More 'flexibility' to reject land sales

Ministers given more 'flexibility' to reject sales to foreigners of 'sensitive' farmland using new 'economic interests' criteria

27th Sep 10, 1:31pm by Alex Tarrant

By Alex Tarrant

Finance Minister Bill English has announced ministers will be given new flexibility from December to reject the sale of 'sensitive' farmland to foreign buyers under a new 'economic interests' test.

However the new flexibility to reject land sales will not apply to applications before December, meaning the bid by May Wang/UBNZ for the Crafar Farms would be judged under the previous rules.

Prime Minister John Key asked for a review of the Overseas Investment Act after public controversy arose around the sale of the Crafar Farms to UBNZ/May Wang, which is backed by Chinese money.

English said there would be two new measures under the benefit test used to assess investments in sensitive land. The Act itself would not be changed, he said. Changes would be to regulations outside the Act.

"A new “economic interests” factor allowing ministers to consider whether New Zealand’s economic interests are adequately safeguarded and promoted," English said.

"This will improve ministerial flexibility to respond to both current and future economic concerns about foreign investment, such as large-scale ownership of farmland," he said, adding there would also be a new 'mitigating' factor to consider.

"A new “mitigating” factor enabling ministers to consider whether an overseas investment provides opportunities for New Zealand oversight or involvement – for example, by appointing New Zealand directors or establishing a head office in this country."

'Farm values could fall - community ready'

Meanwhile, Bill English told a news conference the new rules could potentially make it harder for farmers to sell their farms.

“The advice form the rural real estate industry is that farm volumes are very low, and in some places foreign owners have been the marginal buyer," he said.

“That doesn’t appear to have occurred on a large scale.

“I think quite a lot of the farming community would be happy enough to see an end to the speculative bubble that had developed around farm land, and a focus on farm values that are more related to the cash flows.

“We can’t have it both ways.

“If we really wanted to maximise the capital value of the farms then you just throw the doors wide open and let anyone come in and buy whatever they like.

“But the farming community has had a strong a view as any part of the New Zealand community that they want to see the rules tightened a bit here.”

English said he thought the farming community was ready for a shift in focus around farm values.

“They realise there was a speculative bubble that’s left parts of the farming sector with far too much debt that they’re going to have to pay down, and in the future it would probably be better if the values were a bit more aligned with the profits that can be generated by that land.”

However, English later said he would not like to prejudge this sentiment too far.

“All I’m saying is there’s a bit of a shift in attitude where people realise there’s been some real excesses in the market, where prices got way out of line with productive capacity.

“There will be a group of current farm owners who have got high levels of debt, and their banks, who will be concerned about any radical shift in the policy.

“Now this is not a radical shift, it’s an incremental shift that tightens things up a bit.

“One of the reasons we shouldn’t go to extreme propositions like the Greens, of saying ‘let’s ban it’, is that would have a very negative impact on the welfare of our rural communities.”

Not changing the Act itself

English said the Government would not be changing the Overseas Investment Act itself, and that the changes were to regulations outside the Act

“The process we went through there was to look in detail at all the tests within the Act, and the complexity in the Act is related primarily to sensitive land.

“We looked at a range of alternatives for simplifying those tests and we came to the conclusion after quite lengthy consideration that the benefits from simplifying the tests were not sufficient to outweigh the concern that would go with opening up the Act for change.

“Cabinet had actually come to that conclusion before the real level of public concern arose around the large scale purchase of farm land, so we decided to take the opportunity to make a number of changes to regulations that would help to deal with those concerns.”

Against large foreign vertical integration

English said the Government would be issuing a directive letter to the Overseas Investment Office to outline they way in which Government would apply the economic interest test.

“That would include, for instance, drawing attention to the fact, for any investor and the Minister, that the government was concerned about the undue aggregation of farm land by foreign investors, or concerned about large scale vertical integration by foreign investors.”

Motivated by SCF, Crafar land

English said one of the motivators for Government to change regulations was "the practical reality that over the next few years we could have found a number of existing large aggregated land holdings coming on the market".

“Not least of which could be the South Canterbury Finance-related holdings. Who knows what will happen there, but that’s an example alongside the Crafar Farms and perhaps others.

English would not be drawn on what the other large holdings could be.

“With the way economies are changing it could well have been that the owners of those large aggregated holdings could have had them on the market [in the next few years].

"That may well generate a lot of overseas interest and we want to make sure that if that is going to occur, that it’s clear how the Government will go about treating those applications.”

Here is the full statement below from English. We will update the story through the afternoon after a news conference with Bill English and John Key's post cabinet news conference.

Ministers will have extra flexibility to consider a wider range of issues – including large-scale ownership of farmland - when assessing overseas investment applications for sensitive land, Finance Minister Bill English says. At the same time, a new ministerial directive letter to the Overseas Investment Office will provide extra clarity and certainty for potential investors about the Government’s general approach to foreign investment in sensitive assets.

“In recent months, ministers have carefully reviewed the current framework for considering overseas investment applications – particularly in light of issues with respect to farmland ownership,” Mr English says. “Overall, the measures I’m announcing today strike an appropriate balance. They increase ministerial flexibility to consider a wide range of issues when assessing overseas investments in sensitive land, while at the same time they provide extra clarity and certainty for potential investors and the Overseas Investment Office.”

The Government last year made several changes to simplify overseas investment rules, cut red tape and speed up processing times for applications. “In the past year, application processing times have dropped to an average of 38 days – down from 63 days in the year to August 2009,” Mr English says. “That has made it easier for local businesses that need foreign investment to grow.

“The second part of our review looked at the Overseas Investment Act itself. On balance, we have decided against changing the Act, because it would cause a degree of uncertainty that would outweigh potential benefits.”

However, the Government has agreed to make several changes to regulations outside the Act.

They include:

· Two new measures under the benefit test used to assess investments in sensitive land:

- A new “economic interests” factor allowing ministers to consider whether New Zealand’s economic interests are adequately safeguarded and promoted. This will improve ministerial flexibility to respond to both current and future economic concerns about foreign investment, such as large-scale ownership of farmland.

- A new “mitigating” factor enabling ministers to consider whether an overseas investment provides opportunities for New Zealand oversight or involvement – for example, by appointing New Zealand directors or establishing a head office in this country.

- Providing more clarity about the Government’s policy on overseas investment in sensitive assets, to be set out in a new ministerial directive letter from the Finance Minister to the Overseas Investment Office. This will provide advice to the OIO about which factors in the benefit test are likely to be more or less important in assessing particular types of investments.

These changes are expected to take effect from December. They will apply to applications received after this date and will not apply retrospectively.

The Government has also decided to retain the strategic asset test. Although the test has not been used in the two years since it was introduced, on balance ministers concluded that removing it would reduce their flexibility in dealing with investment applications for sensitive land.

“It’s important that we welcome beneficial foreign investment and recognise the positive contribution it makes to New Zealand through increased jobs, capital and access to export markets,” Mr English says.

“At the same time, the Government recognises there are genuine public concerns about aspects of certain types of overseas investment.” “Taken together, the changes I have announced today achieve an appropriate balance.”

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53 Comments

by Mark Hubbard | 27th Sep 10, 1:41pm 1285548060

So yet another layer of arbitrary and hence unknowable – but no doubt, costly - red tape to put off foreign investors coming to New Zealand.

What’s the name of the type of Nanny State that centralizes more and more power into the hands of fewer and fewer bureaucrats? You know, the State that doesn’t openly advocate for the State control of the means of production, but that, instead, uses the more expedient method of simply allowing individuals to buy businesses, but with the State retaining the coercive right to absolutely control what that individual can or cannot do with their business; that is, total State control of the private sector in all but name?

It’s on the tip of my tongue: that system of governance with the funny march and little mustache.

And as we lurch back to protectionism - for that’s what this really signifies - we all lose. How long before the bureaucrats buy into the belief that our exporting businesses are far too important to be left in the hands of the private sector?

by Gummy Bear Hero | 27th Sep 10, 2:07pm 1285549659

Little wonder that the emerging market economies are surging past us . Much less red tape . Less central government bungling in the marketplace .

NZ is still in a dreamy state of she'll be right , we'll muddle through , the foreign bankers won't foreclose on our debts .

National have learnt nothing from Cullen's foolishness , in arbitrarily declaring Akld Airport a " strategic asset ' . Individuals were denied a $ 3.60 price for their shares , theirs' , not Cullen's . The shares are still no where near that level '

You havn't learnt a thing , nada , Wild Bill ...... Sad !

by Gertraud T. | 27th Sep 10, 2:14pm 1285550041

Tribless, I am all against State control, but with regards of land sales it is important to control that it stays here where it belongs. Land is the core of our well being, economy and identity, your hint to Hitler's regime is farfetched, even outright wrong, believe me, I know what I am talking about, I lived there.

by Mark Hubbard | 27th Sep 10, 3:09pm 1285553394

Gertraud, with respect, the second part of your first sentence contradicts the first: bottom line, you are for State control ‘where it is important’ – try defining ‘important’ then start seeing what trouble it leads to.

All Western nations are moving away from free economies and free societies toward more and more planned economies and thus planned societies: that is indisputable - although yes, there are still large degrees of difference, thank goodness, to the regime I inferred. Doesn't stop me being alarmed at the direction of the movement though, as we all should be - and by the way, in many respects under the ‘earthquake legislation’ Gerry Brownlee has usurped as much control over Canterbury as the bureaucrats of 'that' regime, and we had no way to stop that legislation nor even time to raise concerns - we have to assume 'Gerry knows what he's talking about', and are thus stuck with any arbitrary decisions he makes: (it might be a soft fascism, but has the essential hallmarks nevertheless,and coming back to this case, right down to the blatant nationalism inherent in this particular overseas investment policy move).

I'm sick and tired of being forced to pay tax and hand over the volition over my life to buffoons who also 'think they know what they are talking about'. Mostly they haven't a clue what they're talking about: especially economically, and particularly philosophically.

Somehow related to this thread is a great post by economist by economist Donald J. Boudreaux as to why he is against his USgovernments agenda, quoting from http://cafehayek.com/2010/09/prescient-tocqueville.html

A chief reason for my opposition was expressed by Alexis de Tocqueville in his book The Old Regime and the French Revolution. Discussing the years leading up to 1789, Tocqueville wrote of the French state in words that have an eerily contemporary American ring: “The number of persons having monetary dealings with it, subscribing to its loans, living on wages paid by it, and speculating in government-sponsored enterprises [!] had enormously increased. Never before had the interests and fortunes of private individuals been so closely bound up with those of the State. Thus the mismanagement of the State finances, which formerly had affected only the administration, now brought ruin to many homes.”*

by Alex Tarrant | 27th Sep 10, 2:37pm 1285551468

Hi all. Another update in with confirmation UBNZ bid will be under previous rules. Also comments from English on farming community ready for a drop in values which had got too out of line with cash flows.

Cheers

Alex

by Nicholas Arrand | 27th Sep 10, 2:43pm 1285551780

"...it’s an incremental shift that tightens things up a bit.", which is the way that the Government is going to 'encourage' the speculative excess out of all property in New Zealand, not just farms. " Not in our first term" doesn't have too much longer to run.

by Belle | 27th Sep 10, 2:51pm 1285552309

I honestly wonder if 'Ministers' should be given 'flexibility' to reject some farmers. Took a little tiki tour and checked the boundary paddock this morning. Dead cows galore next door. You gotta just hate some farmers. And hate them with a passion. Yes I know the storm was a little outa the ordinary, but really if you are gona starve them, well they will die in bad weather. Whaddya do... report them...maf are useless..more like titties on a bull. Heres a thought ring the farmer up and tell him he's a useless prick... onto it. I wish, I would be considered an over emotional woman.

How does one explain the situation to the shareholders, oops well yes we did have a few hundred carryovers, now we have a few hundred less...And how did that happen? Well yeah we thought they would do ok on the steep hills in with the lambing ewes ..eh what?

by Belle | 27th Sep 10, 2:59pm 1285552742

Heres another thought, one man (or woman) one farm.... You live in the rural community and you hear the talk. And the talk is pretty bad now that so many farms are so big, and in multiple ownership. Thats what the government needs to look at.... as well.

by Mark Hubbard | 27th Sep 10, 4:07pm 1285556871

Oh dear oh dear. (Gertraud, are you a little worried at what you've unleashed here ;) )

Why stop at one farm each, Belle. Cars are bad, apparently, for the environment, so what about one only per household. For that matter, one house per family (my holiday house is just rubbing salt in the wound of the oppressed who've not worked as hard as me): one house per family also? (Perhaps we could just give families the right to pick house colourings and interior decoration - that'll help to let them feel in control of their lives a bit. Mind you, some people have a bloody awful sense of colour - look at that Michael Hill pink thing).

Um, one child per family only? I actually think I am for that: I'd stand less chance of being attacked in my old people's home by an out of control youth in thirty years?

After reading your posts, I'm wondering if farmers should indeed be regulated all over again. Hell, the fact they are the most efficient farmers possibly in the world now, is just rubbing salt in the subsidies of all those countries whose rural sectors are cot cases and part the welfare state, rather than paying for it.

by Basel Brush III | 27th Sep 10, 3:00pm 1285552827

This country already has far too much so called Freedom on incoming investments.

It has been suggested that most investment made by overseas interests is only buying up assets that are already established and not fronting up with risk money to help develop the base of the economy.

I presume Tribeless and his/her ilk cannot differentiate between investment that is "good" from "bad" and I would not expect that.

I see no bad thing in allowing freedom of investment but on terms that suit New Zealand Inc.

Rightly or wrongly we have elected our pollys to act on our behalf as the board of NZ Inc

Why not allow leases of assets for defined terms. They will still have the freedom to carry out their business but know that it is not open slather in the longer term as they will know they have to meet the market to renew their tenure..

by Belle | 27th Sep 10, 3:17pm 1285553842

If in my little neck of the woods I see wealth destruction of a scale that blows my mind, in the form of dead animals, replicate that over all of New Zealand over the last few weeks. ITS NOT JUST MY NEIGHBOURS that starve their stock. This has a massive cost for all of us. I am not in the South Island. We did not get snow. And one 6th of these cows were dead before the storm hit. MAF and Fed Farmers need to wake up and smell the stink.

by Belle | 27th Sep 10, 3:28pm 1285554534

Basil Brush and your ilk, animals are living breathing articles, they need daily attention. They are 'assets' that require someone to care. So does the farm manager care... he gets paid anyway... does the supervisor care... he gets paid anyway... does the shareholder care... not on a daily basis, so if they all die, and a year down the track the value of shares drops well the shareholder caring is a bit late. Do our export markets care...damn right.. they care if we dont kill em right... halal... no thanks, or yes please depending on your religion. And by god they will care if they see pictures of tipped up carcases all over paddocks.Our government changed the rules, one man one farm, became he who could buy the most land could do what they wanted. Now we have a large percentage of bastards out there who have mega farms, and mega messes... we need to change the rules back.

by Basel Brush III | 27th Sep 10, 4:03pm 1285556600

Belle,

My humblest apologies,for sure, but my tiny brain just fails to relate your comment above to my earlier rant over the comments of the Tribeless brigade.

by Alex Tarrant | 27th Sep 10, 3:36pm 1285554978

Another update there now:

Act itself not being changed - it's regulations outside the Act.

Govt motivated to act in the face of large farm land holdings coming onto market in next few years.

Govt against large scale foreign vertical integration. Ie. they don't want foreigners owning all parts of a supply chain.

Cheers

Alex

by Mark Hubbard | 27th Sep 10, 3:52pm 1285555953

If Key expects many farms on the market over the next few years - and I don't disagree with him - and is now moving to effectively close out overseas bidders, then he will be collapsing the farm price - but again not pursuant to economic fundamentals, just the artiface of government actions.

So, many farmers are going to lose their shirts due to government intervention and distortion of what should be left free markets: that 's going to make for an interesting election next year.

by Belle | 27th Sep 10, 3:59pm 1285556370

So many farmers will lose their shirts due to their own foolish behaviour tribeless. One can not say that overseas buyers blew up this balloon.

by Kunst | 27th Sep 10, 4:07pm 1285556874

100% agree Belle - also what you wrote earlier.

by Belle | 27th Sep 10, 4:02pm 1285556525

All around me, it was locals that bought the land for inflated pricing. Not one overseas buyer around here. I guess the foreigners werent as dumb.

by David B | 27th Sep 10, 4:06pm 1285556797

You mean there wasn't an economic interest test applied to these cases previously??? Unfreaking believable! And we wonder why this country is poor. It's because this country is stupid.

by Kunst | 27th Sep 10, 4:11pm 1285557103

David, today you are unrecognizable in your opinion.

by Belle | 27th Sep 10, 4:20pm 1285557637

Basel, what I saw today has me a little frazzled. I was under the impression you were implying that farms are assets, just like other businesses. However I believe they are a little different because they involve live (mostly) animals. And in my experience, should have hands on management that has skin in the business. My apologies if you meant different. I am focussed right now on tearing strips of anybody that looks, breathes, smells like a corporate dairy farmer, or drystock for that matter, some of them should be shot with balls of their own shite too.

by Belle | 27th Sep 10, 4:22pm 1285557727

And thankyou Kunst, I am on a roll.

by Kunst | 27th Sep 10, 4:30pm 1285558250

Yeah, Belle - I can smell it – even here in my office. I was on a roll a few days ago also about the farming indursty and some of their short sigthted practices - here:

http://www.interest.co.nz/rural-news/storm-worst-generation-causing-sto…

by Belle | 27th Sep 10, 5:00pm 1285560033

Tribeless, I have many reasons for suggesting one man one farm. One of them is the animal welfare issue. Another is my belief that we are heading for serfdom at the moment. Actually I think we have already got there. We now have a rural population of employees. We used to have a rural population of owner occupiers. There was always hope of buying your own farm. Shear, possum hunt, go 50/50, there was a good way of getting in there and getting your own little piece of dirt.

Dont give me that 'well equity partnerships are the way of the future' bullshite. Right this minute far too many equity partnerships are under water and drowning in a sea of debt. With the wrenching and tug of war that businesses in their death throes exhibit.

by Mark Hubbard | 27th Sep 10, 5:51pm 1285563107

Tribeless, I have many reasons for suggesting one man one farm.

I have many reasons for suggesting we have a policy forcibly imposed of only one child per family. Humans are using the planet's scarce resources, overpopulation remains our biggest environmental problem. More, currently we are subsidising having children which has only led to a significant numberof children across the last three generations being born on welfare to teenagers or parents (normally one) who either have not the wherewithal, nor motiviation (natural love and affection) to care for them, hence, we now have a blossoming youth violence problem, plus all the economic problems that come from a welfare state we increasingly cannot afford.

So, if we use your logic, I have much better reasons for a one child per family policy than you do for a one farm per farmer, so the one child policy should also be enacted (and first). Are you for it then? Why not?

In matters pertaining to the pursuit of happiness, where do you place freedom?

Dont give me that 'well equity partnerships are the way of the future' bullshite.

I never stated that, but having said that, I have nothing against that structure either: it has allowed economies of scale in the dairy industry - yes, with some concommitent problems - which has turned that industry into one of the very few bright spots in our economy, and we are all the better for that. I would point out there are many dairy equity partnerships that are managed well, work well and are very profitable; indeed, these are the majority, but you don't hear about them, and for obvious reasons.

Right this minute far too many equity partnerships are under water and drowning in a sea of debt. With the wrenching and tug of war that businesses in their death throes exhibit.

And at the end of your argument that we must have government regulating farming again - despite the direct evidence of what a disaster that was in the past - you give the answer already provided by free markets for 'bad' farmers.

While much is made of how bad the Crafars were, you will note they are no longer farming. The market has sorted that problem, their farms will be purchased by a better farmer, possibly buying for an appropriately much lower price on which the new owners will be able to make an economic return.

The same goes for those equity partnerships that are effectively malainvestments: the market is sorting them out as the market will always do. As you point out, if a farm is losing stock needlessly, then chances are itwill not survive economically - the equity partners certainly will not be getting adequate return on their investment and will want to sell out to those who can get the farm run properly. Just as for those who bought on inflated values without doing their homework, and took on too much debt.

So, do we get the government out of our lives and live in freedom, or do you still insist on leading us down the road to true serfdom (as we already have,namely, serfdom to the State. I suggest you might want to read an economist called Hayek.)

And as a random note in ending, I know of equity partnerships, and 'big dairy farmers', who are prepared to bend over backwards to help 50/50 sharemilkers into farm ownership, but current tax rules, especially concerning tainted capital gains, often makes this damned near impossible. The State putting its bloody great maw in looking for other peoples money, and making other peoples lives impossible again.

by Belle | 27th Sep 10, 6:08pm 1285564087

Tribeless, I dont think a one child policy has anything to do with a one farm policy. A connection between the two is rather a large leap. I am just old enough to remember the one farm rule. And it wasnt perfect... But we are now heading towards large conglomerates owning our farmland and using 'the people' to run them. This reminds me of medieval England, or english ruled Ireland. How long before salaries crumble? Look at the quality of dairy farm employees now..

Good God, TV1 right now, Henry vanderHayden, questioned on inducing cows.... priceless

by Mark Hubbard | 27th Sep 10, 6:15pm 1285564535

I'm making no leap at all Belle. Once you've given the State the moral mandate to control how many farms you are allowed, by the same logic you most certainly have given them the moral mandate to control how many children you are allowed as well, how many houses, how many cars, and for the reasons I've given.

You are an example of how pragmatists will ultimately lead us all to serfdom.

by dug | 27th Sep 10, 6:25pm 1285565108

Guess what there is an old saying in ruralland goes like this The land alone endures. Any ownership is transient so get over yourselves who has the title at any given time doesnt matter . if they want to pay far too much for land from overseas jolly good. Take honolulu when the japs bought it all and lost their shirts. Stop worrying and be happy

by Belle | 27th Sep 10, 6:29pm 1285565366

Are you too young to remember the old policy Tribeless, I dont remember it well, but it did mean many more New Zealanders were farm owners. I say this from the perspective of an owner, and it saddens me to see so many young people wanting ownership, but business corporates and family corporates buy up and amalgamate land into large units. Employing young people who have no sense of commitment to the animals and land. I think that is sad and bad for NZ. Ask many farmers out there and they would say the smaller units outproduce the larger. Yes economy of size is important, but for a long while now it is heading in the direction of larger and larger. To what end...

by muzza | 27th Sep 10, 6:32pm 1285565537

Forget the ideological stuff guys, ideologues are more dangerous than anything. What the government is doing is plain common sense. We can't afford to get all xenophobic (hence the Act remains), but there are practicalities to monitor given the cicumstances particularly at present (hence the procedures being implemented).

by philthy | 27th Sep 10, 7:13pm 1285568012

Good job, all the drips out there that think selling everything off is good are dreaming.

Look at the massive capital flows out of the country every year because NZ as a nation has basically sold everything, hardly any profit from anything stays here anymore, we own every little of anything anymore.

by Basel Brush III | 27th Sep 10, 8:08pm 1285571284

All the Gummint needs do is to make future ownership change include sale to majority NZ resident owners. That would also mean that if an overseas owner was taken over the property would have to be sold back.

That may upset a few international trade pacts but who cares.

by Basel Brush III | 27th Sep 10, 8:03pm 1285571003

I can recall one Bob Jones (I will not acknowledge any accolade) once commenting that farms were not worth anywhere near the prices being paid for them as a business investment.

The reasons are all too obvious. Farmers buy into the lifestyle and try to make their farm pay for their retirement scheme. It once worked but they still cannot face reality.

I might comment that it is not unlike urban owners of residential property but even more stupid.

BTW belle apology accepted.

by Gummy Bear Hero | 27th Sep 10, 10:58pm 1285581515

Fair point , if anyone has the figures , what is the net income of the " average " farm in NZ , and what is the average price of a farm ? The % return on investment is bound to be very low . The name of the game is capital gain ( tax free ) , not annual cashflow .

by Les Rudd | 28th Sep 10, 10:15am 1285622109

Roger - some answers to your questions here:

http://www.johnwalley.co.nz/79-stop_farming_capital_gains_the.aspx

I think another useful question is one similar to that raised by Cactus Kate* a while ago, that is, what proportion of the tax take do they provide?

Bernard, David, Tony - how about an article addressing these questions.

Cheers, Les.

* http://www.interest.co.nz/opinion/top-10-10-krugman-wants-kitchen-sink-thrown-avoid-depression-allan-crafar-confident-dilbert#comment-556864

by Gummy Bear Hero | 28th Sep 10, 10:49am 1285624184

Thanks LES : Excellent slides , # 29 ( household wealth/debt ) is a shocker , and ought to be pinned on the office wall of every politician in Wellington !

Those of us who dabble in the stockmarket can relate to slides 37/39 , farming is capital intensive , little R&D , cashflow erratic/poor ........... Which is why we prefer software companies , as investments ....... Not newspaper publishers either ( run by morons , and heavily capital intensive )

Bob Jones was right . If you're gonna invest in property , go commercial property , not rentals nor farms . Peter Lynch ( ex- fidelity Magellan Fund ) said the same thing , in the USA .

by Belle | 28th Sep 10, 10:57am 1285624635

GBH, lol, there are a lotta investors out there currently wishing they had avoided farming as an investment. Its not for the weak kneed.

by Les Rudd | 28th Sep 10, 11:01am 1285624876

Yeah, all sad, but all true. So re. farming, it does make you wonder about about direct tax generation, does it not. Even for those that can make a buck, because maybe they'd be smart and, you know ...

(Are you on hols up there or moved up for good? Has she said enough is enough with all that shaking malarkey?)

Cheers, Les.

by Gummy Bear Hero | 28th Sep 10, 11:13am 1285625612

The question to mind is , the land tax ( as Bernard laid out the argument ) appears a more efficient and fair way to tax owners or property . Cleary farmers pay little tax during their tenure of a block , compared to the massive capital free gain they make when they sell it . Unlike manufacturing or software , it is in the farmer's best interest to minimise cashflow ( taxable ) as much as is practicable , but to maximise the capital value of the property . This indicates some conflicts of interest , and inefficiencies of asset useage .

[ the Bossy & me moved to the Phils. to develop our small farms and our beachfront properties . Coincidentally , 3 days after the first 'quake hit Canterbury ]

by Les Rudd | 28th Sep 10, 1:33pm 1285634033

Sounds good. All the best with it. Cheers, Les.

by Casual Observer | 28th Sep 10, 10:57am 1285624645

GBH: Capital gain is mainly the aim of corporate farmers. Bonafide farmers it is as more about lifestyle and hence the willingness to accept lower than usual ROI.

There is no such thing as an 'average' NZ dairy farm. There is significant variation between regions and even within regions. However these are figures taken from stats that our accountant compiles from all his dairy farmer clients - which cover various regions in NZ. Sorry it's not going to be in a table format. I will quote Economic Farm Surplus/ha

Farm Owners (Owner operators) Managerial salary allowed at $140/cow

Avg lower quartile -460; Avg median quartile 515; avg upper quartile 1422; avg top 10% 2446 drawings for this group vary between $55,400 - 133,190

Sharemilkers

Avg lower quartile -294; avg median quartile -15; avg upper 318; avg top 10% 740 drawings$49300 - 58960

Farm owners with sharemilkers

avg lower quartile 363; avg median quartile 1060; avg upper quartile 1561 drawings vary between $36000 - 33657 (The reason these drawing are so low is that there is off farm income, either investment or employment that pays the living expenses)

I have to go and enjoy the sunshine for a while but if you would prefer to see some other data instead let me know.

by Gummy Bear Hero | 28th Sep 10, 11:03am 1285625012

Thanks Cas-Ob : I get the picture . Dairy is clearly more profitable than alternatives ( sheep/beef/forestry/horrorculture ) . But even so , it is feast & famine from year to year .

Enjoy the sun .

by Sheep Shagger | 28th Sep 10, 11:30am 1285626623

GBH, I think you'll find that the top quartile of all of those farming types will all be performing suprisingly well. As Tribeless points out, the cream rises to the top and they tend to be the businesses that are able to expand at the expense of the bottom performers. The comparison with software companies is all very well but what happens when a rival company comes out with a better product and yours becomes obsolete overnight surely that is the ultimate feast or famine investment. Land may be solid and boring(to some) but it produces food, everyone needs to eat, populations are growing and it is a finite resource that unlike Bob Jones commercial property cannot be replicated at will. Why are the likes of Warren Buffet, Goerge Soros and and Jim Rodgers pileing in,not to mention soveriegn wealth funds etal.

by Micks | 27th Sep 10, 8:07pm 1285571228

New Zealand has lost the plot when it comes to farming. Corporatising farming is not the future and is far less efficient than an owner operator on one farm. Why are we getting all these animal health, effluent and other related issues now. Because farms are under staffed and stock poorly managed by large scale over leveraged operators greedy for more money.

And to make things worse, expect a new round of Banks trying to push more debt against farms in the coming year. They are once again desperate to "grow their books" and its going to end badly for everyone.

by Casual Observer | 27th Sep 10, 8:41pm 1285573271

No we haven't lost the plot Mick. 43% of all dairy farms milk 250 cows or less. While the corporates may take up large acreage, numerically they are not a significant number in the makeup of dairy farms. There have always been animal health, effluent and other issues out there. So long as you have humans running farms you will have good and bad management. In one area we farmed there were offshore expat owners who didn't have a clue about farming. They were in finance and tried to run the farm on a ROI basis. Given the farm they bought ROI was not going to be very high until some serious money had been spent to improve infrastructure. They kept the screws on spending to the extent there were serious animal health issues. Local farmers, once they realised there was a problem called in the authorities. Many cows were put down. It didn't make the news as it was sorted by the local community. The farm was put under MAF oversight and in time it all turned out well and was a huge lesson to the new owners. I will give the expats credit, they did come out to NZ when it all blew up and took on board what they needed to do and today the farm is well run, and animals are in top condition.

There's a few cashed up people out there Mick who are patiently waiting for farm prices to return to levels that make it worth investing in again. They are not so stupid as to be led by the banks in to unmanagable debt.

by I Am The Man | 28th Sep 10, 5:40pm 1285648858

Where NZ has lost the plot is in thinking that the only thing this country is good for is agriculture. NZ earns peanuts when it could be making real money doing other things.

But oh the farmers are making a mint so we mustn't change anything that will impact their bottom lines. Stuff the country - just keep the cockies rolling in loot.

by Casual Observer | 28th Sep 10, 5:52pm 1285649563

I Am The Man: As a farmer I look forward to someone else taking on the responsibility for keeping NZ Inc going.

I just wonder if we have any entrepeneurs left or if they have all left the country. Get started I Am The Man - what are you waiting for!

by Belle | 28th Sep 10, 8:22pm 1285658540

Rolling in loot, thats a hoot.

by Belle | 28th Sep 10, 8:37pm 1285659471

I dont think you get it Man. Bill English just waged war on rural values. Our exchange rate is such that everytime we think we are getting somewhere we get smashed to the ground. We are as a whole vastly over leveraged. And our competitors overseas are getting good at what we are supposed to be good at. The weather has dealt some pretty mean blows. 'Making a mint' you say... how bout mining the remaining equity... cause that is what a rather large proportion of farmers have done in the last few seasons.

It never ceases to amuse me how long it took the Labour Govt to click that when you have drought you get less income nationally.... 3 drought years later, now flooded with rain and blindsided by a blizzard... rolling in loot indeed.

by Casual Observer | 27th Sep 10, 8:25pm 1285572312

Belle: I have to disagree with you on the one farm policy. We are absentee (not corporate) owners who have done the hard yards in the industry. All of our 50/50 sharemilkers have gone from our place to farm ownership. The last ones bought two years ago. We milk less than 500cows. In the South some dairy farms have gone back to sheep, and some larger ones have had two sheds put on and the farm split in to two smaller units. What goes round comes round.

Belle,Your comment re Sir Henry suggests that you have a fundamental issue with dairying. Did your dairy neighbours outbid you for the neighbours farm? It should be the policy makers fronting up to inducing issues, not Henry. IMO the policy on reducing inductions is a good one - I don't believe it is necessary myself, though understand the argument for it. On a women's only dairy blog this subject was raised and it was interesting to see that there was as much passionate arguing for it as against it.

And by god they will care if they see pictures of tipped up carcases all over paddocks. Actually I don't think they will, its a case of pot calling the kettle black; people in glass houses etc. I don't believe it is the way the sheep are killed that turns people off our lamb it is the fact that it is a halal killing. I know of generation X & Y in the UK that espouse organics, free range etc and now when I ask them they say yes, they still have fundamental beliefs in that sort of farming system, however times are so tough there now for them, that in reality it is price that dictates what they buy.

Tribeless: I agree that there are many good corporate owners out there. Isn't it Sweden or Switzerland that has a one car policy? :-) Walter, can you enlighten us?

I don't think any bona fide farmer is going to be worried by this latest govt move-unless they have a large debt.

or concerned about large scale vertical integration by foreign investors.”

Is this what it is really all about?

Nicholas: I believe you are right!

by Belle | 27th Sep 10, 8:52pm 1285573945

No Cas Ob, not missed out on buying land. I am aging a bit and I reckon I see a helluva lot worse stuff going down these days. Mostly its on dairy farms. But hell I remember years ago working in the sheds shearing and no one gave a rats arse about the ewe with the broken leg....no one. Which is ok, but after it happens the 2nd third time you start getting angry with all shearers and shepherds as a whole. Or the working dog that gets beaten to a smidgeon of its life again and again. Well I havent seen that stuff for a while, as I am surrounded by dairy farms. Now I see broken arsed cows left right and centre. There is bad stuff out there everywhere, its just a matter of what you personally see I suppose. Just sick of it, and the corporate model seems to have made it worse. Of course if I lived in town I'd be watching teenagers drinking themselves to death, little kids being bashed, kittens being doused in petrol or microwaved. As I said bad stuff happens everywhere. I dont intend not to mention what I see though.

by Ahuhyeah | 28th Sep 10, 9:32pm 1285662726

wow we must live in different worlds at the moment Belle (love that name).

I have lived a split life, half in the country and half in town and neither has been full of the things you seem to imply are everyday occurances. Yep I saw some farmers with anger management issues, and I've seen a fight or two in town, but they were exceptions not rules.

Today a saw sunshine and people walking their dogs and children along the river bank. Lots more people biking to work and for recreation, and got a "great day" comment from a complete stranger. I watched my children potter around in the sandpit while I mowed the lawns after work and then laughed as they attempted to convince the new kitten it should try coming on the trampoline with them.

Didn't see anyone drink themselves to death, microwave much more than dinner or harm animals intentionally. Phew.

I hope you have a great day tomorrow.

by Sheep Shagger | 27th Sep 10, 10:07pm 1285578478

I think Bills got this about right. I think the main threat was foreign investment funds hovering up huge chunks of our most productive land and fully intergrating a system back to their homeland. I dont have a issue with sales on a case by case basis for individual properties as in my experience they are often farmed well by owners with deep pockets.

As an existing land holder I should be aggreived that the govt has robbed me of competition for my asset should I decide to sell, potentially reduceing its value. As CO has pointed out I think most farmers will be quite supportive of this move. I think we intrinsicaly understand it is in the national good to have control of the goose that lays the golden egg.