![David Smith, a grape grower near Mildura, says the Chinese could also arrange Asian labourers, many on tourist visas, ...](http://web.archive.org./web/20170714104731/http://www.afr.com/content/dam/images/g/x/b/d/6/c/image.related.afrArticleLead.620x350.gx9v1k.png/1500019437862.jpg)
David Smith, a grape farmer in Victoria's sunbaked north-west, says Chinese crop buyers were earlier this year knocking on neighbours' front doors with offers of cash for crops that were still on the vine.
Smith, who has been growing grapes for nearly 50 years, says the buyers from China's populous southern province of Guangzhou could also arrange Asian labourers, many on tourist visas, to pick and pack the fruit.
Grapes, which typically sell for around $3.50 per kilo, were selling for about 25 per cent more after crop failures in northern Australia pushed up prices to record highs.
"Australian grapes are highly coveted in China because of their quality and high sugar content," says Smith, who lives in Robinvale, about 90km south-east of Mildura.
"But I reckon they paid quite a high price and could have gone home with their tails between their legs."
Smith's experience is being repeated along the eastern seaboard of mainland Australia and in Tasmania as China develops an insatiable appetite for the nation's grapes, citrus, cherries, mangoes and stone fruits.
Other farmers told the AFR Weekend they are offered $56,000 in high-denomination notes to fill a 40-foot shipping container, which is about 1870 cartons of grapes. That's assuming $30 for each nine-kilo carton.
They also claim "suitcases of cash" are smuggled into Australia during October and November to be used as crop deposits.
Foreign middlemen
About two-thirds of the 170,000 tonnes of harvested grapes are exported and the high-powered federal government's Black Economy Taskforce is worried the industry is ripe for picking by cashed-up foreign middlemen with the resources and know-how to beat the system. The taskforce, which is headed by former KPMG global boss Michael Andrew, is finalising its recommendations on combating the nation's cash economy, which is estimated to have grown to 1.5 per cent of gross domestic product, or $25 billion a year.
Demand for the nation's fresh fruit products has more than quadrupled in the past three years to more than $175 million, breathing new life into the industry and securing the future of farmers like Smith.
But as demand soars so are fears that the industry's hard-won reputation for quality and transparency could be put at risk by an emerging cash economy that bypasses traditional supply chains from packaging to ports.
"This is a minority problem," says Dominic Jenkin, chief executive of the Australian Horticultural Exporters' Association (AHEA), which promotes global export of fresh fruit, particularly to Asia's burgeoning middle classes.
"The majority of farmers trade directly through established channels. But there is now the danger of introducing risk and instability in a sector where a lot of investment, time, money and experience has created a first-class global reputation."
Plenty of farmers, such as Jeremy Boyd who runs a 20-hectare grape farm in Victoria's north-east, say they are happy with the bona fides and terms of the buyers from China.
Big concern
Boyd says payments for his crops are promptly paid into his bank account with tax receipts and other required paperwork issued.
The big concern is that a cash-rich, sophisticated international criminal network is evolving that induces farmers to cooperate with offers of cash payments and promises their crops are picked, packed in refrigerated containers, railed to the nearest port and shipped to China.
Cash payments are also a popular method of money laundering, which is the concealment of the origins of illegally obtained money, typically by transfers involving foreign banks or legitimate businesses.
Many of the buyers are believed to be in Australia on tourist visas.
There are millions of ABNs that have never posted any taxable activity. The holders are excluded from the PAYG system, which makes any cash payment they receive tax free unless their income is later declared.
It's a business model that once ingrained could spread to other rural exports, potentially costing billions in lost revenues and jeopardising industry standards and reputations.
Grape farmers in New South Wales, who did not wish to be named, claim lower labour costs, cash payments, cutting out traditional exporters and avoiding industry dues for research are boosting total returns by between 20 and 50 per cent.
Huge disadvantage
Casey Brown, managing director of Agri Labour Australia, the nation's largest recruitment consultancy for the rural industry, claims the use of illegal Asian labour for picking crops is "rife".
"It is a huge disadvantage for farmers and horticultural companies doing the right thing," Brown says.
Advertisements for Asian farm labourers and fruit pickers are on popular Mandarin language websites available in China and Australia and target students and tourists on working visas.
They are offered between $12 and $15 an hour, compared to the Australian minimum wage of $22.86 an hour.
In addition, they evade payroll tax, work cover payments and superannuation contributions, which add another 18 per cent to the cost of a lawful worker.
The foreign labourers often have their passports confiscated, are housed in crowded and unsanitary accommodation and are forced to pay bonds totalling thousands of dollars to ensure they work the indentured term.
"Some farmers are only focused on making a profit and don't ask questions about where their cheap labour comes from," Brown says.
It is happening across the nation and rapidly spreading from horticulture, where labour is needed to pick crops, to agriculture, he warns.
Attempts to stamp out the use of illegal labour have been largely ineffective, farmers claim.
Simple solution
AHEA's Jenkin says while the number and value of deals is unknown there is strong anecdotal evidence that it has been increasing during the past three years.
They are buying crops of oranges and grapes in the rich fruitgrowing Sunraysia district covering north-western Victoria and south-western New South Wales.
In Queensland it's mangoes and mandarins, and apples and cherries from Tasmania.
He believes government agencies involved in monitoring wages, transport, packing and export need to better share information to identify irregularities in the supply chain.
"There needs to be a linkage between departments to audit trade practices. There are enough records of growing, packing and export to see trends emerging and structural changes," he says.
"Providing there is a will to address this issue, it would seemingly be easy to devise a simple solution to audit and trace export receipts and ensure monies are accounted for."