The global agricultural sector has witnessed a flurry of deals over the past month, driven in part by a renewed push from China to snap up producing assets as we enter what could be a sustained period of higher agricultural prices. Last year, the People's Republic supplanted the US as the world's biggest food importer, reflecting the increase in discretionary incomes, and a switch towards protein-rich diets. Total imports have risen by more than a third in the past five years, and the rising tide of imports has left the country more exposed to global food price inflation.
One of Beijing's chief domestic policy aims is to keep a lid on food prices. Food riots have a long history in modern China. And following the last major spike in global prices in 2008, the Communist Party prioritised the stabilisation of price levels to head off unrest before it can happen.
China is determined to secure reliable sources of produce through the use of its huge sovereign wealth funds. China Investment Corp (CIC) is estimated to have a war chest of around $200bn (£123bn) at its disposal to lock-in strategic assets abroad. CIC is in the process of increasing the proportion of private equity and alternative investments within its portfolio, and agricultural assets remain high on Beijing's wish list. It's been reported that the CIC is now looking to make substantial investments in Australia's dairy industry, while a consortium lead by Chinese textile giant Shandong Ruyi recently acquired Australia’s largest cotton farm, Cubbie Station, for around A$280m (£179m).
Increased deal activity is also seen in consolidation within the biotechnology industry, as agriculture becomes ever more high-tech as farmers seek better yields from less fertile soils. German chemicals conglomerate BASF has just paid €1.02bn (£811m) for Becker Underwood, a US biotechnology agri-business, while market leader Syngenta has made an offer to acquire Devgen, a rice seeds and crop protection group for €403m. The Devgen offer came barely a week after Syngenta announced that it had acquired US-based Pasteuria Bioscience for a maximum of $113m.
