The Great Land Grab

I have recently been pouring over a book by Dick Smith, the founder of Dick Smith electronics, Australian Geographic and Dick Smith Foods, ‘The Australian Population Crisis – The dangers of unsustainable growth for Australia’. Being a grandad, father, avid bushwalker, philanthrapist and environmentalist Mr Smith has developed an interest in the unsustainable growth in Australia’s rapidly growing population. He is now one of the few entrepreneurs in Australia that supports an ailing farming industry which is increasingly being sold off to foreign interests. During his quest to understand the dynamics of such matters he reveals that there are some similarities between what is currently happening here in New Zealand to what is happening in Australia and globally. His concerns about the rapidly growing Australian population uncover some interesting facts about some of the issues Australia will encounter over the coming years. One of the real concerns and questions he raises is how is Australia and the rest of the world going to feed an exponentially growing population?

Governments and foreign corporations are seeking to venture into other countries in an attempt to secure the most stable and guaranteed investment, land. Like New Zealand the “Australian farm” is also being sold off to international conglomerates piece by piece. As Smith says in his book China is a big investor in Tasmanian dairy farms, a Canadian conglomerate Agrium in late 2010 bought the iconic Australian Wheat Board, while Japanese investors own large sections of the Australian cattle industry and Dubai interests owns a significant interest in the biggest cattle company in Australia, not to mention the international mining companies that are throwing huge sums of money at farmers to leave the land so they can exploit coal seam gas deposits.

A new report shows the amount of agricultural land now under foreign ownership in Australia has risen 60 per cent over the past 3 decades. This worrying statistic is a trend that is being echoed around the globe and will ultimately impact the citizens of countries such as Australia and New Zealand increasingly over the coming years.

While these figures from the Australian Bureau of Agricultural and Resource Economics and Sciences, show a worrying pattern, the political powers that be say foreign investment in Australia’s agricultural sector suggest that investment in these sectors help increase productivity, keep food prices lower and increase employment. Many local farming communities are however questioning the motives and value of such misguided policy and the longer term implications from such short term profiteering. From the casual observers perspective, food prices have in fact gone up, there has been little if any increase in employment and all the profits return back to the foreign owned entity. Does this sound familiar?

A Brief History of Agriculture

Prior to the industrial revolution (and having 7 billion people on earth) many people earned a living from the land. When the industrial revolution arrived in the mid 1700’s people moved from rural existence into an industrial existence as heavy manufacturing and industry enticed many rural workers into cities seeking a more affluent life. With global populations increasing significantly over the last century the tables have now turned. A recent report by Oxfam indicated that by 2050, the global demand for food will rise by 70 per cent. This is alarming and of real concern to the environment, governments and citizens alike.

With the onset of the Green Revolution in the mid 1900’s we saw crop yields increase dramatically, thanks to advances in new crop varieties, the increased use of artificial fertilisers, pesticides, and herbicides. Global food production in essence went into overdrive. According to Mr Smith’s research “although global food production doubled over the 40 years up to 2000, it is no longer keeping pace with population growth, and the number of hungry people has actually increased. The Green Revolution relied upon a set of one-time-only gifts from the planet: first, low-cost fossil fuels and secondly, soils that contained a vast store of plant nutrients.”

While New Zealand has significant advantages in soil composition, rainfall and geography over its Australasian counterpart the underlying premise Smith talks about will ultimately ring true for many countries and farming communities throughout the world. “Australian farmers will need to reinvent their industry in the coming years if they are to meet the multiple challenges that are coming. Climate change, water shortages, rising costs, soil erosion and land shortages are just some of the factors that will force a radical re-think of the way Australia grows-and consumes-food.” The lessons here are just as relevant to New Zealand and hence why we are seeing a significant trend in foreign ownership of agricultural lands.

Comparisons with Corporate America

Let’s step back for a second and take a simplistic view of what is really happening. A good example can be seen from the more recent corporate demise of the US economy and financial system. During the booming 60’s, 70’s 80’s and some of 90’s the US had a buoyant and thriving economy and manufacturing sector. In all its wisdom corporate America decided to outsource much of the production and manufacturing industries to cheaper developing countries. It did manage to increase shareholders wealth, however at the same time it decimated local industry, communities, employment and eventually brought the economy to its knees. The US effectively sold off its citizens, country and future by short termism and corporate greed. While a few profited from this strategy many industries simply evaporated.

I was speaking to a colleague in the US recently who analyses economic and social trends in America. The “official” unemployment rate in the US is around 9%, however this figure does not include people who have been out of work for more than 12 months who have given up attempting to find a job. If these people are taken into the mix the more realistic figure comes in at around 20% + unemployed. Let’s remember, at the height of the Great Depression, unemployment was sitting at around 23%. No wonder people are upset, hence why we are seeing frustration and discontent among its citizens. The ‘occupy movement’ is simply a representation of the disenfranchised who see corporate America only concerned with itself and no one else. So what has this got to do with New Zealand agricultural sector and economy you might ask?

If we apply the same metrics to the current traditional agricultural sector the same fundamental principles hold true. Effectively any investor who invests in a foreign country is receiving all the benefits of that country, land, water, soil quality, fresh air and the good fortune of being in a relatively safe and friendly environment. The output (agricultural products) are in fact the dividends or returns if you like. These returns are usually (not always) remitted back to the investing country, investor or corporation to be either on sold or produced into other value add products. So what has happened? Where is the value of this investment to New Zealand? So what if a couple of lousy jobs are created, the overall net gain is marginal. In effect, the land that has been sold to the international investors is the ‘factory’ and Kiwis become the Chinese workers in their own country! Where is the sense in that? Shouldn’t we be looking after our local communities and people first? A case in point, the Australian logging industry in the 80’s and 90’s were selling off Australia’s ancient Tasmanian forests to the Japanese for $7 a tonne as woodchips. The Japanese would ‘add value’ to these woodchips and sell paper based products back to Australia at $700 a tonne!

When any country ‘sells off the farm’ it risks isolating and holding citizens at the mercy of foreign controlled pricing power. Most foreign investment is simply a paper investment that benefits only a few, much like our corporate American example. Countries such as Dubai, Qatar, Japan, the USA and China understand the value of land as an asset, it is the only real asset worth holding. Many of these countries are buying the land for their citizens to ensure food security. With New Zealand currently importing over half of its food from other nations doesn’t it make sense to own and manage these wonderful assets for the benefit of the people and ensure our own food security?

Land is only going to increase in value as we see declines in large scale agricultural processes and increases in populations. These countries are wise and are preparing for the inevitable, yet local economies, individuals and government suffer from short sightedness that is detrimental to the community and long term sustainability of the country.

The farm is shrinking, with intensive farming practices, poor environmental management, encroaching urban development and climate change all impinging on the ability of nature to do what it does best. Prime agricultural land that has access to water will only become more precious. It seems like a good opportunity for our leaders and us as citizens to take some initiative on this front and help do something positive for the country and local communities. We have to think outside the realm of business as usual, we have to innovate and look forward with a long term view of what we want for our children and children’s children. Those countries that do not effectively address and manage foreign ownership and the use of lands will one day wake up to find themselves in a foreign land eating the crumbs that fall from the table….

A.D. Martin is the author of ‘One ~ A Survival Guide for the Future...’ (Available at Marbecks stores) he also publishes of an online blog that discusses economic, energy and environmental issues that will impact individuals and society over the coming years.

He helps educate people as to the risks and opportunities that will present society over the following decades.

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