17 December 2015

Australian Agribusiness and Food: What's in the news


China and Australia collaborate on agricultural initiatives

On 12 November 2015, Barnaby Joyce and China’s Minister for Agriculture, Han Changfu, announced their agreement on a range of new agriculture initiatives between China and Australia. Pursuant to a ‘Joint Framework’, the respective governments have agreed to collaborate on the management of fruit flies, to strengthen commodity production and market research, and to establish priorities regarding agricultural policy, food security and fisheries management. The agreement is intended to realise opportunities created by the recent China-Australia Free Trade Agreement by deepening engagement between government and industry, and reflects an enhanced level of agricultural cooperation.

Australia’s agri-food exports are hamstrung by non-tariff barriers

The AFGC has released a report supporting the need for the Federal Government and the agriculture industry to address priority non-tariff barriers across the agri-food sector to further enhance the export momentum generated by Australia’s recent free trade agreements. The report states that 65% of agri-food organisations believe that existing barriers to trade (both technical and regulatory) significantly curb Australia’s export capabilities, impeding billions of dollars in trade. A copy of the report can be found here.

Future of Australia’s agri-food sector requires new focus

On 1 December 2015, the Business Council of Australia, with the assistance of its Agriculture and Food Manufacturing Steering Committee (which includes KWM’s Scott Bouvier) released a report on the Australian agri-food sector. The report outlines a contemporary vision for the sector and identifies the actions necessary to improve the sector’s competitiveness to facilitate future growth. It notes that the mindset and approach of government needs to shift from a focus on agriculture to a focus on the broader agri-food sector, and that there is significant opportunity to grow the sector through a focus on adding value and meeting the specific needs of customers in different markets.

The report concludes that to realise the full potential of the agri-food sector, governments, businesses and the farming community must work together to unblock barriers to accessing markets and increase productivity and competitiveness. A copy of the report can be found here.

Public inquiry into the regulation of Australia’s agriculture industry

On 20 November 2015, the Federal Government released the terms of reference for the Productivity Commission’s inquiry into regulation of the Australian agriculture industry. The inquiry will focus on regulations that have a material impact on the competitiveness and productivity of Australian agriculture, with the aim of defining priority areas for removing or reducing unnecessary regulatory burdens on farm businesses and identifying unnecessary restrictions on competition. While the industry focus will be on agriculture, regulation imposed elsewhere in the supply chain - such as to meet the requirements of foreign markets - will also be considered if it leads to a burden on farm businesses which is significant and unnecessary. A copy of the terms of reference can be found here.

KWM helps Bindaree Beef expand into Asia

KWM has advised Bindaree Beef on the sale of a 45% stake in its business to Shandong Delisi Food Co, one of China’s largest meat processors. Shandong Delisi Food Co will pay $140 million in exchange for its stake, which will be used by Bindaree Beef to expand its supply into new Asian markets. This is one of the first high profile transactions in the agribusiness sector since the China-Australia Free Trade Agreement was signed and it highlights the opportunities that the China-Australia Free Trade Agreement offers to Chinese and Australian agribusiness. KWM brought together a cross-border team from the firm’s Australia, China and Hong Kong offices. Commenting on the deal, KWM partner Shannon Finch remarked that “China presents the biggest food opportunity in the world, and we are delighted to have been able to assist Bindaree Beef on this important deal which extends its footprint into Asia. The cross border deal is a great example of how we are able to use our Asian insights and capability to the benefit of our Australian clients, drawing from expertise across China and Hong Kong throughout the deal process”.

Queensland coal seam gas country used for cropping and grazing

Stanbroke, a privately-owned integrated beef company, has obtained a long-term lease of a portfolio of 40 properties in Queensland’s coal seam gas country. Altogether, the portfolio of properties covers 67,000 hectares, which will be used by Stanbroke for cropping and grazing operations. The deal is worth more than $10 million over 10 years.

Partial listing of Chinese dairy company on ASX

The privately owned Chinese milk producer, China Dairy Corporation, is planning to partially list on the Australian Securities Exchange. Funds raised in the partial listing will be used to buy an Australian dairy processor, which will produce and export infant baby formula to China. This move responds to the recent demand in China for safe baby formula.

Value of cattle stations on the rise

An analysis by CBRE has found that the values of cattle stations are rising across the Northern Territory, Western Australia and, to a lesser extent, in Queensland. According to CBRE, summer rains in Queensland could result in a further boost in property values in the state, which has recently been plagued by drought.

Sale of Australia’s largest private landowner blocked

On 19 November 2015, the Federal Government Treasurer, Scott Morrison stated that he would not authorise the sale of Australia’s largest private landowner, S. Kidman & Co to foreign investors. The portfolio attracted interest from both Australian and international bidders, and led to a bidding war above $350 million between two Chinese bidders Genius Link Group and Shanghai Pengxin. Mr Morrison would not authorise the sale on the basis that 50% of Anna Creek, one of the portfolio’s 10 properties, is located in the Woomera Protected Area which is used for defence purposes. For these national security reasons, the Treasurer considered that a sale to a foreign investor would be “contrary to Australia’s national interest”. S. Kidman & Co has just announced that the sale will proceed without offering Anna Creek.

Sale of Market City after marathon night of negotiations

After an 18-hour sitting, ending just before dawn on Saturday 5 December 2015, the Upper House of the Western Australian Parliament passed a bill allowing for the sale of Perth’s Market City. Market City was first developed in 1989, and is managed by the Perth Market Authority. The 51-hectare facility is used as a clearinghouse for wholesale fresh foods, which are on-sold to a range of businesses, including supermarkets and restaurants. More than 50 wholesalers operate out of Market City, generating annual turnover of more than $500 million. West Australian Treasurer, Mike Nathan, said that passage of the bill was critical for the sale of the government-run fruit and vegetable trading facility. The sale is expected to net the State Government around $120 million.

Sustainable practices rewarded in Australian Export Awards

Austral Fisheries has won the Agribusiness category of the 2015 Australian Export Awards. Austral Fisheries experienced a very successful FY 15, having achieved export revenue growth of 41%, buoyed by a marketing strategy which highlighted the provenance, quality and sustainability of its products. In congratulating Austral Fisheries, Assistant Minister for Agriculture and Water Resources, Senator Anne Ruston remarked that “Austral Fisheries specialise in environmentally friendly sustainable fishing practices, and is a great example of how sustainable practice can underpin a profitable business”. Sustainable fishing practices are very important to the Australian Government, with the recently published ABARES Fishery Status Report 2015 showing that no solely Commonwealth-managed fish stocks are subject to overfishing.

For more insights on the food and agribusiness sector, see AgriThinking

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