Selling all our assets makes New Zealanders 'serfs in our own country', says Brian Gaynor

Selling all our assets makes New Zealanders 'serfs in our own country', says Brian Gaynor

By Gareth Vaughan

New Zealanders need to develop long-term investment thinking, realise there are good returns to be made in their own country and stop selling all their assets to foreigners or resign themselves to being "serfs in their own country", warns Brian Gaynor.

Gaynor, an executive director at fund manager Milford Asset Management and long-time business and economic commentator, told that rather than legislating against foreign takeovers of New Zealand farms and companies or taxing exports of low value products such as logs or milk powder, he'd rather see New Zealanders start thinking over the long-term rather than settling for a quick buck.

In a Double Shot interview following up on his Saturday NZ Herald column 'A lesson we shouldn't have to learn again' comparing the foreign takeover of the forestry industry with the potential NZ$200 million Chinese buy up of the Crafar dairy farms, Gaynor said the Crafar deal - requiring just Overseas Investment Office approval - was an important precedent.

"The history of New Zealand is if we sell an asset in one area, whether it be forestry, brewing or say the publishing industry, we tend to sell others fairly quickly. The same happened with banking," Gaynor says.

"And I think it just sets a precedent. It’s important that we establish at the beginning whether this is a precedent that we want to continue, or else it’s something that we think is of such important national interest that we should take some steps to ensure that it doesn’t occur, or occurs in such a way that’s an advantage to us rather than a disadvantage."

Gaynor notes that the forestry industry 30 years ago was considered one that was going to be a major export earner for New Zealand and a great wealth creator. Companies like Fletcher Challenge and Tasman Pulp and Paper dominated the sharemarket.

What went wrong, Gaynor says, is the forestry industry got into difficulty, overstretching itself during the 1980s boom. In a not too dissimilar development, dairy farming - with the likes of beef farms and forestry blocks converted to dairy - assisted by eager banks leveraged itself up during the boom of recent years leaving rural debt sitting at NZ$47.7 billion. Now, KordaMentha, the Crafar farms receiver, has accepted a bid from Pengxin International Group which is led by wealthy Shanghai property developer Jiang Zhaobai.

Overseas forestry buy up curtailed investment in the sector

Gaynor notes when forestry companies got themselves into difficulty a familar situation developed.

"And we did what we always tend to do when our companies get into difficulty. We accept an offer from an overseas purchaser. As soon as that started, and it started off very quickly in about 1988, 1989, in the space of the following 10 years, virtually all our forestry companies and all our forests, became offshore owned."

"And as a result of it there has been almost no investment in the industry," adds Gaynor. "And when we compare ourselves with Chile, for example, which was seen to be a similar country with pinus radiata, it has completely surpassed us in terms of exports."

"One of the major companies in Chile last week announced a US$600 million investment in a new pulp plant. We’ve had nothing new in the last 30 years and now we’re exporting logs, low value logs, which actually adds very little to the New Zealand economy."

What this means is that some local sawn timber millers can’t get any logs because overseas forest owners have contracts with overseas purchasers and some are forced to close. Meanwhile, in South Korea the sawn timber industry is prospering through imports of New Zealand logs.

"Now I’d hate that to occur in the dairy industry," says Gaynor.

"The real way that you create value, you create wealth, is the added value. Distribution profits are normally higher than the amount you get at the farm gate."

"I remember when there were a lot of meat companies listed on the stock market we worked out that about 10% of the total value of the meat when it was sold went to the farmer, about 20% went to the meat company here and about 40-50% went to the distributor in the UK."

'Fonterra needs capital to compete globally'

That means if New Zealand just exports the raw material, the commodity, the country gets little of the value.

"That certainly happened in forestry and it’s why the forestry industry has really not fulfilled its potential,' Gaynor says. "The dairy industry has got huge potential in New Zealand but we will lose a lot of that potential if we just export the raw material commodity product."

"Fonterra has done a very good job but unfortunately it’s capital constrained. If you compare it, for example against Nestle, Fonterra has capital of just over NZ$5 billion whereas Nestle has capital of NZ$88 billion. In other words Nestle has about 20 times more capital than Fonterra."

To compete in the big global dairy markets, New Zealand needs a strong and well funded Fonterra and perhaps even another company, Gaynor says.

"If we don’t have that we will just end up exporting our raw material products and most of the value will be captured by the big distributor offshore, whether it be a retail outlet or somebody like Nestle," Gaynor says.

He acknowledges, however, that Fonterra's farmer owners aren't keen on bringing in outside investment. Farmers, already seeing significant foreign buy ups of farms, were "protecting their patch" which Gaynor says you can't blame them for up to a point. Nonetheless, the mentality of not letting outside investors into Fonterra needs to change.

"Because it’s much better to have a strong internationally competitive, aggressive Fonterra rather than a defensive, weak Fonterra," says Gaynor. "At the moment to me Fonterra has done an excellent job but it has got chains around its neck and those chains need to be loosened a little."

'Asset sales contributed to New Zealand's living standards falling behind Australia's'

Meanwhile, Gaynor says much of the gap in living standards between Australia and New Zealand that has opened up since the 1970s, stems from us no longer owning many of our own assets.

"You take the banking industry. We sold the Bank of New Zealand for NZ$1.5 billion. The bank has paid its shareholder in Australia (National Australia Bank) dividends of NZ$5.1 billion since it was taken over. I could go through all the other assets that we’ve sold. And by selling all your assets you effectively become, I hate saying it, but a bit of a serf in your own country," says Gaynor.

"The wealth gets transferred offshore and overseas owners don’t have the same interest in your country and in developing it as domestic owners would have. For example, somebody who is a local director of a company who is going to local football games and is mixing with people at the theatre is going to have a lot more interest in New Zealand than someone who is making a decision from Sydney or New York and only comes here twice a year, jets in and spends a few days here."

"So I think most countries are better off if they own most of their strategic assets. But my way of doing it is to try to convince people not to sell rather than to have legislation saying that you can’t sell," Gaynor says.

However, he acknowledges is a hard ask.

"Because we do tend to take the (takeover) offer particularly in positions where companies are going through a poor period and that of course is what happened to the BNZ, it happened to Fletcher Energy, Fletcher Paper, there’s a list of them a mile long."

He says he wouldn't support the introduction of a tax on log or milk powder exports as an attempt to promote more value-added development of the commodities within New Zealand before they were exported.

"My answer would be to try and convince New Zealanders to take the long-term view. I know there are other bidders for the Crafar farms but it appears theirs is a much more short-term view than the Chinese."

'Invest domestically'

Gaynor says he'd like to see more equity capital in New Zealand and more savings in New Zealand so the country has enough capital to compete with overseas interests.

"But of course we don’t because in the last 20 years there has been a real swing away from investing in the productive sector to investing in residential property."

People need to be convinced there is merit in investing onshore.

"Because there are actually huge advantages of investing in New Zealand particularly from a tax point of view," says Gaynor.

"We’ve got some very high yielding stocks in New Zealand (with) fully imputed dividends. And if you compound that over a period of time, as long as those companies are competing well, I’d be quite surprised if the KiwiSaver funds that are invested in New Zealand - particularly in the equity market on an after tax basis - are not doing substantially better than the money that’s invested offshore."

"But for some reason New Zealanders are convinced that you’re always going to do better offshore even though the New Zealand sharemarket on an after tax basis when you take into account dividends, has actually done pretty well since the KiwiSaver scheme has come in."

See Bernard Hickey's article and 3 charts showing how New Zealanders are getting poorer despite rising GDP as the foreign drain grows.

Also see last August's Double Shot Interview with Brian Gaynor: Sharemarket quietest for 35 years, future hopes pinned on generation's X & Y.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.


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Brian Gaynor for PM!

JK and his bunch of Wollys (sorry Wolly) OUT.

So lease for goodness the assets...the Serfs have been created by brainless shoddy govt over many years...that will not change...whatever good National do by mistake will be buggered by Labour the day they get back to the pig trough.


A mixture of Roger Douglas and the 4th Labour Government who flogged off half of it and then Ruth Richardson who flogged off the other half after the then National Govt. had to bail it’s sorry arse out following its incompetent lending practices during the excesses of the 80s. Remember the share market collapse of 87? I guess she thought she was dumping a financial lemon.

Ah Labour Govts!  Didn't they promise us that their reforms would ply the country with milk and honey within a few short years of their undertaking them? Who was the Baboon in Chief back then? Oh that’s right, David Lange. The towering giant of New Zealand’s Left. Cup of tea and nuclear free mince and cheese pies anybody?

Oy vey. 

I agree that there needs to be more investment in the forest industry and not just exporting more logs but I disagree when Brian Gaynor says that  " virtually all our forestry companies and all our forests, became offshore owned." More than 30% (some estimates say as much as 50%) of New Zealand's forests are owned by small landowners (less than 1000ha of forest). Individually they may not make much of a difference but collectively they have a large impact on the timber market.

All that may well be so but who determines how much they get for the logs and whether they are further processed here?

Not disagreeing with you, just pointing out that the not ALL of NZ forests are owned by overseas companies as stated in the article. I have seen some limited examples of small landowners with small sawmills producing a higher quality product than just logs and with species other than radiata.

Julie, the New Zealand Superannuation Fund also owns a minority stake in the Kaingaroa forest estate through a partnership with Harvard Management Company. See more on this here -

And Graeme Hart also has forest interests through Carter Holt Harvey but recently sold a big chunk as we reported -

Rank Group recently sold 17,000 ha of land, not forest.

Julie is correct, about 30% of the national estate is owned by small (<1000 ha) land owners.

The Overseas Investment Office granted approval for Hart to sell more than 17,000 hectares comprising 18 Central North Island forestry blocks -

What do the small forestry owners think of what has/is going on with the industry? And do they look to team up to get greater scale and influence?

And as for dairy farms, remember that 83% of Dairy Holdings is also on the block.

Simon, I think the percentage of small landowners may be even higher. The MAF study only included people with 40-1000 hectares of land. There are another 3000 landowners with less than 40 hectares of forest land.

Gareth, Small landowners are pretty evenly divided. Half think things are getting better for forest landowners, 25% think it is about the same and 25% think things are getting worse. Currently there is not too much interest in teaming up but I think they perceive it as being something the government would try and organise/control. I think they might be more interested if it was organised locally. They was a big planting spike in the mid-90's (as seen in the MAF report that Simon mentioned) so as those landowners think about harvesting, there might be opportunities for landowners to work together to find better markets for their wood.

The problem I see with that though, Julie, is that such a large number of small holders simply don’t have the economies of scale, cohesion and financial clout to develop the industry in New Zealand to its full potential.

It’s a bit analogous to all the small vegetable growers who have to sell their produce to the supermarkets in New Zealand. It’s the supermarkets who call the shots and dictate the terms (and rake in the profits), not the growers because, individually, they are too small to take on the might of the supermarkets. It’s just too easy for the supermarkets to play one grower off against another.

If there was one or two large publicly listed NZ owned forestry companies here that were well managed and run, then you could develop a more integrated vertical industry from tree to value added tertiary product with sufficient size to market and supply the volumes required to international customers.  Sadly we don’t have that, and 5000 leaderless disjointed small Kiwi holders simply aren’t going to make that happen. 

David, I completely agree with you. Individually they have very little power in the market and currently no great way to work together. Most of the small landowners aren't currently harvesting much but in 10-15 years most of those small landowners will start to think about harvesting. So there is time to make changes that would benefit both the landowners and NZ. The big questions of course are how to get landowners to work together and more imporantantly, finding international markets for the products.  Perhaps forestry cooperatives? They could purchase their own small sawmills to process wood. As far as international markets, everyone seems to be looking at moving from logs to lumber but I think perhaps NZ could benefit from even further wood processing. If all the wood is going to housing starts in China/South Korea/India, why not export trusses or even housing kits that could be easily assembled on site. I don't know anything about those markets, I am just trying to brainstorm beyond the usual idea of exporting logs.

I agree, we shouldnt sell...


I had a tender on my farm from GMO an overseas pension fund associated with Harvard, a very low tender and as part of their application they stated they have purchased 240,000 hectares with no issues from OIO. So I agree with Gaynor NZ has something the world wants and we are slowly but surely selling of our own productive base. Some how we need to invest in our own country and we will continue to pay for the debacle around rural lending for a long time to come especially as more regulation introduced by NZRB rolls out over the next 5 years.

If GMO really have purchased 240,000 ha of freehold land they have done that pretty quietly. It's more likely they are referring to forestry rights that they have an interest in.

Note the Jeremy Grantham, the founder of GMO, is being discussed elsewhere on this forum with his theory that we've hit a Malthuisian crisis point.

Wolly - you are spot on, NZ should lease - 75 or 99 year renewable lease.

The Govt is on a really tight spot on this one. Unlike the May Wang bid, the current proposal satisfies all of the OIO criteria and it will be very tough to reject under current legislation without creating significant uncertainity. Also given the recent sales to US, and German interests, it would be very internationally politically damaging to reject on the basis that the bidders have slantly eyes and yellow skin.

A viable solution is for a private NZ based company to purchase the farms and then lease to the current bidder. The Govt can lend the private company the funds to purchase the farms. The private company will earn a spread over the cost of funds on the Govt debt and the lease yield. This way you keep the assets are kept in NZ while preventing the Govt setting the precedent of nationalising private farmland. Also prevents a loss of investor confidence in NZ and a consequently significant drop in NZ farm values, including the SCF the Govt has on its books. The bidders will be satisifed as remember they are after food security and profit margins on NZ protein sources as the world faces towards resource contraints. 75 or 99 years is a significant amount of time to justify them in bulding plants and investing in NZ. 

GG it would be very internationally politically damaging to reject on the basis that the bidders have slantly eyes and yellow skin. But it wouldn't be if the rules were based on reciprocal rights, GG.  That is, if we cant buy land there they can't buy land here. 

The biggest threat is interests (Asian, USA or anyone else) getting large tracts of land for the purpose of vertical integration of dairy exports.  Especially if these vertically integrated companies get preferential treatment back in their home countries, for their exports.  This threat has the potential to destroy the industry here in NZ and should not be underestimated.  The dairy industry will not survive if the future for it is fragmentation the same as the meat industry currently.  The strength of the industry is in it's cooperative nature.  Those outside the cooperative model are struggling in the current volitile dairy commodity market. 

Brian Gaynor is correct when he says we need to think strategically rather than short term. 

However, he is way off the mark if he thinks that outside investment in to Fonterra would be helpful.  Fonterra made the decision years ago that it would be far better to be the supplier of choice to Nestle and Kraft, rather than try to compete with them. Fonterra needs to have a strong NZ farmer base to be sustainable, without that, there is no Fonterra. Period.  Non Fonterra farmers need a strong Fonterra also, to ensure they don't get ripped off by the corporate processors in payment for their milk.

Interesting you bring up Nestle vs Fonterra.

I had a discussion with a CFO recently on this topic. His comment was that NZ's problem is we export raw commodities and won't get ahead until we start moving away from this mindset.

He went on to say that Nestle and Fonterra were similar in size and nature in 1950, now Nestle is 50x the size. 


The company grew significantly during the First World Warand following the Second World War, eventually expanding its offerings beyond its early condensed milk and infant formula products. - Wikepedia re Nestle.

Nestle has moved on from a production focused model, to a point where is buys milk from the likes of Fonterra and adds value. 

Scarfie - Fonterra was only formed in 2000 so any comparison with it and Nestle in the 1950's is not a valid comparison.   In 1950 there were something like over 100 different dairy companies so the comparison would be with the size of the dairy industry, not Fonterra as it is now. Farmers could see that there was no future in having multiple dairy companies competing with each other in overseas markets, hence the idea to form Fonterra.

To compete with the likes of Nestle the advertising budget would be enormous.  It took something like 5 years to get real pay back from the advertising costs in the Asia markets. 

While commodities make up the bulk of our exports there are considerable value add products and research undertaken at the Fonterra research centre, specifically for customer needs. There are also products made that you will never hear about because of their commercial sensitivity and agreements with customers for whom the product has been designed.

In the future the majority of our payout will come from JV partnerships offshore, not from the NZ farmers milk.  This will be the reality.

Casual Observer  -- the comparison that Scarfie made about Nestle should have been with the Dairy Board v Nestle ( I heard the same comment before about the two being roughly the same size in the 1950's )

I really like Bryan Gaynor, he's a very smart cookie and very right on this one.
He seems to be one of the smartest commentators out there.
Why is this country so full of idiots who have couldn't care less about the long term picture, wanting to just sell everything off

Good comment by Philthy (no relation, BTW).

Gaynor is far & away the most perceptive & insightful analyst in this country (& I don't mean to demean your worthwhile contribution, Bernard).  I don't remember when he has ever made a poor call on economic matters.  His articles are always impeccably researched, and get to the heart of the dysfunctions and lack of balance in the NZ economy.  It is a pity that successive governments never take a blind bit of notice of what he warns or suggests.

A special bouquet to for interviewing Brian.  A quantum leap above some of the regular contributers on this site (did any mention Roger Kerr or Olly Newman?)

Cheers to all. 

Did not Brian Gaynor compare us to Ireland a few years ago,  saying we should copy what they were doing?

I agree with Gaynor and others. But the dairy industry has to back itself. The Govt should not be involved (it's got enough on its plate)

The farmers have for years said they want Fonterra to stay as a co-op. Fair enough it's their company. Its getting more and more difficult for young people to get into farm ownership so down the track the industry has an issue as more farmers/owners retire. Here is an opportunity for the industry to try some new ideas. For decades the fishing industry ( companies) has funded young fishermen into fishing boats and more recently quota ownership or leases. Why can't the dairy industry through Fonterra fund the purchase of the farms and as Wolly has said , lease the farms to young people or preferably " lease to buy". There have to be plenty of models in other industries for them look at.

But if everyone wants to stop foreign ownership then those in that industry have to do something for that industry and stop running to the Govt.



Casual Observer

I agree with you comments and I know from your previous comments that you have a very good understanding of the NZ Dairy Industry.

Also based on my experience of Fonterra I know that they will not survive if faced with credible competition for NZ domestic milk supply.  They are very concerned about competition for NZ domestic milk supply, particularly from a foreign (most likley Chinese) party who has deep pockets, a long-term horizon and inside contacts for the local market.

However, the issue I have is that given the large number of dairy farms on the block and the high levels of accumulated foreign debt on NZ dairy farms, how do we manage the sell down of these properties when NZ has such low levels of domestic savings.

There are calls to socialise the problem. i.e. the Govt to buy the farms via Landcorp or the NZ Superfund. However, we must remember that this will be funded by foreign debt and consequently via taxation (which falls heavily on a small % of PAYE earners).

I don't like the thought of privatising the gains and socialising the losses. Dairy farmers can not expect the taxpayers to bail the industry out while refusing to allow any public / non-farmer interest or controls over Fonterra. While you could correctly argue that NZ Inc benefits from a strong monolopy Fonterra, if taxpayers are being expected to bail out the industry, they should have some ownership or control of Fonterra. We must remember that the issue with Crafar Farms, and other dairy farms is that it was foriegn debt fueled increases in land values. Many farmers benefits personally from this growth.

An alternative could be for the market and the NZ dairy industry to bail itself out. i.e. change the legislation to block foriegn ownership of land. This would result in a significant drop in land values, the cost of which will be borne by farmers (and possibly some of the banks). The Govt would take the hit of its holdings in NZ Dairy Holdings. Howeevr, it will allow young NZ farmers into the industry.

Alernatively, Fonterra could buy the farms and fund via levies on future payouts to farmers.

Some really interesting comments here folks, cheers.

Fonterra shareholders would never agree to what is essentially a bailout for banks and their crass lending policies.  Once that starts where would it end. 

I understand what you are saying GG and for me personally a significant drop in farm prices would not be an issue.

Then again perhaps Fonterra, it's shareholders and staff and Taiwan and Japan JV partners should have kept the $5,805,000 cash it has donated to Christchurch and used it as a deposit ;-)

Interesting comments about NZ domestic competition.  I would have thought that if there was a heap of money to be made in it, the other big companies Open Country and Synlait would have been in to it.  Problem is the domestic market is very small when all things are considered, but can be valuable in the times of a downturn in commodity prices. 

I have  had the best read for ages , with Casual Observer and Mr Gaynor  we are all concerned  and I will be disappointed if some of these very good ideas and writings are not acted upon by this country's good clever brains and proactive New Zealanders these folk who have responded on this site obviously care very much about our country's identity and heritage and decency to each other for the common good of all NEW ZEAlLANDERS  in the future. I  will watch with great interest to see what develops.

I find it deeply irrational that NZ-ers so mistrust people of other nationalities that we do not want them owning property here, but our mistrust of these people does not extend to any perception of need to have a proper defence force. Just one of many irrationalities into which the nation is sinking.

 Here the first lessons for 2013 for Brian, Bernard, Steven, Wolly, Andrew, Christov, Gummy, etc. dealing with the new leaders of this country.

9) Watch what you left foot is doing - near another arse.

WELL that' Walter................we need a platoon guide...not a P.M. ...cause the platoon guide is never out of step.....just every other bas$%rd. 

We need to ask ourselves why overseas interests can pay more for our farms than we can and who benefits from the higher prices. I believe the answer to the first question is the huge interest rate differential. The USA and UK have bloody near zero interest rates so why keep cash in the bank. The biggest beneficiary of the high prices foreigners pay, are our banks.


 When you can borrow of the fed at %.2 and invest in NZ farmland where the locals are paying %7.3, its not a level playing field. The banks lent huge amounts to pet clients, who then ended up with huge holdings, that no local can afford to buy, but become attractive to foreign corporates.  

Im sick of this argument, its all about the banks and its time we sorted this issue out. Forestry should be joint venture and farmland should be farmed by young enthusiastic Kiwis, we should not be forcing those same people into management roles for foreign entities.

Not sure where the whole argument that New Zealanders can't buy Farms comes from. I have been to some open days lately on Dairy Farms and plenty of interest. 2 x farms go to auction next week so will be interesting to see if they sell to Kiwi Farmers, at the moment it would seem more than likely.

Out of interest is that 7.3% lending rate floating?? If it is, then you are getting had. With OCR 2.5%, BKBM around 2.65%, 1.25% Liquidity Margin you would have a customer margin of 3.40%. Pretty darn expensive.

You are right Chuck there are farms being sold to kiwis.  We have friends who have just bought their second farm after a few years of watching the market. It has been reported 80% of debt is owed by 20% of the farmers, so 80% of farmers are doing ok, thank you.  But as Andrewj said, there are a few who are waiting in the wings for prices to tank further.  Banks are awash with money and are mad keen to lend again to those who have only 30% equity in some cases.

Cows at auction round here recently sold for $2000-$3000 each.  Some of these high prices are being paid by existing farmers looking to top up.  It is early days in the clearing sale calendar yet, so it will be interesting to see if these prices hold up.

Federated Farmers recently took some of the big 4 banks to task for not dropping rates by the 0.5% cut we had recently.  Some banks admitted they hadn't passed it on to their rural clients and some said they weren't likely for a bit either.


NZ’s are too scared to opposed this because we are so politically correct now that heaven forbid someone might think you are xenophobic or something.

Even though the only reason most oppose it because it’s a very stupid thing to do financially for NZ.

Also if we are so xenophobic like what keeps getting claimed, why do we have practically more businesses owned by overseas interests than just about any other OECD country in the world?, doesn’t sound like a xenophobic country to me, in fact the complete opposite. It does sound like a very naive country though.

This nuts. Can't you see it. The chinese remimbi is pegged to the USD. The USD has been depreciated 50% over the past 12 months and thus the remimbi has also depreciated by the same amount. And the Chinese are willing to pay $200 million today what they could have had for half price 12 months ago. If they are willing to pay double the price today they are signalling to "you all" something is very valuable. What is it? Why dont the receivers float the Crafar Farms on the NZX and do an IPO? Probably because the locals cant see the value, dont trust it, cant see past tomorrow or next week and there is all that debt hanging around.

I thought the same thing when I saw the Canadians bought NZ Choppers for $160M. Given the amount of companies with a market cap in the $20-$100M range it would have been a decent addition to the NZX. I do wonder why the NZX doesnt lobby for more of this, particularly when its the Govt flogging the stuff off.

But like you say, NZer's in general dont trust the share market, and would prefer to flip houses to each other, which is the catch 22 really. Unless NZ Inc (mum & dad investors) start putting their money where its mouth is, good assets & companies will continue to be sold offshore. And unless they do so then they really have no right to whinge.

As you mention (& Gaynor), there is a very real lack of long term vision in NZ. Like Gaynor I do hope the younger generation pick up interest in the local sharemarket & business, although a lot of young people are still fed on tails from the 80's crash.

I don't entirely subscribe to Bryan Gaynor's views. He takes selective anecdotal information and leaves other stuff out and spins his web. In the case of Fletcher Challenge he conveniently didnt mention the CNIP (Forestry) (central NI partnership) with the chinese. That was a fiasco. Then there was the $1 billion lawsuit that was hung around Fletcher Energy (Capstone) throat. Together it all but destroyed Fletcher Challenge. They ended up being very willing sellers. And that is the problem for NZ. The willing o/s buyers sit back and wait for the willing NZ sellers to appear. And they will. And they do.

The receivers of SCF (Dairy Holdings) and the receivers of Crafarms should be talking to one another. Amalgamate the two and float it off in one go. This is shit-or-get-off-the-pot time for NZ. Time to decide what business we are in. The $50 billion per annum investment property industry or farming.

but the returns from dairy are poor, and the banks are not lending like they used to. Fonterra auction prices are back %20 in the last two auctions alone, so it looks like we are past the peak of the present bubble.

AndrewJ: "but the returns from dairy are poor"

Maybe, but explain this: what is it that the Chinese can see that makes them willing to pay double the price? Perhaps they are taking a "long term view"

My bank takes a short term view, it wants me to do budgets on present incomes. I dont have a State with trillions of US$ in its back pocket, backing me like the Chinese competition. A couple of bad years and the bank would be all over me, my interest rates are realtively high and it would be a very risky time and im risk adverse especially with all the 'climatic events' we are getting. 

However if farms were allowed to fall in value to where we can get realistic returns on capital, Id be in boots and all like every other Kiwi farmer with minimal debts.

Philthy  --I don't think it is a case of xenophobia ( well maybe for some ) but if we cannot buy land in China why should the reverse apply ?

AndrewJ -- I agree it is about the banks. With abit of creative thinking the industry/Fonterra could get together with the banks and work out an arrangement for young guys to lease to buy the farms.( I believe the old sharemilker arrangements are harder to find now). They may not even have to raise any funds -- the banks stay in , Fonterra perhaps gives some guarrantee of payment ( even deducting from payments to give directly to the bank --if it doesn't already occur) , some experienced farmers give on going practical advise to the young guys etc etc But everyone would need to take a long term view because it would not be an easy road .

Yeah I agree entirely Ross, I don’t think it is either (you kind of missed my point), I find it annoying that every time this debate comes up, almost without fail some idiot comes out accusing people of being xenophobic just because they want to keep NZ farms in NZ hands.

Like it’s a big crime just to want to keep our major industry in NZ hands, and they want to take a cheap shot any way they can by trying to tag the label xenophobic on them.

Top cheese factory forced to close - unbelievable !

 High milk prices have forced an award-winning Hawkes Bay cheese factory to close, with the loss of nine jobs.

I have not much more to say: Another example of mismanagement of our economy by the government.

Possible consequence: Nine qualified people working in Australia soon, making award winning cheese, competing on the international markets with NZ - HA - what an economy ?

Wasting money - laying more roads minister Joyce !!



Walter - mismanagement of the company perhaps.  The government isn't to blame for people making incorrect business decisions.  How much thought do you think Kaimai put in to buying Te Mata when their GM said this'

"It will be pretty much business as usual [at Te Mata] for at least the next three months until we see how it might work,”

might work?!  Sounds to me they were more interested in buying up the competition than making a real go of it.

Perhaps also it shows the folly of relying on 'cheap DIRA milk' instead of entering in to long term contracts for supply with farmers.  What do they say about if a deal is too good to be true?


CO - have a read with the link below. My concerns are the government wasting money on building roads, etc. while at the same time valuable knowledge/ skill been lost in the production sector - under current economic circumstances.

Here's some good news for you Walter.  I was talking to a chap today who is well along the road to developing and manufacturing what he called a 'Cargo Bike'.  It will be able to take a passenger and a 250kg payload. The manufacturing will be, not in China, but in NZ!  This chap also is employed by a UK company to design improvements to its e-bikes.

There are many cottage cheese and small cheese makers Walter, in NZ.  It is entrepeneurs like the chap above who we need.


 CO - of course such stories help our economy, but the government should do more, not wasting money, which we cannot afford. It is missing and cannot be allocated in other more important departments. Do you think government is spending money wisley ?

We buy wonderful cheese from a number of small cottage factories – top quality for affordable prices, by the way.

I like the stop wasting money bit Walter, in fact I think that is all they need to do to help the economy. Otherwise just get out of the way.

Simon P I was pretty surprised as well. I don't think they were refering to forestry rights as they're not fussed on joint ventures. Harvard have also been involved in purchasing land around Taupo catchment which came with 15 NDA's per hct and the NDA's are worth about $400.00 a unit and you only need 5 NDA's for forestry so the selling of surplus NDA's more or less funded the purchase.

Andrewj agree with you.We need to set up some sort of structure that allows young people to enter Dairy Industry, and the interest rate Chinese have gives them an advantage. Also we have the Bank of China setting up in NZ with currency swap systems to assist purchases and investment in NZ.

Someone asked why the Chinese want to invest here so much. After the melamine debacle Chinese don't trust domestic production. Apparently one NZ supermarket sold $170,000 worth of Baby formula to chinese buyer and now there are restrictions on the amount that can be bought at one time.As I have stated before NZ is paying for the legacy Banks have left as a result of their rush to get market share.

Ross, it still isn't a good comparison as the Dairy Board was made up of many different companies, whereas Nestle was only ever one company.  Each dairy company was in effect in competition with the others. Nestle and Fonterra are complementary and the value to each is to work with each other, not against each other.  NZ is only ever going to have a finite amount of raw milk for product.  The problem then is to be able to hold your market share in an ever increasing market.  Fonterra couldn't do that with only NZ sourced milk.  It doesn't today either, if you look to its South American joint ventures and also the likes of Sri Lanka.

Fonterra is the largest exporter of USA dairy products.  The USA industry recognise that Fonterra has the best exporting nous bar none in the dairy world today.  Going in to competition with one of your biggest customers isn't always the brightest idea.

I am glad ross came to my rescue though:) But I did wonder about the structure behind the story, being a genX I am sometimes at a disadvantage.

Some of your comments in reply to me are encouraging.

Almost go into dairy with someone about 5 years ago by buying a herd. Probably should have done.

Doesn't change my view that a big crunch is still to come, and after some debt write downs against property in NZ I think agriculture will be a great investment.

I agree with your comment about a big crunch still to come, but at the moment things are looking ok.  The telling point will be the Fonterra advance payment for next season.  They will probably make a statement re this in May.

The good thing about this site is the sharing of knowledge and views. :-)

Equity partnerships are quite popular now with young people wanting to move in to farm ownership.  Some work well and some end in tears.  Not so many 50/50 sharemilkers now - banks have pressured some owners in to giving 50/50 the flick - very short sighted but that's bwankers for you.

I am heartened by the passion I see in some young farmers for the industry and their belief that they have a good future in it. It is also interesting to see how selective they are about who they will work for i.e. seeking out jobs where they get an all round learning experience rather than just a mono experience like 'milk harvester'. Getting ahead in the industry has never been easy, unless you have family to help, but if you are motivated to succeed, the sky's the limit - as it is in anything. ;-)

But the Dairy Board had sole export marketing "rights" for those companies at the time and they were able to direct what products were produced where to a large extent. They also had the centralised R&D at the old DRI in Palmerston North. So I think it is a valid comparison.

I'm not knocking what Fonterra do or have done. But it could have been different if the Dairy Board had better strategies, at times, in the past.

I hear what you are saying Ross but perhaps this will illustrate my point better.  I remember a time (way back in early 90's) when the Dairy Board wanted a certain company based in the lower north island to change product as they had a market for this particular product.  Problem was, it was a lower paying product.  The said company refused.  NZDG came to the rescue.  This shows how while the Dairy Board may have found markets or have a product mix it wanted, the dairy companies could in fact veto it by refusing to make it or refuse to expand their operation if they felt it was going to be to their detriment.  This is why a comparison with Nestle and the Dairy Board isn't an apples with apples comparison. Nestle could set a strategy in place and go follow it.  The Dairy Board could have a strategy but had to have the buy in of companies that were at times very parochial and patch protective. The industry was too fragmented to move ahead like Nestle could.

David makes a case on this thread for why the forestry industry small players need to consider joining forces.  His arguments explain exactly why dairy farmers wanted Fonterra. You need a united front on the export stage, not a divided one.

I have got to enjoy some thing else rather than this interesting debate as I have a numb bum, and need some liquied refreshment for tonights T.V wedding highlife in Britain and forget about the Chineese and the Crafar farms  for a spell.Mr Crafar would no doubt be running those properties now much better than the receivers that put him out of business,what anquish all round  Crafar and Hubbard empires have thrown up. I say limit the number of farms people can own in New Zealand  instead of the greedy ones buying farms and houses  more than what they need to put a feed on the table for themselves and family .

It was the banks that put Crafar out of business, not the recievers.  The recievers were brought in to clean the mess up. The recievers couldnt have been  expected to fire up production when upon arrival they found stock in severe distress. It was an awful spring that year, and 2 droughts since, so of course those farms would struggle. They have put in competent managers and sharemilkers who will be keen to get the best production they can. They have dressed the farms up a bit for sale, what else can you expect. Crafar is gone because he was a disgrace to dairying. Financially, environmentally, as an employer, and in animal welfare.

A warning. If these farms go to the chinese, it will take the rustling pressure off the rest of us... I am quite sure they will be significantly targeted by the locals. And yes they kill dairy cows for meat around here. It will be open season.


FYI for those interested in GMO, the GMO Forestry Fund 9 has bought 1,149.3972 hectares of land around Taupo from the Lake Taupo Protection Trust -

The OIO says: "The Applicant will enter into a Nitrogen Management Deed with the Lake Taupo Protection Trust which requires it (and subsequent owners of the land) to use the land so that is has a nitrogen discharge allowance of 5kg, or less, of nitrogen per hectare per annum for the land for 999 years. The Applicant intends to establish a pinus radiata forest plantation on the land to comply with these requirements."

"The investment provides a further opportunity for GMORR to invest in timberlands in New Zealand thus expanding its existing New Zealand forestry investments."

There's also a forestry purchase by Malaysia's Timbergrow in Marlborough -

A Japanese forestry buy in Southland -

An Australian (Craigpine Timber Limited) forestry buy in Milton to "secure a long term log supply for the Applicant's sawmill" -

And another Aussie forestry buy up (Carbon Conscious Holdings NZ No. 1 Limited, this one near Gisborne -

And Germany's Aquila buying a Southland sheep farm that will be converted to dairy -

The full list of March OIO approvals is here -


Gareth Vaughan. Are you NOT concerned?
Can you or anyone explain the following
If an overseas entity buys 1000 hectares of NZ forests plus land, lets it mature, harvests it on maturity, ships its own logs overseas, then re-aforests, repeating the cycle for 999 years - how does New Zealand benefit? .. I'd like to know .. does the following article have any bearing on what's going on?

I think you are correct Iconoclast - 'worldwide set-aside'. Ongoing financialisation of carbon. A new market to trade in.

Why is this all so secretive though... (related to GMO Forestry Fund 9)

Nothing here  Lake Taupo protection makes solid progress    (Scoop.. today)

Or here Lake Taupo Protection Trust

Not a good look.

double post

Yes, I am concerned. I think we have been naive as a country for way too long when it comes to flogging off assets to overseas interests. By the way, there's another good column on this topic from Brian in today's Herald, this time looking at the sharemarket -

I wonder if our politicians will ever wake up to this. You just havae to take a look across the ditch to see a more successful approach. We are not nationalistic enough.

Look at a couple of the examples here -

Fletcher Energy was sold to Shell and Apache Corporation for about NZ$4.8 billion in 2000-01.  Around the same time John Howard's government blocked a takeover of Woodside Petroleum by Shell  in a move that was panned by international investors, some of whom threatened to never invest in Australia again. Well, that didn't happen, overseas investors still flock to Australia.

Then there's their four pillars bank policy whereas we short sightedly sold off our big banks...


I think that the ownership of New Zealand land in excess of forty hectares must be limited to New Zealand citizens who have been citizens of New Zealand for more than five years.  A company listed on the N.Z. stock exchange would be deemed to be an N.Z. citizen.  Local authorities would be entitled to charge double rates on land owned by a citizen that had emigrated.  They would be similarly entitled to charge double rates on large blocks of land not owned by residents.

     What would happen?  The value of farm land would decrease, but it would not plummet.  That would make it affordable for younger farmers to purchase, and get over the present problem of our aging farmers.

     But that will reduce the value of the securities thatt we hold over land, will be the response of the foreign owned banks.  My response would be "tough".

     Such a move would not be tough on foreigners; we would be encouraging them to buy land in N.Z., but no more than 39 hectares.

     Then the Crafar receivers could put the lot on the market and bring their exceedingly lucrative gravy train ride to an end.

I reckon "all" land holdings held by absentee owners should pay double rates or double land taxes. No exemptions. Otherwise eventually you will need to get Hugo Chavez to come on down to run seminars on how to re-nationalise stuff.

Absolutely "all land holdings held by absentee owners "  should pay and pay again for that privilige  Absentee ownership is a poor way of running a thriving  farm  - remember farms are so much more extensive ( not saying more important ) than a corner dairy or business in the general term of things. How do these people keep a proper check on their agricultural land - animals - crops - whatever if they don't work their properies themselves and live on them to monitor things successfully.- who do they think they are fooling.Not me thats for real and Graham Hart and all these who  high flyers  must all be supermen and women    that is before it catches up with them and it all turns to custard. For goodness sake Politicians and The Oversees Inverstment Commission wake up  and stop all this speculation into our precious resources  and don't let it be sold to these opportunitists, that are here today and gone tomorrow.Sir Paul Callaghan  and Brian Gaynor could get their heads together with a possible idea and come up with a solution of assisting young men and women keen on the land to get a toe hold in  and pay off their debts in a sustainable and long term manner.


The Ballot Farms were an opportynity for New Zealanders to own a piece of dirt. The people were rigoursly appraised as to their suitability by a hand picked group of agricultural people at the time and went in for a ballot by marbles. It was a long time ago but a modern version could be thought out perhaps. The alternatives are not appealing to the N.Z. Public anyway. just allowing folk to come in to New Zealand   because their own country is stuffed  full of people  and  they see a wonderful example in Fonterra 's hard and innovative work that has delivered good benefits to many folk. I say tread very carefully. if we wish to retain  the beneficial aspects of  farming.



It happens slowly. Snowflakes are announced progressively. Each individual announcement is never significant. You have to join the dots. Today in the Australian Financial Review it is "announced" China's goal is to vertically control 40% of global commodities by 2015. Crafarms is just one snowflake in a snowstorm.

Iconoclast I agree, however is this strategy successful. Do you remember the riots in some of the pacific countries a few years ago. The chinese shops were targeted mercilessly.  Many were burnt down. Britain, France, Spain and Portugal were great at this stuff historically but they all had to pull out. At some point the native people revolt. At some point the locals realise they are being shafted and react. I believe the reaction will be quick in New Zealand. There is a great deal of 'I am owed a living' thought process going on in middle new Zealand. Us farmers, shop owners see it everyday. In particular blokes want to eat meat and in some areas our farms are under threat from some pretty serious rustling.  If foreigners want to own our farms, the locals will help themselves. They will see it as their right. You dont hear much about the rustling going on at present, its getting worse, and a lot of farmers are too embarrassed to talk about the big losses they have taken.



Graeme Hart has apparently sold some of his Carter Holt Harvey farms to brethrens -

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