Developments impacting on Queensland agribusiness
The Queensland agriculture sector is recognised as the world leader in a number of sectors such as meat, livestock and dairy. When the China-Australia Free Trade Agreement (ChAFTA) comes into force, it will give Queensland agribusiness unprecedented access to the world’s second largest economy, and has the potential to boost and diversify the state’s trading relationship with China.
Agriculture has been identified by the Queensland Government as one of the four pillars of the state’s economy. The Queensland Government is committed to doubling the state’s agricultural production by 2040.
The tariff reduction in ChAFTA agricultural exports to China and the commitment by the Queensland Government to doubling the state’s agricultural policy by 2040 presents opportunities for Chinese investors to invest in the growth of the Queensland agricultural sector.
What can Queensland agriculture offer?
The Queensland agriculture sector is recognised as a world leader in tropical and sub-tropical agriculture, innovative packaging, research and development, high quality products and services and sustainable and safe practices. These unique advantages make Queensland attractive to source products, services and technology and forge investment partnerships.
The agribusiness market data indicates an overall slightly declining trend in cattle, eggs and retail fresh milk which reflects local farmers falling confidence, however, considering the strong needs from the China market, this declining trend means that now is the best timing for entrance. The commodities of sheep and poultry show a rising trend; in cereals, fruit, vegetables and pork, little trend is apparent, indicating an increasingly growing and steady market for this range of commodities.
Major Tariff reduction for agricultural exports to China under ChAFTA
Meat and Livestock
- removal of tariffs of 12 - 25% percent on beef over nine years, 10% on live animal exports within four years and 12 - 23% on sheep meat over eight years.
Queensland is the largest producer and exporter of beef in Australia, Beef is the most significant agricultural commodity for Queensland with cattle and calf sales worth an estimated $3.259 billion in 2013–2014.
Queensland’s beef is exported in a number of different forms, including live cattle exports (feeder and slaughter, where Indonesia has been the primary market), and live exports (breeding cattle, where China has been the main market). Since January 2014, Queensland beef exports have leapt more than 400% to 140,000 tonnes, making China the third biggest beef customer after Japan and the United States for chilled or frozen meat (bone in) and chilled or frozen meat (boneless).
Who is moving into this market?
- New Hope Investment Fund has recently acquired the business of Queensland's Kilcoy Pastoral Company (Kilcoy).Kilcoy processes more than 250,000 grain-fed cattle annually.
- A north Queensland cane farmer is driving plans for a new $75 million abattoir near Townsville to meet the growing demand for Australian beef in China.
- Burdekin grower David Cox is already developing a 30,000 head feedlot and export facility at the proposed meatworks site to supply the booming live cattle trade.
- removal of all tariffs on dairy products (which can be as high as 20%) within four to 11 years.
Who is moving into this market?
- Mining magnate, Gina Rinehart, has recently moved into investing in the Queensland dairy industry, to target China’s infant milk market.Gina Rinehart has reached an agreement with the Queensland Government over a $500 million dairy export deal into the Chinese infant formula market.
- removal of tariffs on all horticultural products, ranging up to 30%, most within four years.
Queensland is the largest producer of vegetables in Australia and the second largest producer of fruit. In 2013–2014, Queensland’s total vegetable production was estimated to be worth $1.211 billion, while the total fruit production was estimated to be worth $1.547 billion. Over the last ten years, most of Queensland’s fruit, vegetable and nut markets have been consolidated into Hong Kong, New Zealand Singapore, Indonesia, Thailand, Japan and China.
Cotton, sugar and wheat
As part of joining the World Trade Organization (WTO) in 2001, China already allows generous imports of cotton, sugar and wheat, with generally low tariffs imposed within a quota. Australian exporters have unrestricted access to these allowances. China has not provided further liberalisation of these products in any of its FTAs, on the basis they are significantly sensitive staples.
- Cotton: Queensland is a major producer of cotton, growing approximately 41% of Australia’s cotton crop, with an estimated value of $632 million. Almost all of Queensland’s cotton is exported. Growth of the textiles industry and associated manufacturing industries in the East Asia region has been the main source of growth in Queensland cotton exports. In 2012, a consortium investment led by Shandong RuYi bought into Australia’s largest cotton producer, Cubbie Station, in South Queensland.
- Sugar: Queensland has the third highest value of production for broadacre cropping as a whole in Australia. The total estimated value of broadacre cropping in 2013–2014 was $2.645 billion. Data shows that 85% of Queensland’s raw sugar is sold on the world market with Asia (Korea and China), Europe and the USA being the key markets. It is reported that some of the state’s iconic sugar mills face closure because soaring power prices are forcing farmers to reduce irrigation of the crops. Some areas around Bundaberg have already seen production drop around 10%. These present an opportunity for investment. Chinese investor COFCO completed a deal to acquire the Tully Sugar mill in 2011.
- Wheat: Queensland produces Australian prime hard wheat which is high-protein milling wheat of exceptional quality for production of noodles and bread. Queensland wheat production was estimated to be worth $375 million in 2013–2014. Korea and China have been the main driver of increased exports over the last ten years.
Queensland offers a wide range of agriculture education and training opportunities, from higher education to vocational education covering livestock farming, livestock production, farm handling, welfare, transport, processing and management, to training on sustainable management of horticulture, conservation and efficient use of resources. Queensland also offers a range of world class agribusiness research facilities and transport pathways support for the primary product exports.
Investing in Queensland agribusiness
An investment decision in Queensland agribusiness will require considered planning and understanding of the relevant legal and regulatory issues. Potential investors should ensure they have undertaken their due diligence which may include (but without limitation) the following issues:
- Ensure you are aware of any specific agricultural statutory and licensing requirements, including those related to importing and exporting;
- If it is relevant to the target agribusiness, ensure you have an understanding of water entitlements and allocations in Queensland;
- As a threshold issue, ensure you have engaged legal advisers to ensure you are aware of any Foreign Investment Review Board and Australian Competition and Consumer Commission approvals which might apply to your investment;
- Ensure you have considered any infrastructure requirements in respect of the target agribusiness (i.e. access to road, rail, port, storage etc.);
- Engage and consult with tax advisers in relation to any international and local tax planning surrounding structuring, financing, ongoing operations, and exit strategies regarding the proposed investment;
The following Queensland Government websites will provide useful information in relation to Queensland agribusiness:
- Food & Agribusiness Investment – www.tiq.qld.gov.au/invest/
- Investing in Queensland’s food and agribusiness industry – www.business.qld.gov.au/invest
We would highly recommend that you engage qualified advisors prior to making your investment.