Taking the debate beyond selling the family farm, the report outlines how complimentary the relationship between Chinese and Australian companies can be across the whole food production cycle, for the benefit of both countries.
“China’s growing population, changing diets resulting from rising middle class incomes, and declining food production capacity means there are enormous, long-term, sustainable opportunities for Australian food sector companies to work constructively with Chinese partners to help solve China’s food safety and security needs,” said Doug Ferguson, head of KPMG Australia’s China Practice. “Chinese companies have the investment capital and more importantly, the off-take demand to help build the next stage of Australia’s agricultural industry.”
Opportunities for China and Australia in Food Security has been released at an important time in the Australia-China trade and investment relationship, and seeks to provide greater transparency around issues and opportunities for both countries’ food and agricultural industries.
Australia consumes only 40 percent of agricultural produce that it grows, and therefore has an important role to play in meeting international food needs, while also fuelling an important part of our domestic economy. China, on the other hand, has been a net agricultural importer since at least 2003. With 21 percent of the world’s population, only 8.5 percent of the world’s arable land and just 6.5 percent of the world’s water reserves, China is unlikely to be able to meet all of its own food needs in the future – despite a strong desire for self sufficiency.
Food safety is increasingly top of mind for the Chinese middle class consumer, following food contamination and food scare issues, and the Chinese will pay a premium for Australian grown and manufactured food. “Australian agriculture and governments need to build strong commercial ties and lower the barriers to trade and investment in order to take advantage of the Chinese opportunity,” said Phill Napier, head of KPMG’s Agribusiness practice.
“A critical component for our agricultural industry’s survival is R&D and innovation. Australian industry and governments need to give this a higher priority. Industry needs to consider all available channels for investment, including foreign direct investment, to fill the gaps,” he added.
While Australia is the second lowest investor in R&D of the OECD countries, China is the second largest investor in R&D worldwide. China and Australia already have proven joint R&D models in areas such as solar energy.
“Farmland and water pollution remediation, animal and crop gene technologies, food safety standards and operational processes are among the valuable services that Australian companies can deliver to the domestic Chinese market. However, Australian companies need to be on the ground in China and willing to be patient, as our research shows that Chinese prefer to see successful demonstrations of the application of international technology in China before committing,” said Doug Ferguson.
Australia has an emerging crisis in the availability of labour to meet the needs of its agribusiness sector. In the short term, experienced and skilled labour from China and other skilled countries will be critical to meeting the resourcing needs of our farmers.
In 2010 alone, China produced 116,556 agricultural undergraduates and post-graduates, while the National Farm Institute estimates graduates from agriculture and agri-related degrees across Australia that year was a mere 700. There is an opportunity to create partnerships with Chinese agricultural universities and leverage this talent pool into commercial applications. This could help bridge the Australian talent gap in the short term, as well as provide Chinese agri-talent with invaluable experience in agriculture management.
“The reality is that Australia’s agri industry is headed for a major generational change, with the average age of an Australian farmer being 56 years, and a lack of younger Australians prepared to fill the roles. Skilled international agri sector employees working together with experienced Australian farmers in larger corporate farming operations may be very complimentary,” added Phill Napier.
KPMG noted that Chinese companies have an important role to play in allaying misguided fears about their investment intentions.
“The Chinese are still relatively new investors to Australia and increasingly recognise the need to clearly explain their long-term objectives and provide commitment to key areas of concern. Chinese companies entering Australia are adapting and understand the importance of having strong Australian partners – which we believe is the best model for both parties,” concluded Doug Ferguson.