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Allan Barber assesses what the Crafar Farms saga has taught us. Your view?

Allan Barber assesses what the Crafar Farms saga has taught us. Your view?

By Allan Barber

The sale of 16 assorted, somewhat rundown dairy farms to the Chinese buyer, Shanghai Pengxin, looks as though it can finally go ahead, although there is still talk of an appeal by the group headed by Sir Michael Fay.

It is hard to see on what basis an appeal could be successful, because the OIO tightened its criteria for recommending the Chinese bid which was already required to jump through more hoops than any previous application for foreign ownership.

The Ministers were satisfied by the OIO’s changes and would clearly have taken great care not to land the Government in any more embarrassment over the issue.

Assuming it all goes through now, this particular saga will quickly fade into the background, to be superseded in the mind of the media and public by the next attempt, imagined or real, to sell New Zealand’s sovereignty to the highest bidder.

This morning on National Radio Bruce Wills, President of Federated Farmers, made the valid point that the Crafar farms represent a drop in the bucket, as does dairy farm land as a whole with 13,000 hectares sold to foreign bidders since 2002 compared with 1.78 million hectares of forestry.

70% of our forestry land is now owned offshore, encouraged by the ETS scheme, although ownership of land in general tends to fluctuate between domestic and overseas investors, rather than being cast in stone for ever.

Wills also pointed to the growth of lifestyle blocks on the outskirts of our cities as an equally large threat to pastoral farming as the sale of farmland to overseas buyers. In fact this may be an even bigger threat, since land converted to lifestyle will never return to productive, large scale agricultural land.

The Crafar farms saga has inspired a lot of hot air, particularly from leaders of opposition political parties who sense an issue with which to pillory the Government. David Shearer is trying desperately to sound authoritative on a subject which he hopes will gain him some traction as Labour leader, even though his party when in government was quite happy with the overseas investment climate. Winston Peters is at least consistent in his opposition to sale of land to non New Zealanders, while the Greens were always unlikely to agree with it.

Russel Norman seems to believe the strength of the New Zealand dollar is entirely the fault of the Government and Reserve Bank without taking into account the impact of the American and European economies, while Peters and others ignore the enormous amount of overseas borrowing New Zealanders have done over the last 20 or more years.

The reason Crafar farms got into trouble in the first place was borrowing too much from the banks for expansion and then not being able to service the loans, hence the fact the farms haven’t been maintained as well as they should have been.

The loudest complaint about this particular sale has been that it is unfair on local buyers who can’t afford to buy the farms at the price Shanghai Pengxin has agreed and as a result all future sales will face the same threat. This is patently a load of nonsense, because New Zealand investors, whether private or corporate, will continue to buy good farm land which will generate a commercial return.

As an example there is an opportunity for all New Zealanders to invest capital in dairy farms through AgInvest’s MyFarm which has 43 syndicates managing 14,000 hectares of dairy farms milking 32,000 cows. It will also be a lot better managed than the Crafar farms have been, although Landcorp may be able to lift performance with Chinese investment of $16 million.

The whole question of overseas investment in this country needs rational debate about acceptable forms of investment instead of attempts to force the development of policy on the wing. After all overseas investment has been a crucial feature of our economy since Europeans arrived in the early 19th century. Without it New Zealand would still be a peasant economy, not an economy clinging slightly tenuously to first world status.

There have been suggestions that land should be leased not sold as a means of ensuring we retain our birthright, which may logical, but this will require very careful analysis to arrive at a workable solution. If landowners wish to sell, they will not be thrilled to find out that they have a choice - either sell to New Zealand residents or lease to an overseas investor without being able to withdraw their capital. A further requirement that offshore investors must also invest in value added production, while reasonable in theory, would also be difficult to apply in practice.

A review of the Overseas Investment Act appears to be required despite the rules being tightened by the current Government. However a review must not be dictated by politics, but would need to be carried out by a politically neutral body or commission set up solely for the purpose.

Although it is an issue that has occupied an enormous amount of time and debate, I am not convinced a change is necessary. Unless New Zealand gets its offshore borrowing under control by generating more wealth internally, overseas investment will remain an essential component of our economy.


Allan Barber is a commentator on agribusiness, especially the meat industry, and lives in the Matakana Wine Country where he run a boutique B&B with his wife. You can contact him by email at or through his blog at

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Crikey Allan you write a long winded article. Before the NZ economy was well and truely Rodgered in the eighties there was regulation on how many farms one could own (Land Aggredation Act). Repelling this act in the name of Friedman provided a environment ripe for speculators to bid up land beyound productive value. Do you think this is a fair go for aspiring farmers, and that the current generation has a right to sell to who they want?
Also could you please explain how the Chinese, or whatever foreign investment in land, is going to add to the NZ economy on an ongoing basis. Are our export reciepts going to increase as a result?
How do we get on once we've sold a critical mass of land? What's going to generate the wealth then, and more importantly for you, who's going to bother paying  for your opinion pieces?

Do you think the OIO has covered off the following scenario Allan? It was posted on another thread on this site, and the links are worth reading.

by jh | 23 Apr 12, 4:43pm New

Once feted as saviours in much of Africa, Chinese have come to be viewed with mixed feelings—especially in smaller countries where China’s weight is felt all the more. To blame, in part, are poor business practices imported alongside goods and services. Chinese construction work can be slapdash and buildings erected by mainland firms have on occasion fallen apart. A hospital in Luanda, the capital of Angola, was opened with great fanfare but cracks appeared in the walls within a few months and it soon closed. The Chinese-built road from Lusaka, Zambia’s capital, to Chirundu, 130km (81 miles) to the south-east, was quickly swept away by rains.
Business, Chinese style
Chinese expatriates in Africa come from a rough-and-tumble, anything-goes business culture that cares little about rules and regulations. Local sensitivities are routinely ignored at home, and so abroad. Sinopec, an oil firm, has explored in a Gabonese national park. Another state oil company has created lakes of spilled crude in Sudan. Zimbabwe’s environment minister said Chinese multinationals were “operating like makorokoza miners”, a scornful term for illegal gold-panners.
Employees at times fare little better than the environment. At Chinese-run mines in Zambia’s copper belt they must work for two years before they get safety helmets. Ventilation below ground is poor and deadly accidents occur almost daily. To avoid censure, Chinese managers bribe union bosses and take them on “study tours” to massage parlours in China. Obstructionist shop stewards are sacked and workers who assemble in groups are violently dispersed. When cases end up in court, witnesses are intimidated.
What the reporter, Oliver August (he emailed me while he was working on the article but I was in Ethiopia and we never managed to talk), got right was a generalized sense that lower standards, lack of "corporate social responsibility" (social and environmental) in business practices, poor labor relations, competition with import substitution industries (especially textiles), and not enough hiring of local labor are the downside of China's increasingly prominent presence in Africa. These are serious issues and rightly tarnish the general reputation of China in Africa. I've written about them all in The Dragon's Gift.


What a waste of time typing that out or copying it - all you're doing is putting forwards a massive strawman argument.   Completely unrelated to the situation over here, completely different companies involved, and completely irrelevant given the OIO, not to mention racist overtones of "All Chinese are the same - if Chinese company A did it in Ethiopia then Chinese company B will do it in NZ"

King hit antsbull, it's a relief to know it's completely irrelevant, but a bit humiliating being associated with racist overtones...again. I would prefer culturally challenged, as it's hard to understand and empathise with other cultures you know. Peace Love and Harmony my friend.

While its not that relevent here, maybe.  I have to wonder if you undertstand the chinese way?  because what was written there is quite typical....and not atypical......

Jeepers Omnologo. Do you really believe that will happen here?
Any buildings and infrastructure built on these farms will have to meet New Zealand regulations. Not Chinese, not Zimbabwean, but New Zealand regulations.
They will be inspected and approved by New Zealand building inspectors. Not Chinese, not Zimbabwean, but New Zealand building inspectors.
They will have to operate under New Zealand labour laws. Not Chinese, not Zimbabwean, but New Zealand labour laws. Furthermore, Landcorp will be managing the farms with Landcorp employees.

... and the same with environmental and animal welfare laws

You would be foolish in the extreme to completely ignore that

If you ignore history, you repeat it.  Being forewarned allows you to be forearmed.  Bernard bangs on about a free trade treaty with the US likely being a bad deal for NZ.  I assume he has based it on his observations of how the US has dealt in other Free Trade deals.
Look at the Korean run fishing vessels in NZ waters.  Can you put your hand on your heart and say that they comply with NZ regulations?
Given the nature of your posts and comments over the past few days, I would be interested to know  whether you have spent any meaningful time outside the New Zealand environment?  If not, perhaps you can persuade Bernard to let you pop off to Zambia and swan around some of the copper mines to see whether you can provide an update to Peter Hitchens article from 2008. 

Who cares about what Bernard bangs on about - very rarely does he ever get anything right.  He "banged on" about the imminent housing price crash over here (of ~40%) for two years and nothing remotely even close happened.  Bernards qualifications on these matters are lightweight, so using his assertions to prove a point is pretty shakey...

If you need the qualification teat to suck all your information in with, go for it.
I would rather assess the ideas as they come up.  Plenty of qualified idiots out there who would struggle when asked to articulate how to put on shoes with velcro tabs

BH commented that the 40% was probable as the BBs cashed up..he didnt say it was going to happen in 2 years but is a fundimental that looks to play out over the next decade maybe 2.
Think on a depression, that is 10% drop per annum, even Russia only managed to lose 25% of GDP when it broke when BH says 40% that isnt an over-night event....So in terms of lightweight this suggest sto me you are somewhat bloated.
I will go further, I think 40% in the next decade is the minimum loss I expect to see...worst case is 75%, though Ive seen 90% suggested.......but its not going to happen inside 2 years...its going to take 6 to 10....though I am assuming the very worst can be we wont do a Russia...

This BS is reminiscent of the Toyota Rav4 advertisement with 4 Camels climbing inside

That's kiwi law. The chinese dont play by your rules. Ever.

Here is a recent (2012) example of a bunch of Chinese ripping off the NY stock exchange and the SEC with all its rules and laws and controls, and still they do it. It's in their DNA. They cant help themselves.
Tell me alex, how many successful prosecutions for insider trading have there been in NZ in the past 10 years.

A lot of US nationals insider-trade as well, many don't get caught. So do US Congressmen, it was actual legal for them to do so prior to this year. Maybe your example suggests that Chinese aren't being treated equally or fairly :-)

Agree, many chinese have dubious ethics at best.....Im sure that if things are left vague or unsaid and  if corners can be cut and my experience is the chinese are masters of it, they will be....and that's the honest ones.....

Alex, I don't know if that scenario would happen or not; I suspect not. I thought it may provide some insight or viewpoint on possible motivation, behavior and changes which we may need to adapt to.
Anyway Alex, do you think such investment will strengthen our export reciepts?
Do you own a home in Auckland? not leaking I hope.
Have you worked on any fishing trawlers hired by NZ companies? Neither have I but I've heard some horror stories. What about large scale dairy farms? Is that what you envisage for your children, or does the Aussie mining industry or closer to the heart, the London financial district seem a better prospect?

And that's why the discussion needs to be about New Zealand regulations and laws.
Some conditions on NZ-owned large-scale farms (and small-scale for that matter) are pretty terrible. That's our own government's fault because in the end it controlls how all farms in New Zealand are regulated.
Yes, some Chinese companies are dreadful operators in other countries, especially Africa. If they are investing here, then we need to make sure they are not acting the same ways here. We can do that through our own laws and regulations.
Conditions on fishing vessels operating in New Zealand are absolutely dreadful. Yes, that's due to how these vessels are run by their Korean or whatever owners, and it's deplorable, but in the end it's the New Zealand government that is allowing these dreadful practices to happen.
The way these vessels operate and are regulated needs to change. We can force that to happen (although this govt doesn't seem to want to do anything about it).
I just think people are getting too preoccupied with the 'nasty Chinese' lines, when we actually have the sovereign power in New Zealand to force anybody here to operate in accordance with NZ law and practices. If they don't, then we can kick them out, fine them, imprison them, and let that be a warning to everyone else.
If conditions are bad here, then it's because we are allowing them to be bad.
In respect to my post the other day, the point I was trying to make was that this is a debt story first and foremost. I think Allan hit the nail on the head in his post above.
If the Crafar Farms hadn't been saddled with so much debt, which in the end couldn't be serviced, he would have been able to take proper care of his calves and effluent disposal systems, not got in trouble, and would still be farming today.
In my view the Crafar saga is the 'poster child' of the last debt-fuelled decade. That's why I wrote what I wrote on Friday.
It's now also the poster child of the merits of foreign investment. And that discussion is being had, and needs to be had. Let's look at what David Mahon had to say.
Will it lead to increased export returns? 
The New Zealand dairy industry is great at producing milk, making it into powder and then sending it offshore for others to turn into higher value products.
There may be good reasons why we're not doing so much of the value-add ourselves, but Pengxin thinks it can do it here, sell it in China, and make enough money for it to be profitable to pay Landcorp workers and New Zealand processors (rather than lower-wage processors in other countries, like China).
If they're able to do that, and by using Fonterra or another NZ company as their processor (Fonterra is their preferred processor), then shouldn't that be a wake-up call to New Zealand's dairy industry? Shouldn't others in NZ be looking to do this too then?
If this is what it takes to get the dairy industry doing what the govt wants it to do (produce more value-add), then shouldn't we welcome it?
Do I own a home in Auckland?
No. Am currently saving for a first home deposit through KiwiSaver, while also saving for a big OE, and at the same time deleveraging by paying off the old student loan.

Taking issue with "in the end it's the New Zealand government that is allowing (bad behaviour)". 
No.  In the end it's the companies or individuals themselves who are behaving badly, and in the end it's their responsibility.
It may just about be defensible to blame somebody else for your own bad behaviour if they forced you do it against your will.  You are on weaker ground trying to blame them for it if they merely encouraged you.  And you are on no ground at all if you blame them for failing to prevent you.

I am blaming the govt for allowing these vessels to operate in New Zealand's waters.
Yes, the actual actions of the mistreatment is the companies' fault for their behaviour.
But we are letting them do so in our waters. We shouldn't be. Surely there needs to be blame on the government and its regulators as well for that?

  • Brilliant response cheers Alex, I take your point, and should have faith in our regulation and standards.  I'd like to reply to a few other points you made.


  • I'm a dairy farmer, and I don't believe we are any worse as an industry than any other in NZ as far as employment standards go. Personally, I doubt the efficiencies of scale championed by landcorp and other large scale operators. I think in farming where there is a pathway and incentive, it will always get the best out of the land, given environmental and resource constraints. Do you realise in a past life landcorp was once used to settle aspiring farm owners? I wonder why they changed?


  • I also strongly believe the government is way out of line imposing its will on the sovereignty of Fonterra as a genuine supplier co-op. Once that structure has been demutalised, as farmers we loose whatever leverage we have over our product and are seen as a cost to be minimised. For the benefit of who, you may ask Alex? The co-op has done more for NZ then any corporate has or will. Unless it's environmental regulation, the dairy industry shouldn't do what the government wants it to do, otherwise we'd be communist, but that might be a good thing As Burning Spear sang 'Social living, is living at its best; but it takes behavior'.


  • The co-operative dairy industry has been successful for generations, and would continue to be if not undermined by the government and debt. I doubt the governments 'corporatisation in a can', is going to propell the dairy industry into the value added stratosphere. It should use it's influence to create new innovative projects and industry, maybe with the CHCH rebuild, or the world class uni in Auckland.


  • Wether a foreign domiciled processor chooses to add value to NZ milk here or offshore is beside the point if subsequent profit is repatriated offshore. Working for wages for Landcorp doesn't inspire me Alex, what about you? Where is the value in that my friend?


  • This debt burden seems to be a problem, but instead of relying on the demise of the successful co-operative dairy industry, maybe we should identify the source of the problem. From a few books I've been reading, I'd say it was something to do with neo classical economics, and fundamentally flawed rational created by Milton Freidman and co, and espoused by ideologues such as Douglas, Richardson, New Labor, Repulicans, Democrats, Conservatives, Liberals and other such compadres around the world. S..t, maybe I've just lost faith in those regulations and standards.  I think it's too much to expect of farmers who wish to belong to a co-op to pull us out of this one. What are your thoughts?

Have to run, so only a quick response sorry,
Agree with your points re TAF and there are many concerns about it which needed to be ironed out. Have just been talking with colleagues trying to get stuff out of Fonterra on it, and they're being turned round and round in circles.
I also think Fonterra hasn't properly or fully informed farmers about the scheme.
There is growing disquiet among farmers about the scheme. I'm told to watch TV3 news tonight.
On subsequent profits being repatriated offshore: Yes they might be. But in this case we have a Chinese company buying farms/setting up processing to supply goods to the Chinese market. No doubt they would want to produce as much as they can, so will re-invest some profits in the company to try and do this.
Seeing as they were going to accept the bid, perhaps the OIO could have put a requirement on how much profit needed to be re-invested? (Just a quick idea, perhaps needs work).
Fonterra has also invested in China, and while it's not able to own land there, would have the same right to repatriate profits made there back to New Zealand.
Have to run sorry. Have a good evening, we can resume tomorrow :)

Hi Alex, hope all well.

  • Good luck with finding answers on TAF, there is a bit of uncertainty amongst suppliers, I suspect many don't understand it or realise the consequences. If interested your colleagues could try the website and read Caroline Gilberts article on 'Critical thinking and TAF' under tthe 'Co-op principles' tab, plus many others.
  • Yes Fonterra has invested in China, I think at Chinas request, really makes us racials look xenophobic. My interpretation is China is keen to develop a viable dairy industry, and Fonterra is seen to have the skills and reputation to help them achieve that. Cut and carry, confinement farming, energy intensive, and different to NZ methods. From what I understand other industry has also been encouraged to start up in China. I think this helps secure access to their market. Given FTA, do you know if China would place tarrifs on value added dairy product exported from NZ?
  • From my point of view, I think China are keen to buy our product, and I'm keen to sell it to them, minus tarrifs if any.


  • OIO placing requirements on transactions isn't very free market! But what is anyway, bit of a fallacy really.


"If the Crafar Farms hadn't been saddled with so much debt, which in the end couldn't be serviced, he would have been able to take proper care of his calves and effluent disposal systems, not got in trouble, and would still be farming today."
Unfortunately  wrong..if he could have serviced the debt he would have just borrowed more and the recievers would be selling 30 farms instead of 16...


Very true Don m. I'd like to suggest Alex and co at interest, should examine the issue of debt in agriculture, and sovereignty issues spawned, in the context of cause as opposed to regulation of the effect.


"what the Crafar Farms saga has taught us."

I think what it shows is that people are still really unsure about the whole Globalism concept, and if there are lots of news articles on a particular topic which has globalist overtones then its almost guaranteed there will be a public reaction.

Yes  the attitude that we shouldn't have borders comes out strongly in the Crafar farm debate  as in:
“Chinese economy we all know about…
Chinese government says it’s time to grow offshore…..
Let’s take a good selection of New Zealands “products” over….
“We’re all New Zealanders, we all love the country so I think it’s healthy for us to have the debate and make the right decisions for our country…. but hey!…. young people coming through see it as “our planet” rather than “our country”
Harcourts Showcase more than 800 million of property in Shanghai
and from a high priest of marxism:

“Both in New Zealand and globally, the best of the leftwing tradition has always rejected small-minded nationalism, xenophobia and racism. In fact, leftists of an internationalist tradition have always favoured globalization and getting rid of national borders and barriers to migration. Progressive advocates of globalization of course do not defend a handful of rich imperialist countries, including New Zealand, dominating the world’s economy, but instead advocate an integrated and radically egalitarian world economy where production is based on social need and not on private profit. ”
the state of our world is indispute it is overpopulated or (other view) "only" ".0x% urbanised" and global warming isn't happening etc.

this saga has taught me that you can start off a lowly cook for the Cartwrights and end up owning not only half of nevada but also some of nz.
MMM democracy i love the smell off it.
signed hop sing

Think it says nz dairy farming system isnt viable 

I think it says we need more effective taxation of capital gains and land; more effective monetary and prudential policy. If this were the case this sector would be paying a fairer share of tax, monetary policy execution wouldn't be warped by high levels of tax sheltered debt, NZ would be benefitting more from the revenue  - rather than the Aussie banks who suck it away from NZ in debt servicing; plus, maybe more young Kiwis would be able to get into the sector rather than the 737s heading for Australia.
However, we chose unwisely ..... and have done for decades.
Cheers, Les.

On the BulldustTV  at  Nine panel  last evening   one of Crafars moo cows commented she'd be jolly glad the Pengshin and  Landcorp fellas  will be looking after them .  "  At least I will get  decent feed and a wander around a properly run farm" , Ms Daisy chortled. "Alan couldnt run a bath let a lone a dairy farm "  ,she grunted

Finoetrra's farms in China are good for both counries but the same doesn't apply to the Crafar deal.
Rod Oram:
“but this is the big one: Katherine, we are talking here about a one hundred year business model and one which has screwed NZ. I’m sorry but I can’t be more blunt than that. Cast your mind back to the meat industry (for example) and the Vestey Group from the U.K who owned farms here , who owned shipping, who owned processing and they owned the Dewhurst chain of butchers shops in the U.K We made a bit of money helping them farm that and our exports looked good but very little of that stuck to the economic ribs of NZ. And if how that screwed uop the meat industry, think how it will screw the dairy industry. What Shanghai Penxian is offering is a 100 year old re run of that model. “
Katherine Ryan:
“Why then is the government doing it”
Rod Oram:
“I would argue that the government has niether the intelligence or the courage to go to the Chinese government and say: “yes we are extremely interested in your foreign investment in NZ, but let’s make it like your other investment that’s been highly productive in Taiwan (opps probably bad example), like Ireland, in other words that enables us to do something we couldn’t do ourselves. Shanghai Penxian doesn’t do that, but unfortunately this government and its economic strategy doesn’t do that. It is trying to do is push on incremental growth of existing businesses. And it
is cutting some very dangerous corners in its failure to analyse that properly. I would apply that to this to the casino issue and I would apply it time and again to the decisions it makes.
Katherine Ryan [more why, why]
Rod Oram:
“Shania Twain doesn’t have the same economic impact. It doesn’t set a precedent with a very powerfull counter party (I.e China Inc), at some time you have to draw a line . In the sand, we should have drawn it a while ago.”
Katherine Ryan:
“Why is it a Chinese bidder that has to be that line when you have someone like James Cameron buying up in the Waiarapa? Why is it now we have to draw a line in the sand?”
Rod ORam:
“First of all I want to make something incredibly clear, I’m a huge believer foreign investment but it has to be foreign investment that is good for them and good for us and this isn’t. And it’s not an anti Chinese thing. We should have drawn the line in the sand a very long time ago by approving this decision a second time the government has made it very, very much harder, particularily with applicants from the States, Germany and China who are already large investors in dairy here.”
Katherine Ryan:
“But that’s exactley the point, why now, why should this case be any different from those that have been approved?”
Rod Oram:
“There is a very important concept that applies to cases like that and I’ll draw a parralel with the RMA . If your in a water catchment and have been taking water to irrigate your farmland, and lots of other people take water and get consents. If yours is the same but if your application tips it over into over allocation, the RMA is ill equipped to deal with that. It can’t handle with our laws in NZ cumulative impact. And it is incredibly easy and just so lazy of the government to just say: “oh we have to do this because we are under pressure from China”.
Katherine Ryan:
“Why is this different. Why has this point been reach”
Rod Oram:
“This is different because unlike say, the Harvard University Endowment Fund or a German Agri business, Shanghai Penxian is an integrated marketer and producer. This throws us way back to the Vesteys of hundred years ago.”

Assuming it all goes through now, this particular saga will quickly fade into the background, to be superseded in the mind of the media and public by the next attempt, imagined or real, to sell New Zealand’s sovereignty to the highest bidder.
Where New Zealand is not to beconfused with New Zealander,  which is an element that moves in and out (and switches jerseys).

The loudest complaint about this particular sale has been that it is unfair on local buyers who can’t afford to buy the farms at the price Shanghai Pengxin has agreed and as a result all future sales will face the same threat. This is patently a load of nonsense, because New Zealand investors, whether private or corporate, will continue to buy good farm land which will generate a commercial return.
As an example there is an opportunity for all New Zealanders to invest capital in dairy farms through AgInvest’s MyFarm which has 43 syndicates managing 14,000 hectares of dairy farms milking 32,000 cows. It will also be a lot better managed than the Crafar farms have been, although Landcorp may be able to lift performance with Chinese investment of $16 million.
that seems to be the weakest link in your argument. Your claiming that an globalised property market doesn't increase prices.
Buying shares in a farm isn't the same as getting up in the morning and hearing the skylark.

Agreed. Would Allan be able to demonstrate how well these 'managed investment syndicate' farms are performing?   One thing that is apparent with Pengxins purchase of Crafer farms, is "commercial return" as Allan states it, doesn't come into it.

Apparently they can run at a loss as they will make their money at their supermarkets.

No one seems to mention the total rural debt and how it came about , if i was from loss after loss from a majority of farmers , this isnt the end , this is just the begining of the end ,
Got to imagine all banks have there own crafers

Kiwi's tend to look in terms of a few years; see decades as long term. Christ, we have only been here a couple of hundred years and have done more damage to our land than the Chinese have in a few thousand. 
We have even managed to screw up our resources and regional family units by shifting the revenue and employment north/south to the city that can never grow without a massive waste of funding for survival.
What country; mindfull of reality towards growth and stability would put all it's eggs into maintaining growth in an isthmus that is only going to suck up any "real revenue" created by the rest of NZ. 
You cannot logically create your business hub on the narrowest bottleneck of a country that also holds the largest population. If you choose to live there, or do business then you should expect to be paying a really big premium back to heartland NZ. 
Sucesssive policies, governments drive to split communities, families and whanau by driving a stake through them and forcing all young to Auckland. Removing any option to remain in the town/region they love. Suck the life blood out of every community outside Auckland.    
Here's hoping that any Asian investment in this country brings some long term focus and redirection of investment to other regions. At least that may assist those who wish  to remain with family in the region they love.
That may not necessarily be Asian investor focus currently but terms and conditions could be changed without cost to JK NZ Inc.
 Let's try and take a bright side!
Plus keeping values up to keep our banks and current landowners safe............

It's a great deal: we supply the farms & cows & milk, while the Chinese supply the melamine & filler products - then sell the product/s to the Chinese population (who suffer from a tainted food supply chain already).

Screw the rest of us.
The Magpies

When Tom and Elizabeth took the farm
The bracken made their bed
and Quardle oodle ardle wardle doodle
The magpies said
Tom's hand was strong to the plough
and Elizabeth's lips were red
and Quardle oodle ardle wardle doodle
The magpies said
Year in year out they worked
while the pines grew overhead
and Quardle oodle ardle wardle doodle
The magpies said
But all the beautiful crops soon went
to the mortgage man instead
and Quardle oodle ardle wardle doodle
The magpies said
Elizabeth is dead now (it's long ago)
Old Tom's gone light in the head
and Quardle oodle ardle wardle doodle
The magpies said
The farms still there. Mortgage corporations
couldn't give it away
and Quardle oodle ardle wardle doodle
The magpies say.

jh you just need to become a little more aspirational .....its as easy as that.

I think we just need to know whose side everyones on.

The real issue isn't about Sinophobia or xenophobia. It's about the fact that NZers have seen far too many TranzRail and Deane-era Telecom asset-strip jobs - both of which American speculators were heavily involved - for every Heinz-Watties that builds a processing plant.
The trick is to how to tell the two types of foreign investment apart. In the long run, NZ needs a stronger domestic savings pool - one that can outlast a Muldoon hit-job on it.

Hi omnologo
Terrified as I am of being long winded again, I can only comment that AgInvest has a good track record (I invested in an early syndicate 15 years ago) and I would trust it to produce a good return from good property buying and farm management practices. However we can't guarantee the dairy price which must eventually justify the investment.

Good for you Allan, Aginvest has suprised me.

Me too:
MyFarm is party to an agreement with German fund manager, Aquila Capital Green Assets GmbH (“Aquila”), under which farm investment opportunities identified by MyFarm
(which is a key role MyFarm will be performing for MyFarmAM and therefore PDI)
are subject to Aquila’s first right of refusal ......... this came from the PDI Prospectus
It seems that AB (and AB's all New Zealanders) now need to put their money with Aquila in order to get a good deal, otherwise they would get to see farm deals only after Aquila has looked at and rejected them......
AGInvest’s NZ business, MyFarm Management Ltd currently manages 44 farms in New Zealand and 3 in Australia.

Henry_Tull. Thanks for your input on this website. I am grateful for the research you manage to do, and find it insightful and thought provoking.

  • I'm not sure what your position is on Fonterra, it's direction and it's revised proposed strategy, particularly when you make reference to the significance of volume? Volume is a bane in collection and processing of a useful and valuable product for export, the proceeds of which help underpin our economy.


  • I'm interested because I manage a family farm which is a shareholding supplier, and have always struggled with the complexities, propoganda, and what I suspect is misinformation that I get fed from the supposed co-op (voting rights tied to shareholding, therefore farmers with scale have greatest influence; corporate; not a co-op principle). However I'm willing to admit my own ignorance and comprehension ability would be part of the issue. Growing up on a sheep and beef farm and witnessing the impact and effects of Rogernomics reforms, I was grateful we could join the co-op dairy industry.


  • I'm currently concerned at revised regulation currently before primary production select committee in unison with proposed change in capital structure and demutalisation of co-op refered to ambiguously as TAF (Trading Amoungst Farmers). I'm strongly opposed to both issues as I fear it will result in aforementioned demise of co-op (I suspect that's the purpose) and consignment of us as primary producers to the bottom of the heap.


  • I'd hazard a guess that this has been the agenda since Fonterra was formed, mainly because of the imposition through DIRA (Dairy Industry Regulatory Act 2001) of providing subsidised milk to allow competing processors to get a foot hold and more significantly the requirement of the  Fair Value Share (FVS) which assumes that the co-operative is not a co-operative, and members shares are calculated in reference to an entirely fictitous market which supposedly is modled on open free market in which there are willing buyers and sellers. The reasoning is that it facilitates open entry and exit, but in doing so commendeers generations of capital invested into the co-op dairy industry. This contravens co-op principles and in doing so completly undermines it.


  • The way I see it we are on the brink of losing a 'NZ success story' to use the catchphrase. I don't know wether MAF are ignorant in their allusion that such regulation will result in greater value add, or if it has more sinister cloistered origins? Are you able to share your thoughts?
  • Please excuse the overuse of personal pronouns.
  • Omnologo
  • I'm not sure what your position is on Fonterra, it's direction and it's revised proposed strategy, particularly when you make reference to the significance of volume? Volume is a bane in collection and processing of a useful and valuable product for export, the proceeds of which help underpin our economy.

Seems to back to being a processor with “milk pools” - being a move across the supply chain rather that up it to better margins. There does not seem to be a clear analysis description as how farm gate returns will increase over and above the “commodity price”. Say $5 to $6 at farm gate (cpi'ed for prior years)
They lump the above processor activities as the Distributable Profit, with current forecast range of NZD 570 - 720 million, being to 40-50 cents per share (with each share “worth $4.52).
There is no road map as to what the Fonterra “locked in equity would be used for in commercial markets. Rather the ever green reason is given as to protect/insulate Fonterra from dairy farmers wanting redemptions (there are other options - they could say of every supplier $1 co-oped, 60c is working capital, and 40c is capital asset, and redeemable accordingly) .
Given the narrative and style of things over the last couple of years, the refresh strategy does not seem to be an evolution, advancement etc... Rather it seems an application of present position/assets to current environment (Each day is a new day)..
What one would like to see could include:
1. What they intend to do with the Oz supermarkets to get back the ANZ earnings that the supermarket wars have taken away.
2. What they are looking to achieve with Nestle. For instance are we at best be Nestle’s “processor pal”  - NZ, Aust, Chile and China.
As Chile Plan A. seemed to fall ou of bed:
And all the chatter is about Asia with Nestle making some large bets:
Nestlé to Help Fund Dairy-Farming Institute in China
Nestle squeezes margins of Chinese dairy farmers
3. What they intend to do with adult/infant formula in Asia and China in particular
For example they seem to be in photos with Bright from Synlait one day and then Shanghai Pengxin the next.

I'm interested because I manage a family farm which is a shareholding supplier, and ..................
Know what you are saying, the sheep and beef experience drives the understanding as to what the business would be without a co-op, and working with a corporate/private processor. Fortex anyone?
The non co-op example we have is Bright Synlait, with all the talk of $80 plus a can for formula, whats the chance of any of that getting back to suppliers, or are they stuck at Fonterra farm gate price +/- 25 cents….
Their corp. thinking could be reflected in:
As the Herald revealed today, Fonterra chief executive Theo Spierings is inviting Bright personnel to the opening of the New Zealand dairy giant's third farm in China.
Bright Dairy wasn't happy when Fonterra plonked a "dryer" in Darfield, which it regarded as its territory.

I'm currently concerned at revised regulation currently before primary production select committee in unison with proposed change in capital structure and demutalisation of co-op referred to ambiguously as TAF (Trading Amongst Farmers). I'm strongly opposed to both issues as I fear it will result in aforementioned demise of co-op (I suspect that's the purpose) and consignment of us as primary producers to the bottom of the heap.
I think you are right, and at the end of the day it probably will. Put another way, by doing this, how is your ownership position improved, how is your milk price increased and how is your share dividend increased? We already know that all we produce up to $5.50 to $6.00 will be comfortably be sold
Another way: If this or any other re structure was such a good idea, then it would be blindingly obvious to the most of us. Every supplier would be able to real off the dollar value of the commercial benefits (we would say this is good because it will add $2 or 50 cents to the payout each year for the next xx years), or the dollar cost of not doing this…..
The wink, wink, trust me just does not cut it. Its not how dairy farms are run.
There appears to be confusion caused by the NZ Inc govt. plan. NZ Inc. is just a slogan, it is not a company/venture/partnership etc, etc. However some people seem to think that Fonterra is part of NZ Inc. and therefore everyone has a share. This is muddled thinking, it’s the 10,000 to 11,000 shareholders that own it. People that claim “stakeholder” status should be moved out of the room.
It would be helpful if Henry and coy came out with a minimum number by which the restructure would improve the suppliers lot (and to which they could be held to account).
For example, "our capex is $3.0 billion dollars over the next five years, of which 1 billion needs be equity, .5 retaimed earnings, and 1.5 long term bonds or NZ fund investment",a and "this will increase MS kg by $2.25 annually from the sixth year".....
At the farm level one would say, well $2.25/kg, will increase farm value by $15 to $30 per 4 to 5 years time....
Its like a company doing something large like this would put out a public prospectus.
If the benefits cannot be quantified or are “intangible”. Houston, we have a problem.

Agree with your comments re FVS, yes some get a free ride re investment...
DIRA, they probably thought, "this gets us out of anti-trust trouble ex the WTO". And thought at the time, who else would be mad enough to set up as a processor....
I remember 15 plus years ago, the industry was not flash...
Re: the NZ success story, well in the same way Australia is a success because of the coal and iron ore that happens to be there.
It's what has happened outside of NZ that is driving this. And with China, we have been waiting a long time. Some family members went on a farm tour to China back in the 1970's, so its for those, its only taken 40 years (and most of them are dead now). 
Regulation is difficult to roll back, and given the marginal land now taken up in the last boom, to some degree not a bad idea.
The other driver, esp. in South Island has been water.
In 40 years we have gone from sub-clover and down lambs, to border dyke, then coopworths, then to dairy - as the co-op companies would allow, then replaced the borders with pivot...
Dairy under the mega co-op structure has been the glue that has delivered the increased exports that made the water scheme deliver.
Sheep, beef and deer have not done the same...

Henry_Tull, once again thanks for your insightful comments on the dairy industry and in particular Fonterra. Much appreciated.