Draft Report on the Regulation of Australian Agriculture released by the Productivity Commission

The Productivity Commission released its Draft Report on the Regulation of Australian Agriculture on 21 July 2016. Submissions on the Draft Report are due by Thursday, 18 August 2016.

The Productivity Commission’s draft recommendations and findings include:

  1. Removal of the following agricultural regulations: restrictions on the use of land held under pastoral lease arrangements, state bans on cultivating genetically modified crops, recent changes to tighten foreign investment review requirements for the agricultural sector, barriers to entry for foreign shipping providers, mandatory labelling of genetically modified foods, and statutory marketing legislation relating to rice in New South Wales and sugar in Queensland.
  2. Reform of other regulations and regulatory systems, including native vegetation and biodiversity conservation regulations, animal welfare regulations (led by a new national, independent body), ‘gluten-free’ standards and agricultural and veterinary chemicals regulation.
  3. A more consistent approach to regulatory requirements across jurisdictions to improve regulation of heavy vehicle and road access, and the use of agricultural and veterinary chemicals.
  4. Reduction of regulatory burden on farm businesses by improving government consultation and engagement practices, doing more to coordinate actions between agencies and governments, and ensuring that good regulatory impact assessment processes are used as an analytical tool to support quality regulation making.

The Australia Treasurer, Scott Morrison quickly rejected any calls to change foreign investment review thresholds for Australian agriculture.

Agriculture under the Turnbull Government

After one of the longest election campaigns in Australian history, it was confirmed on 10 July 2016 that the Coalition Government and Malcolm Turnbull would be able to form majority government. A reshuffled ministry was announced by Prime Minister Turnbull on 18 July 2016. As expected, no changes were made to the Department of Agriculture and Water Resources: The Hon Barnaby Joyce MP remains Minister and Senator the Hon. Anne Ruston remains Assistant Minister.

The Coalition’s election policies suggest continued Government support and investment in Australia’s agricultural sector. In particular, its policy for “a Stronger Agriculture Sector” includes establishing a Regional Investment Corporation, delivering $4 million to establish a Northern Australian rice industry and committing $500 million to the National Water Infrastructure Fund to provide future water security for farmers. There is also a continued push on the innovation front, with initiatives such as the Global Innovation Strategy and Incubator Support Programme supporting Australia’s agricultural sector.

Australian Food Governance to go under microscope

Between 1 and 3 November 2016, the Sydney University Law School and Charles Perkins Centre will co-host a Food Governance Conference.

The Food Governance Conference is intended to explore the role of law, regulation and policy in promoting food security and safety, improving nutrition and preventing obesity and non-communicable diseases. The Conference will also consider how legislative and policy regimes impede or facilitate access to a nutritious, equitable and sustainable food supply, including economic, trade and intellectual property regimes.

Further information about the Food Governance Conference is available on the Sydney Law School’s website. Early bird registrations close on Friday, 12 August 2016.

Australian farmers who use GM crops are better off

In a report commissioned by CropLife Australia, PG Economics has found that over the past 20 years, the use of genetically modified (GM) crops has contributed $1.37 billion to Australian farmers through higher crop yields and production. The report also found that farmers who embraced GM crops used, on average, 26% less herbicides, due to the GM crops’ natural resistance.

In most Australian states, the use of GM crops is limited to varieties of cotton and canola, due to a fear that food produced from GM crops may be harmful when consumed. In Tasmania and South Australia, there is a complete ban on GM technology.

Growth in value of land

A study by Rural Bank has found that over the past 20 years, the value of Australian farmland has grown by an average of 6% per annum, making it one of Australia’s best-returning long-term asset classes. In 2015 alone, $7.6 billion of agricultural land was sold across Australia, representing a 10% year on year increase for land sold in New South Wales and Western Australia, and 12.8% for Tasmania.

CEO of Rural Bank, Alexandra Gartmann, heralded the findings as positive news for Australian farmers and cites the report as proof that Australian superannuation funds should actively invest in Australian farmland:

“When we talk about Australian agriculture, this report shows that if you are in there with a long-term view, this is absolutely an asset to invest in; farmland is a great wealth creation opportunity… Foreign companies and pension funds obviously recognise this because they have been buying so many rural properties in Australia in recent years, with some then contracting out management of the farming operations on the land so they are just exposed to farmland value gains.”

Murray Goulburn asked for answers by ASIC, ACCC and shareholders

The Australian Securities and Investment Commission (ASIC) has served a formal notice on Murray Goulburn to produce documents and emails relating to its April 2016 profit downgrade, and statements in the product disclosure statement it issued in connection with its $500 million partial listing on the ASX. ASIC’s notice coincided with the resignation of Murray Goulburn’s CEO and three directors and heated disagreements with dairy-farmer shareholders in relation to lower farm-gate milk prices. The Australian Competition and Consumer Commission (ACCC) is also examining the timing and notice of the cuts and is considering the possibility of misleading or unconscionable conduct in connection with Murray Goulburn.

There is a potential class action looming for the company regarding whether it provided accurate guidance in its initial product disclosure statement and subsequent market announcements. The company’s disagreements with its dairy-farmer shareholders worsened in June, culminating in Murray Goulburn setting the industry’s lowest opening milk price on 28 June 2016, at $4.31 a kilogram. Labor’s agriculture spokesman, Joel Fitzgibbon, has called on farmers to get involved in a collective action to claw back money from dairy producers such as Murray Goulburn.

China defers commencement for new regulations on sale of imported goods

In April 2016, the Chinese government introduced a set of new rules to control the sale of imported goods. Under the new rules, imported goods must meet the standards of goods produced in China in order to be sold via e-commerce through China’s bonded warehouses. The Chinese government then announced in June that full introduction of the new rules will be delayed until 11 May 2017.

For more details, see our alert “Exporters of the world rejoice – PRC customs issues e-commerce reprieves”.

Clarity required for Chinese investors seeking FIRB approval

Rifa Australia (Rifa), the Australian subsidiary of the Chinese manufacturing and agribusiness giant, has called for greater clarity around the process for obtaining Foreign Investment Review Board (FIRB) approval.

Rifa is currently awaiting FIRB approval on its proposed acquisition of six beef cattle farms, and has been told that no approvals will be made until after 29 July 2016 following the federal election. Under FIRB’s current rules, Chinese purchasers of farmland worth more than $15 million require FIRB approval, whilst investors from countries such as the USA only need FIRB approval for purchases which exceed $1 billion.

Danny Thomas, head of agribusiness at CBRE Property, has warned that without greater clarity and transparency of when FIRB approval is given and withheld, there is a risk that Chinese capital will go elsewhere.