March 1, 2011

Notes from New Zealand: China’s Investment in NZ Agriculture and a Bumper Crop for Grapes

Robert Lawrence, MD

Robert Lawrence, MD

Director Emeritus

Johns Hopkins Center for a Livable Future

CLF Director Robert S. Lawrence, MD, is on sabbatical in Auckland, New Zealand, where he is studying the country’s agriculture system.

As we waited in the Sydney airport for our connecting flight to Auckland, I picked up a copy of The Australian, one of the major newspapers in Australia, and noted an article titled, “China hungry for local food assets.” The article noted that China was preparing a multi-billion dollar investment campaign to acquire Australian agricultural lands to provide farm produce over the next five years. My thoughts went racing back to Lester Brown’s Who Will Feed China: Wake-up Call for a Small Planet, published in 1995 and arguably the single most important book in shaping the strategies of the early years of the Center for a Livable Future. Brown exposed the myth of Chinese grain self-sufficiency and predicted that China would soon become a major food importing country as water resources were depleted or diverted to the booming industrial sector; rising standards of living would shift dietary choices to a higher meat, western diet; and increasing amounts of grain would be diverted from direct human consumption to animal feed.

Grape VineyardThe Australian reported that in the last six months there has been a dramatic increase in the interest of Chinese buyers in purchase of segments of the agricultural sector “with the sweet spot being in ‘under the radar’ private farms, aggregation and processing businesses worth between $10 million and $200m.” Why this range of enterprise? Because under Australian law the Foreign Investment Review Board is limited to investigating sale of businesses to foreign enterprises that are worth more than $231 million. So a partial answer to Lester Brown’s question of who will feed China is a loose consortium of Australian agricultural resources, each valued at less than $231 million.

The Chinese buyers are showing particular interest in grain, meat, and wool opportunities. To date the majority of China’s investments in Australia’s agricultural sector have been less than $10 million with examples cited of dairy farms, orchards, vineyards, and Tasmanian spring water. But China’s appetite is growing with reports of one Chinese company looking for 5000 hectares (about 12,500 acres) of grain production land, worth about $75 million on the current Australian market.

The government of Australia has responded by launching a parliamentary inquiry into foreign ownership of Australian agriculture, all reminiscent of Russia’s decision last summer to ban export of wheat after their record-setting drought, India’s restrictions of rice exports in 2008, and other signs of countries protecting their domestic supplies while remaining a player in the global food market.

Then it was on to Auckland where The New Zealand Herald featured a story about a glut in the grape market with the headline, “Grape tonnage spells trouble for wine growers.” Predictions are for a 13 percent increase over last year’s harvest and the threat of a repeat of the 2008 vintage when a bumper crop of grapes produced an oversupply of 27 million liters of wine, driving down prices of wine, grapes, and vineyard land. The New Zealand Winegrowers association has urged growers to control the harvest to keep supplies in balance with demand. The weakening of the New Zealand dollar against the U.S. dollar and Australian dollar as a result of the earthquake in Christchurch last week may offer hope of expanding the export market. 

As I have been observing the New Zealand agricultural districts these last few weeks and learning more about the growth of the wine industry, some interesting connections are emerging. The late Michael King wrote “The Penguin History of New Zealand“, published in 2003, a year before King died in a car crash. In his opening he quotes the late Geoff Park, a prominent New Zealand ecologist and writer;

 “New Zealand’s fertile plains were the last that Europeans found before the Earth’s supply revealed itself as finite. Our relationship with them has been completely unsustainable…[We] have exploited these islands’ richest ecosystems with all the violence that modern science and technology could summon…[We] must live with the rest of nature or die with the rest of nature.”

The impact of this violence on a rich ecosystem was the clear cutting of vast forests, the conversion of 51 percent of the country’s surface area into grasslands, the exhaustion of the shallow fertile soils under the forest cover, the application of increasing amounts of fertilizer peaking in 1985 at 2 percent of the world’s total in a country with 0.2 percent of the world’s population, and the ultimate conversion of some of the agricultural activity to tree farms and horticultural production of grapes and olives. In order to live with the rest of nature the New Zealand food system is struggling to balance supply and demand, ecologic agriculture with global market forces, short term gain with long term sustainability.

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