Large corporates, foreign farm owners often realise they have to 'live it and love it' to make any money, Finance Minister English says; Thinks owner-operator still the way

Large corporates, foreign farm owners often realise they have to 'live it and love it' to make any money, Finance Minister English says; Thinks owner-operator still the way

By Alex Tarrant

Finance Minister, and Southland farm owner, Bill English reckons the owner-operator model for farming is still the future for the industry in New Zealand.

Large-scale local and foreign corporate farm owners soon realised they had to 'live it and love it' in order to make any money out of farming in New Zealand, English told the Victoria University-Peking University Conference on Contemporary China in Wellington.

English said he would not be surprised if the high-profile Crafar Farms reverted to New Zealand ownership sometime in the future.

However, the farms' new owner, Shanghai Pengxin, had bought them with good will and stuck it out through two testing years to get their operation - first buying the farms then setting up a dairy exporting business to China - up and running.

English's speech focussed mainly on the benefits of foreign direct investment into New Zealand. It was a source of capital to supplement New Zealand’s domestic savings glut; was a driver of growth in wages, employment and output; brought technology, skills and know-how to New Zealand; and helped improve connections to valuable international markets, he said.

Live it and love it

Foreign investment was often not just a one-shot deal, where assets sold to foreigners remained in foreign ownership, English told the conference.

“Businesses built up under foreign ownership can move or return to New Zealand ownership. For example, Shell petrol stations were recently acquired by New Zealand-owned Z Energy," English said.

“Often farms that are purchased by foreigners end up reverting to local ownership, as the owners realise you have to live it and love it to make any money out of it," he said.

“I think in the aftermath of the Crafar Farms discussion it’s pretty important that we keep that in perspective."

Speaking to media after his speech, English said New Zealand had experienced waves of anxiety about foreign ownership of Kiwi farms.

"They come and go. At one stage the Japanese were going to buy all our farms, then the Indonesians were going to buy all our farms, and both overseas and local corporate owners have never really succeeded in making very large farm operations viable," English said.

“So while the Crafar farms have been high profile, if you look back over thirty or forty years, large scale farm ownership often fixes itself because the owners find that they can’t do as well as the owner-operator model," he said.

"I think the owner-operator [model] is how New Zealanders see their agricultural industry based."

English said that in the long-run he would not be surprised if the Crafar farms ended up back in New Zealand ownership.

“But they’ve clearly made an investment with goodwill. They’ve stuck in through a fairly testing period of a couple of years to get going," he said.

Higher threshold

Meanwhile, the court process brought by a group of New Zealanders opposing the Crafar Farms sale to Pengxin had led to a higher threshold for foreign purchases of farmland than before due to the High Court’s interpretation of the Overseas Investment Act.

“So investors will have to make a stronger case to the Overseas Investment Office, if they want to buy farmland, because the court has clarified the threshold, and it is higher," English said.

“But that’s for farmland. The rest of the overseas investment regulations and rules remain as they were. That means there are opportunities for foreign investors where they’re going to contribute more jobs and higher incomes," he said.

“[Farmland is] not the only sort of foreign investment that’s going on in New Zealand, or the only Chinese investment. Historically we have relied on, at times, foreign investment to develop some of our industries, and if it’s beneficial, we need to be clear to foreign investors that there are still opportunities in New Zealand despite controversy over one of them.”

Trade flows point to more investments

There was anecdotal evidence that the Crafar Farm court cases had created uncertainty among other potential investors, who were now aware of the hurdles for buying farmland in New Zealand “were fairly high.”

“The level of Chinese investment in New Zealand is remarkably low compared to how much trade we do with them, and New Zealand’s investment in China is pretty low compared to how much trade we do with them," English said.

“If it follows an historical pattern, then there’s likely to be more Chinese investment in New Zealand, and there’s likely to be more New Zealand investment in China," he said

“It’s part of what usually happens when you have extensive trade with another country. And yes, we think there are some real benefits from foreign investment, particularly the linkage to markets.Often you get, New Zealand has the expertise in producing a product efficiently – often the most efficiently in the world. But we don’t know how to distribute that product in markets in a different language and a different culture.

“So the opportunity to bring those two together would be good for the economy," English said.

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10 Comments

 
English said "New Zealand had experienced waves of anxiety about foreign ownership of Kiwi farms".   I would suggest it is the Goverment and the OIC that experienced waves of anxiety as New Zealanders clearly stated their objection to offshore owners purchasing farmland.
 
It is ironic that Governments pass legislation into law and then the justice system has to interpret what the Politicians may or could have intended.  Then after draining huge quantities of dollars from taking an issue to Court,  finally a decision is made on what the relevent section of an Act means.   If you plug up the beehive collander holes your budget would probably be in surplus now. 
 
What has the IMF been whispering in you ear Bill?
 
 
 
 
 
 

Frankly, as an Aucklander, I am even more concerned with the insideous buying up of residential property in this city by overseas interests but mainly Asian.
Each dollar value may be smaller on average but added together I suspect the total value exceeds that of farm land by an order of magnitude.
Just what this investment(?)  contributes to the country is beyond me but the downside includes excessive prices that need to be paid by our own citizens when  they want a home of their own. 

Basel Brush: A "lone voice" in the wilderness. You are (almost) on your own. Have you not noticed. Have you ever wondered why.  It's either (a) everyone is in a "supermarket checkout trance" and don't notice, or (b) the majority of the regulars here are not born here, and/or (c) the majority of the regulars here are not in Auckland, but elsewhere.

Perhaps  the rest of NZ would like to share by taking some of the demand.
Len Brown's Auckland vision will ultimately reflect a Vancouver or Toronto with 45% so called "visible minorities".

Well, I've been saying for a long time, no foreigh ownership of farmland, strategic businesses and rental houses. Been wondering how long before someone else comments on that
I'l like to say also that the corporatisation of practically everything is something to be concerned about as well.
 

What are the numbers on Asians buying Auck res property?
 

“So while the Crafar farms have been high profile, if you look back over thirty or forty years, large scale farm ownership often fixes itself because the owners find that they can’t do as well as the owner-operator model," he said.
 
Is he right here?  Is there actual evidence that over a 30-40 year period corporate ownership of farmland reverts back to individual ownership and then it goes the other way again?
 
It's a pretty bold statement.
 

Large-scale local and foreign corporate farm owners soon realised they had to 'live it and love it' in order to make any money out of farming in New Zealand, English told the Victoria University-Peking University Conference on Contemporary China in Wellington.
and
“Often farms that are purchased by foreigners end up reverting to local ownership, as the owners realise you have to live it and love it to make any money out of it," he said.
 
so, don't worry these coproate farms/foreign investors eventually just go away..... he thinks?
 
Well it makes some sense - we can't see - aside from Crafar - (and M Wong blew up first time round) any large set of farms able to be sold as a lot/in aline to one buyer:
Look at the lengths Govt had to go to get any $ back from the SCF.equity stake in Dairy Holdings (selling to an existing shareholder), or
the sale of Synlait farms that didn't happen, or
the Carter farms for sale - some still, or
the equity stake in Grasslands going round...
think back to Tasman Ag and even Applefields...
nothing sticks.
There is the listed Rural properties, that shares trade at 25% to 30% discount to purported NTA (but does it really).
 

Who will stop the megalomaniac’s in this country ?

do you mean the bank lenders or the mad cap dairy borrowers