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  • Dec 20, 2014
  • Updated: 12:16pm
BusinessEconomy
AGRICULTURE

Punting on Australian food bowl

Northern Australia's bid to become a rich source of agricultural products for Asia is fraught with issues, such as land rights, transport and weather

PUBLISHED : Monday, 25 August, 2014, 3:33am
UPDATED : Monday, 25 August, 2014, 3:33am

Australia's northern region - a 3 million sq km expanse of floodplains, rainforest and grasslands - is perhaps best known as being the home of the mythical knife-wielding Hollywood character Crocodile Dundee.

But the largely isolated northern wilderness that was the backdrop to the hit movie franchise is set to be transformed as the government ramps up plans to turn the region into a "food bowl" for Asia.

Canberra has released a green paper that envisions developing large tracts of land covering sections of Western Australia, the Northern Territory and Queensland into farmland.

The bounty from the land, according to the government, could produce a range of food for Asia's growing middle classes and help double Australia's agricultural output.

While environmentalists have decried the proposal as an environmentally destructive pipe dream, the government says the region, which is closer to some Asian markets than it is to the big cities in southern Australia, is ripe for development.

"Northern Australia enjoys the geographical advantage of being Australia's gateway to the Asia-Pacific region," said a spokesman for Federal Infrastructure and Regional Development Minister Warren Truss. "The large quantities of available land and water suggest there is potential for significant growth in agriculture, helping to meet demand in Asia for food."

By 2030, the Economist Intelligence Unit forecasts China will buy 59 per cent of Australia's food exports from only 12 per cent in 1997. The government hopes that much of that will be sourced from northern Australia.

Chinese companies, already big investors in Australia's mining sector, are eyeing agricultural opportunities in the north amid growing demand from China's middle classes for clean food. One company, Shanghai Zhongfu Group, plans a major sugar cane plantation in the next stage of the Ord Irrigation Scheme in Australia's northwest corner.

Shanghai Zhongfu, which has interests in petrochemicals and hotels, will invest up to A$700 million (HK$5.05 billion) over six years, including construction of a sugar mill.

Brian Healey, an agribusiness lawyer at law firm Holding Redlich which advised Shanghai Zhongfu on the Ord deal, predicts there will be more Chinese investment in agricultural projects in northern Australia as arable land in China becomes increasingly scarce. China lost 8.2 million hectares of arable land between 1997 and 2009 as urbanisation accelerated.

Healey said investment in infrastructure such as transport links and dams, however, would be crucial in order to achieve economies of scale.

"Old hands say that you can grow anything in northern Australia but you can't get it to market because of the cost," he said.

According to one report, Australia will need A$600 billion of capital investment in its agricultural sector over the next 35 years. To attract that investment, Healey said regulatory barriers to foreign investment in agricultural projects were being lowered.

"Australia has signed free-trade agreements which will affect Australian agriculture, and many states are now repealing restrictive land tenure laws," he said.

Not everyone is cheering the proposal. Australia's indigenous people have expressed concern that unchecked development of northern Australia could affect their rights to traditional land.

"Global capital investment will be deterred if there is risk of serious conflict and unethical processes that further marginalise Australia's first people," Joe Morrison, the chief executive of the indigenous Northern Land Council, told a recent summit on developing northern Australia,

Environmentalists warn that any proposal to turn the north into a food bowl is fraught with risk, for the environment and investors.

Gavan McFadzean, an organiser with the Wilderness Society, said northern Australia was a "graveyard of failed agricultural projects" because

of its harsh climate and poor transport infrastructure. As long ago as 1965, economist Bruce Davidson in his book The Northern Myth dismissed the idea of intensive agriculture in Australia's deep north because of its unsuitable climate and soil.

McFadzean said even the Ord Irrigation Scheme, which is held up as a model of what can be grown in the north, produced mainly sandalwood rather than food. The scheme, which started in the 1960s, now covers 27,000 hectares of irrigated land.

McFadzean said much of the soil throughout northern Australia was poor while extreme weather conditions generally made traditional agriculture untenable. "There is heavy rain for three to four months of the year but then effective drought for seven to eight months," he said.

He said infrastructure also was inadequate, which meant that even if crops could be grown in the north they could not be economically shipped to markets in Asia.

Any food bowl in northern Australia would therefore require a lot of investment with very little return, he said. "The Ord scheme has cost taxpayers A$1.45 billion," he said.

He said widespread agriculture in the north also threatened one of the few remaining grass savannah areas in the world and precious water supplies.

Plans by the Queensland state government to develop a 65,000-hectare sugar plantation in the Gulf of Carpentaria could destroy the river system in the region, McFadzean said.

Those with experience of farming in northern Australia caution that commodity crops such as sugar and rice were unlikely to be successful.

John Foss, a fourth-generation Western Australian grain farmer and managing director of Chia Co, said such large-scale crops were not suited to northern Australia because of the lack of transport infrastructure and higher costs of getting products to market.

For the past decade, Foss' company has been in partnership with farmers in the Ord river area growing chia, a grain-like oil seed high in omega. Foss said the climate in northern Australia was perfect for chia, which has been called one of the "superfoods" of the 21st century.

"Broad acreage crops have come and gone," he said. "Low volume, higher value crops" like chia work better. "You can grow some fantastic crops in the north but you have to meet the market."

Foss already supplies chia to premium supermarkets such as City'super in Hong Kong and recently obtained the first licence to import chia into mainland China.

The government, while sanguine about the potential of its northern food bowl plan, is also realistic about the challenges. The spokesman for Regional Development Minister Truss said there were "a range of challenges that impact on the potential to expand northern agriculture" including harsh seasonal patterns and soil.

"Capturing and storing large amounts of water is difficult and often costly," the spokesman said. "Distances in Australia are often vast, meaning the cost of delivering products to market are often high."

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