2010-05-25

Crafarm conditional sale highlights shallow capital markets

Crafarm conditional sale highlights shallow capital markets

Federated Farmers believes the conditional sale by the receivers of 16 CraFarm farms to UBNZ Funds Management, the New Zealand company partly owned by Hong Kong listed Natural Dairy (NZ) Holdings, reflects a lack of depth in New Zealand capital markets. The sale is conditional on Overseas Investment Office approval.

“This latest development reflects a lack of depth in New Zealand’s capital markets,” says Lachlan McKenzie, Federated Farmers Dairy chairperson.

“Ever since the receivers took control of CraFarm these farms have been available for sale. That New Zealand interests have not been front and centre is concerning.

“Either it reflects a banking sector that is frozen or a lack of Kiwi corporate interest. Given only a dozen dairy farms were sold in the three-months to April 2010, according to the Real Estate Institute of New Zealand, that tells me there is little domestic appetite out there.

“It’s not helped by an Emissions Trading Scheme, which will strip thousands from farm budgets already under pressure. Ironically the ETS will probably drive these large corporate investors going forward, given the investment needed to offset the ETS’ cost.

“As there is also an international tender out on these farms, overseas investors seem to realise the immense potential of New Zealand agriculture. Overseas investors wish to buy into a quality reputation we farmers have built over decades, valuing our dairy industry a lot more than New Zealanders outside the farm gate.

“I think this interest in New Zealand agriculture makes a mockery of KPMG’s prediction New Zealand will be swamped by low cost competitors. Hong Kong’s Natural Dairy is keen on New Zealand and not China, because we are in a pastoral sweet spot very few other countries possess.

“I think that non-farmers need to wake up to the potential of New Zealand farming or otherwise, our country will end up as one small cog in a big global supply chain,” Mr McKenzie concluded.

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