China deal major 'coup' for Aussie wool growers

This follows news last week the company signed a Memorandum of Understanding with the Australian Superfine Wool Growers Association in a deal which will see Australian ultrafine wool being used by the company.

This week, Shandong Ruyi took their Australian ties one step closer by entering into a 10-year arrangement with Jema Genetics, Benalla, to develop a significant ultrafine sheep flock.

Jema Genetics chairman Ian Gill said the deal was a major coup for Australian ultrafine growers.

"Shandong Ruyi want to shore-up production and guarantee wool supplies," he said.

Mr Gill said a breeding program would now be developed, in conjunction with Deakin University, Geelong.

Late in 2011, the Chinese processor purchased historic Victorian property Larundel, located via Elaine - where the breeding program is planned to take place.

"The deal initially came about because we approached the company to sell them our Jemala Knitwear range, but it has developed into this science collaboration now - where we will be breeding the sheep," he said.

"Our role now is to stock the property and get everything started."

Although Shandong Ruyi has specified they would like a 1000-strong ultrafine flock on Larundel, Mr Gill said the property was capable of carrying more.

He said the collaboration, which will be between Jema Genetics, Deakin University and two Chinese universities, would enhance the Australian ultrafine Merino gene pool.

"This deal will go a long way in stabilising supply and creating new markets for Australian wool," he said.

"At present the money being offered for ultrafine wool is way below the cost of production."

The news comes hot on the heels of State farming organisations calling for the Federal Government to tighten its laws on foreign investment.

The review into foreign investment by the Australian Bureau of Agricultural and Resource Economics (ABARES) was released last week, but did not result in a reduction of the $231 million threshold for Foreign Investment Review Board (FIRB) scrutiny.

However, Mr Gill says foreign investment is a good thing and can result in new opportunities.

"We operate in a globalised market-place and this could have happened anywhere, but it's happening right here in Australia," he said.

Robert Burbury, managing director of agricultural investment company Drapac Agribusiness, agrees, saying the Coalition's negative reaction to foreign investment in agriculture could be damaging to the rural economy.

"For all the money spent on foreign investment, very little leaves Australia," he said.

"The vendor will get sale money from the sale and owner will continue to spend money on capital expenditure and taxes, which is all spent here."

Mr Burbury said the issue of food security should not be linked to foreign investment.

"If food security was ever an issue, the recent debacle over the live cattle export business has shown that a sovereign government can control the export of foodstuff at the stroke of a pen," he said.

"A foreign investor landowner is unable to remove his asset from the country and is at the mercy of the government in his ability to export his produce."

However, many of Australia's leaders remain worried about the effects of foreign investment laws that are too "relaxed".

In particular, Victorian Farmers Federation president Andrew Broad, who says the government is not doing enough to monitor and regulate the issue.

"There is not enough data known and collected on foreign ownership and the FIRB threshold of $231m is too high," he said.

"A foreign business can buy a $10 million property in the Western District, which is a significant purchase, but that does not even register on the FIRB radar."

He says it does not take into account creeping acquisitions either.

At the moment, Japan, the Republic of Korea, Latvia, Mexico, Poland, France, Iceland, China, New Zealand, Indonesia, the Russian Federation, Saudi Arabia and Brazil all have more restrictive policies on agriculture than Australia.