asian investment money, Extraordinary growth in Real Estate developments on the Queensland Coast and the problem is?

    @ Meg, the corner dairy is owned by a landlord from where?
    The Truck drivers rig is owned by who?
    Who actually owns, ie has title to the Agricultural contractors Plant?
    Over 60 years around the Agricultural industry and I have seen many perceived impediments to “Farm Ownership” for young enthusiastic potential farmers who desire to own the real estate.
    In my youth it was local businessmen who had made fortunes in government controlled industries, Lawyers, Doctors, Accountants who raised the cost of land with purchase subsidised from “other money” as opposed to the “young farmer” trying to convince the Bank they could make it work, at interest rates that would make eyes water.
    Many of the biggest land owners in this country started with much debt and little equity.

    The substantial burden imposed on the economic health of New Zealand’s future is the welfare mentality and rewards to those who rely on the state to finance their lifestyle choices at the exorbitant costs on the productive sector and not who “owns the Title” of a small percentage of our productive land.
    Xenophobia much, you will hear the same argument from people trying to start on the ladder of Entrepreneurship via a corner dairy in competition with The Indian Family who work extraordinary hours using family labour, factors that the ordinary New Zealander find unacceptable.

    When the wave of Dutch immigrants arrived here after the 2nd WW, their attitudes to work hours, effort and acceptable conditions were challenging to the locals believe you me.

  4. Meg says:

    @gravedodger While I agree that the welfare mentality is a key problem I disagree with your comment that who owns the title of the land is not. Both are a problem. You refer to a small percentage of productive land, I assume you are referring to the crafar farms in isolation? I tend to think of the crafar farms as an example only. the problem is wider than that and as i said earlier likely to get bigger s more and more farms go on the market as older farmers retire.

    I’m not quite sure what you’re suggesting. – with the insinuation that this is only a perceived problem and by saying that ‘many of the biggest landowners in the country started with much debt and little equity’ – true but I would argue that we are in a different environment now, the motivation for this foreign investment is different. Are you suggesting that young farmers once again go to the bank begging for the cash at insane interest rates?

    The money these foreign investors are paying is millions of dollars more than what we can afford to pay. You’re dreaming if you think that we can compete even if the banks would loan us these crazy amounts of money.

    Land is different to other types of property, it is a resource which can not be replicated anywhere else. Unlike your corner dairy or your truck drivers rig.

  5. Andrei says:

    I suppose the cultural elite are not going to wake up until they have completely sold New Zealand’s sovereignty in order to keep their party going as long as possible.

    The Greeks,Italians, Irish and Romainians are finding out about right now what it is to loose your sovereignty and self determination.

  6. homepaddock says:

    Meg – farmland has never been cheap – if it was everyone would be trying to farm, then the price would go up . . . .

    As for interest rates, between two and three times current rates in the 80s – and up to 26% on seasonal finance.

    One of the impediments to farm ownership is Landcorp – if it was to gradually sell properties, one by one rather than competing with private buyers it would be a little easier for those wanting to go farming.

    Allowing foreign purchasers to buy here only if we can buy there is a valid argument but countering it is there might be more advantages for allowing foreign investment here than in New Zealanders purchasing land elsewhere.

    GD – You’re right, there’s always competition for land and I’m noticing quite a bit of city money looking for farms now.

    Andrei – Selling a little here and there could lead to eventually having a lot of land in foreign hands but there are safeguards in place now -t hat’s why it’s taking so long for the Crafar deal to go through the OIO.

    The nasty thing about the oppositon to Chinese buyers is it does seem to be directed at them in particular rather than foreign buyers in general.

  7. Meg says:

    I realise that farmland has never been cheap and that interest rates now are far better than the 80’s but what of the future? Foreign investors purchase farms for a number of reasons, and these are not necessarily the same as kiwi buyers. Securing a safe source of food production is one of these. If they can come in, buy the means of production (being the land) and then export to their country. They then take the profit from their operations back overseas. Not only do we lose a portion -be it small- of the export market we can get best prices from we also don’t benefit from the profit being raised within our country. In short rather than exporting our products which we have the best resources to produce we’re giving them the means of production.

    I still do not believe that young farmers can compete with the prices foreign investors have the means to pay. Where does a young couple get say 13milllion from to buy a farm.(obviously these are very rough numbers based on 200mil divided by 15) at a 10% deposit that’s 1.3mil they have to come up with first. And then how does one service a loan that big? I’m not saying it’s impossible but it’s pretty bloody difficult.

    Agreed on Landcorp. Alternatively the Landcorp farms should be set up as a stepping stone for young farmers to build up capital, set them up as all 50/50 sharemilking jobs to create the opportunity that corporate farming is replacing with management fee salary jobs.

    Noboody is willing to comment on the raw milk regulations in the DIRA, where fonterra is effectively subsidising the start up of new companies, sure if they’re a nz owned company, but why should we subsidise the set up costs of a foreign owned competitor. The companies that take the allocation of raw milk at farm gate price are also not taking it across the milk supply curve so fonterras factories are running inefficiently for a portion of the year due to this.

    Something needs to be done to ensure that there are still going to be clear pathways for young farmers to move up the ladder to farm ownership. The issue of our farmers ageing and few to take their place is one of concern and if we aren’t careful foreign investment is going to make this complex problem even bigger.

  8. homepaddock says:

    Meg – It’s not just young farmers who wouldn’t be able to come with with $13m, or enough deposit to enable them to get and service a loan for the balance. But most don’t start with a $13m farm, they start with another business, a smaller farm or get in as you suggest via sharemilking.

    I agree with you about the problems with raw milk regulations in the DIRA. Isn’t it under negotiation at them moment?

  9. Meg says:

    Fair comment- at the prices being paid for the crafar farms that’s for about a 400ha property. Hopefully more of the smaller farms don’t continue to get gobbled up by lifestylers or joined with others to create more larger scale farms then.
    Sharemilking jobs are becoming less and less common too which is quite concerning. Hopefully some of these soon to retire farmers remember how they got there and offer them up for sharemilkers.

    They are being reviewed, however there doesn’t seem to be much confidence that a satisfactory solution will be reached. If the raw milk regulations stay in a similar form to the current I can’t see it being written in that foreign companies will be excluded.

  10. Meg says:

    Funny we should be talking about the raw milk regulations today as the proposals have been released. I can’t seem to find a copy at the moment to read it for myself but press releases from fonterra and others suggest the issue has most definitely not been dealt with in a way that farmers are going to like. In fact the raw milk available has been increased to 5%. I’m not quite sure what these regulations are supposed to achieve, more competition so cheaper domestic milk prices i think is the line, but all of the companies claiming the milk are exporting it and not supplying the domestic market. I smell a fight coming on..

  11. homepaddock says:

    Meg – post on that under construction.

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