By Alex Tarrant
I’ve been asked to pen my thoughts as a Gen-Yer over the sale of the Crafar Farms to a Chinese company
Well, I have to say, I’m actually loving watching and hearing our Baby Boomer politicians, media commentators, and talkback hosts getting all up in arms over it.
What a travesty, they all argue, the way we sell to the highest foreign bidder. These farms shouldn’t be allowed to be sold overseas. Kiwis can’t compete with the vast hordes of cash foreigners have.
First of all, I don't buy that. If a Kiwi investor, or a group of Kiwis, believed it was economical enough to pay what Pengxin’s offering for those 16 run-down farms, I’m sure they would have found the money.
We supposedly know about farming here. We supposedly know the economics behind it. We supposedly know the business models.
The fact no Kiwi bidder put up over NZ$210 million for the farms should be a sign that Pengxin is paying way too much for them. So good luck trying to turn it into an economic business. Let them pick up the pieces for a failed piece of lending by Westpac and Rabobank.
On the other hand, if in fact it is economical for Pengxin to pay NZ$210 million for the farms, then set up its own brands, set up its own processing plant and then make high-value products in New Zealand before sending them off to China, then aren’t we missing something?
Perhaps the belief that we all supply raw milk to Fonterra, which dries it out and then sends it to Indonesia for the value-add, needs to be challenged.
If that’s the case, then hopefully this is a wake-up call to our dairy industry leaders, and I welcome the sale. Teaches you right.
Secondly, my dear baby boomers, and this is the point I want to emphasise, to be quite honest, this bloody well serves you all right.
Squirm, squirm, and squirm some more. I’m actually enjoying it.
Between 2000 and 2009, farm debt in New Zealand quadrupled as the Australian-owned banks fought willy-nilly with a Dutch bank and each other for share in the rural property market.
Likewise, housing debt trebled, because, mate, you can’t lose with property.
Farmers were convinced by shiny young bank managers, many of whom had no experience in the sector, to buy the farm next door, then the one next to that, and then George’s old one down the road.
Borrow more, you were told. Farmers, (and Queen Street farmers) believed Fonterra payouts didn’t fall.
You ‘invested’ in any property you could find. Merrily bought and sold, round and round to each other due to a constant flow of credit from the Aussie-owned banks, which they sourced from offshore.
When banks are offering mortgages on third properties with loan-to-value ratios above 100%, then surely something’s wrong.
You bought the biggest flat screen tellies you could find. You bought flash oil guzzling cars, and boats. All from overseas and all hocked onto the mortgage.
Then the bubble burst. You were all sold a dream.
Allan Crafar was sold a dream. He expanded his farming empire year after year, on seemingly never ending credit from Westpac and Rabobank.
At some point during this expansion the Crafar Farms became foreign owned. There came a point where Allan Crafar didn’t own his farms; an Australian bank and a Dutch bank did. And when Westpac and Rabobank decided they didn’t want to own the farms any more, they kicked their tenant off and put the farms on the market.
Over that decade, as you were all buying and selling farms to each other (because mate the payout won’t drop), prices shot up so far that young farmers trying to get a foothold with their first slice of New Zealand land couldn’t even reach the first rung.
My partner’s brother is now the same age as his father was when he bought the family farm off his parents. Her brother doesn’t have a hope right now of being able to buy that farm with the same ease his dad did.
Likewise us in the city. We don’t have a hope of buying our first house the same way as my parents did.
Values are so high now that perhaps there should be a great ‘clearing out’. Perhaps we shouldn’t be letting Pengxin buy the farms. Let the banks take the hit for their irresponsible lending over the last decade. Bring values back down where they belong.
The banks had lent NZ$216 million on the Crafar farms. Imagine if they had to accept the Fay bid for NZ$45 million less – a 20% hit. If that happened to every property they’d lent on I’m not sure there would be many banks left standing to help us buy our first house, or help him to take over the family farm.
So while the values of your properties hopefully stagnate, and wait for our incomes to get back in line with the current cost of housing, squirm as you watch the Chinese take over your assets, baby boomers, squirm.
It should teach you all a lesson. It’s certainly taught my generation something, and that’s not to be as stupid and naive as our parents’ generation when the bank manager comes knocking on the door.
And by the way, just remember who’s going to be paying higher taxes to look after you all when you’re 80 because you haven’t put enough away for your retirement.
Have a nice weekend.