CIC chief strategic officer talks Australian agri investment

Chief strategic officer Johannes Zhou said there was great opportunity in Australia, but Chinese demand is much harder to predict than many investors realise.

The China Investment Corporation’s chief strategic officer Johannes Zhou said there were great opportunities for investors in Australian agriculture to target the Chinese consumer, but warned the country’s demand pattern for food is difficult to predict.

Speaking at Agri Investor‘s Australia Forum, Zhou said China’s ability to produce and process its own food will improve, but at the same time it is sourcing food from an increasingly large range of geographies.

“Food security is a major issue in China’s official policy,” said Zhou, adding that created a demand for high-quality products from Australia. He also said China will move towards genetically modified foods.

Last year Chinese investment in Australian agribusiness reached A$375 million ($287 million; €252 million) after years of little dealflow. The investments point to long-term sourcing of meat, dairy and fruit from Australia, according to conference panellists

“China, like the rest of the world, especially North America, will be eating a lot of genetically altered foods,” said Zhou, adding that “Chinese companies are trying to buy companies like Syngenta, maybe Monsanto”.

Zhou said that as Chinese industries improve and diversify food sourcing, they are also cracking down on goods and food safety internally “you can see a major difference [from] what you saw 20 years ago or even five years ago”.

Mentioning the 2008 baby milk scandal that left at least six infants dead and thousands with health issues, he said countries such as Australia have built up their capacity in response to demand for safer milk.

However, he warned: “Trying to predict China’s demand is very, very difficult; in particular those demands created by problems in China. Once those problems get corrected the market will slowly recover.”

Another move in the Chinese market is the importation of better meat, from which Australia has benefited, said Zhou. He told investors in Australia that Chinese beef production capacity was worth watching closely, as well as the country’s ability to source beef from Argentina and Brazil.

Other panellists discussed the global supply and demand picture.

ABARES director of agricultural commodities Trish Gleeson said, “More recently demand has fallen off in the US [Australia’s biggest beef market] as they have started increasing their numbers again and quite a large increase in stocks of frozen beef over there – so the market in the US, our largest market has been weakening.”

“In Japan demand has also been weakening. We are still seeing very strong demand in the Korean market and still looking at increasing our export to China, but in China there is of course a huge influx of Brazilian beef, so I think you have a story of major competition in our major markets. The last two years have been rosy, but there will be some ups and downs along the way,” she said.

Jeremy Bayar, managing director for the Ace Farming Company, said on the difficulties facing Australian dairy farms at the moment, saying there were lessons to be learned from the past: “The boom never lasts forever … The lesson is not to get mesmerised by high prices.”