Zhong Fu to develop Australian agricultural project

A Chinese property company was awarded the rights on Tuesday to develop a farm project in Western Australia, following a series of high-profile deals related to agricultural resources in the country involving Chinese investors.

The Chinese real estate conglomerate Shanghai Zhong Fu (Group) Co Ltd plans to set up a sugar-manufacturing project after being chosen to lease and develop 13,400 hectares of irrigated farmland in the Kimberley region, according to a statement issued by the Western Australian government.

The Chinese company operates in the country as Kimberley Agricultural Investment, or KAI.

The investment over the next six years is projected to total A$700 million ($727 million), the statement said, with KAI expected to produce around 4 million tons of sugar cane and 500,000 tons of sugar crystal for export each year.

KAI will develop the vast tracts of land into irrigated farming units under leases with terms ranging from 10 to 50 years.

The majority of the investment will be used to build a sugar mill expected to cost A$425 million, and possibly a biofuel plant, as well as to upgrade ports in the area.

KAI worked with Australian companies to develop farming models for the project, and indicated it will offer sub-leasing and share-farming partnership opportunities to Australian growers on up to 20 percent of the new farmland.

Western Australian Premier Colin Barnett said that he believes the project is a pioneering move and "a major step" to allow the region to reach its full potential.

"This investment in the large-scale agricultural industry and downstream processing will be the start of an exciting new era," Barnett said.

The company will look to start clearing land from 2013, the Australian Associated Press reported, citing Brendon Grylls, the minister of regional development and minister of lands for Western Australia.

The Western Australian government said that an estimated 350 local construction jobs and more than 400 operational jobs will be created once full production is achieved by 2021.

According to a report by the Australian government in July, 11.3 percent of the country's agricultural land was then fully or partly owned by foreigners. The number in the northern territory hit 23 percent.

The country's agriculture sector is likely to see a boom in Chinese investment when interest in its resources sector faces a slowdown, according to a KPMG report released in August.

Between September 2006 and June 2012, nearly 90 percent of the $45.1 billion inflow of Chinese capital was directed at the mining and oil and gas segments, KPMG said, but it foresees a quick increase in the agriculture business.

Doug Ferguson, head of KPMG Australia's China Practice, said he expects to see more investment from Chinese private companies in Australia's food industry, particularly following the joint-venture model seen in many resources projects.

Last year, China's COFCO Ltd won control of Tully Sugar Ltd, and Bright Food Group Co said it is eyeing more Australian deals, after buying a 75 percent stake in the Australian food distributor Manassen Foods Australia Pty Ltd.

Australia is the world's third-largest raw sugar exporter, according to official data. Its exports are forecast to rise nearly 12 percent from last year to 3.4 million tons.

China is the world's second-largest sugar consumer after India, accounting for about 8 percent of global output.