Chinese Sovereign Wealth Fund Eyes Investment Opportunities in Australian Dairy Industry

Published Date : Sep 26, 2012

China, which has been focusing on alternate industries in efforts to shift from traditional commodities such as iron, coal and ore, is showing interest in the Australian dairy industry. In its bid to safeguard supplies for its 1.3 billion people and provide them with secure and safe food resources, China has been investing more on agriculture industries.

Australia’s agricultural sector which has been an investment focus of CIC (China Investment Corp.) is a high-tension sector and investments have been met with considerable opposition by local business communities. To diversify its focus, the Chinese wealth fund is now targeting the Australian dairy industry. With a USD 192 billion budget for foreign investments, CIC is exploring various opportunities to ensure it meets rising domestic demand and aspirations, which are driven by increased disposable income levels. Last year, with a rise in imports by 34%, China overtook the United States to become the world’s largest food importer.

The move is also believed to be influenced by a recent report by Rabobank, which forecasts food inflation to hit record highs next year. The record ‘agflation’ is driven by rising supply demand gap for quality and secure food sources amidst growing consumer aspirations and increased income levels.

As part of exploring new opportunities across the Australian dairy industry, representatives of CIC visited Tasmania recently and showed interest in Australia’s dairy giant Van Diemen's land company’s Tasmania operations. The company has its operations expanded across 19,000 hectares, through its 27 individual farming operations. Most of these are dairy farms. The company currently employs 160 people who look after a livestock of 6,500 cattle (beef) and 25,000 cows (dairy). The company is looking for an USD 180 million investment to double its operations and capacity.

CIC has officially submitted its request to Australia’s Foreign Investment Review Board seeking preliminary consultations. CIC officials on their visit to Tasmania, inspected two large northern dairy operations with a combined worth of more than USD 200 million and considerable expansion capacity.