Smithfield embodies China’s record hunger for farms

Foreign Ownership

To be sure, China’s farm and food asset acquisition drive may be hindered by stricter government controls. Brazil, the world’s biggest producer of sugar and coffee, started adopting in 2010 a more restrictive rule on farm land ownership by foreigners that was already set by a four-decade old law.

Argentina approved in 2011 a bill that limits land ownership by overseas companies or individuals to 15 percent of rural areas, and 1,000 hectares each.

The influx of foreign investment into Australia’s agriculture assets prompted Prime Minister Julia Gillard to announce the introduction of a register of foreign farm holdings last October. Foreign ownership of land in Australia, the world’s biggest producer of wool, has almost doubled since 1984, while almost 60 percent of raw sugar output and 40 percent of red meat production is controlled by foreign-owned companies, according to a government report in 2011.

Bipartisan Concern

The Smithfield accord, which needs regulator and shareholder approval, has sparked bipartisan concern, with Democrat Senator Debbie Stabenow, saying June 5 that the deal has implications for U.S. food safety. While Republican Senator Charles Grassley of Iowa, the largest hog-producing state, said last month that a sustainable food supply is critical to national security and urged a U.S. regulator to consider issues such as the role the Chinese government plays in Shuanghui.

China also faces competition from rival nations including Japan and commodity companies. Marubeni Corp. this week said it will pay $1 billion less for the U.S. grain merchandiser Gavilon Group LLC after excluding its energy assets, revising a deal first announced last May, while Mitsui & Co. took control of Brazil’s Multigrain SA in 2011. Decatur, Illinois-based Archer- Daniels-Midland Co. agreed this year to acquire Australian crop handler GrainCorp Ltd. for A$2.2 billion ($2.05 billion).

Investor interest in land deals has accelerated since the spike in food prices and needs to be limited, Oxfam International, an Oxford-based aid organization, said on its website. According to an Oxfam report in October, an area of land the size of London is sold to foreign buyers every six days in poor countries.

“This is just a start of China’s food entities identifying strategic partners and acquisition targets,” PwC’s Armitage said in an interview. For target countries, “it’s a balancing act between attracting foreign capital and balancing the need for local production,” he said.

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