Australia’s largest “food bowl” snared by China-based developer for ethanol

Posted by AFN Staff Writers on 14th November 2012

A China-based property development company with no previous involvement in food production appears to have won control over one of Australia’s largest irrigated agricultural land tracts.

The company, Shanghai Zhongfu, has said it is looking to grow sugarcane crops across the 15,200 hectares of irrigated land that had been offered for sale by the Western Australian government as part of the famous Ord River scheme. The Ord is located near Kununurra, close to the border between Western Australia and the Northern Territory.

The waters of the Ord River were first dammed in the 1970s to trap the heavy monsoon rains for year-round irrigation. The Ord River scheme in the 1970s was aiming for cotton crops, but lack of modern farming management techniques and inexperience in tropical farming systems, are said to have caused the scheme to fail.

In more recent years, Stage One of a new Ord River scheme has been a success with the region now supplying Australia with year-round fresh fruit such as melons as well as experiencing strong growth in beef cattle farming. Experimental cotton crops, using modern biotechnologies, have been successful leading to speculation that cotton could be revived to supply nearby Indonesian cotton mills.

Shanghai Zhongfu has no experience in cotton farming.

Shanghai Zhongfu won the bid for its land against Australian-based competitors. One of Australia’s largest beef producers, Australian Agricultural Company, and another Australian company had also bid for the land but neither was successful.

Former Australian Prime Minister Bob Hawke was an active lobbyist for the China-based company and reportedly met with Western Australian and Federal ministers.

Shanghai Zhongfu is expected soon to sign a 50 year lease for the land but will not own the irrigation channels. The company has indicated it has plans to process its own sugarcane crops and produce sugar and ethanol biofuel through a new sugar mill being built near Kununurra.

The Australian newspaper today reported that the sugar mill is expected to cost the company about $250 Million including the preparation and planting of the cane crops across the 7800 hectares of undeveloped land. The remaining 7400 hectares of its Ord Stage 2 land is already developed and fully irrigated, courtesy of Australian taxpayers.  As part of the Ord East Kimberley Expansion Project, the Australian Federal government has spent $510 Million on building roads, irrigation and local community infrastructure in the area.

The developed agricultural land in North West parts of Australia had previously been described as being “Asia’s future food bowl” by various Australian politicians. Last year, Australia and China joined in a study on how to utilise Australia’s agricultural potential to feed China’s growing population.

Australia’s recently announced National Food Plan had designated the area as a source of food for the wider Asia region.  The National Food Plan mentions on page 148 that:

“The Australian Government is supporting the exploration and development of alternative food production areas, notably in northern Australia, to prepare for the possibility of climate-change induced drying in southern food production areas and to explore the opportunity of sustainable economic development in the area.”

NAB chief executive says Australians need to avoid “economic xenophobia”

There has been an ongoing heated debate in Australia regarding foreign purchases of Australian farming land. Some have suggested that foreign buyers may end up “wasting” Australian resources with little regard for the environment or the long-term interests of Australian taxpayers.

Yet, National Australia Bank Chief Executive Cameron Clyne, speaking to the Lowy Institute yesterday said that Australia needs to build an engagement with Asia to take full advantage of the Asian Century.

Mr Clyne said Australians “need to avoid economic xenophobia” in regard to foreign investment in Australian agricultural land.

Mr Clyne may not have been referring directly to the Ord River land, but it seems that Mr Clyne may have used the expression “xenophobia” in its ordinary meaning of “an irrational fear of the foreign.”

A leading Australian politician, Senator Nick Xenophon, had earlier described the sale of Australia’s largest cotton farm, Cubbie Station, to a Chinese buyer as a “mongrel of a deal.” The Cubbie Station sale was approved in September 2012. Senator Xenophon also said that sales of Australian land to foreign investors were “redefining the concept of sovereignty.”

The Federal government has recently announced the introduction of a Foreign Investment Register, as reported in Australian Food News last month.

In September 2012, China’s Sovereign Wealth Fund was also reported to be in purchase negotiations with one of Australia’s largest dairy companies, the Van Diemen’s Land Company in Tasmania.