Chinese Invest in New Zealand Dairy Farms, Fonterra Invests in China

NEW ZEALAND - This week New Zealand has given the thumbs up for Chinese investors to purchase the former CraFarms.
calendar icon 20 April 2012
clock icon 3 minute read

The topic has been one of controversy in New Zealand, with concerns over large scale overseas investment particularly in farmland.

Today, after nearly a year of discussions, the New Zealand government has approved a new recommendation from the Overseas Investment Office (OIO) to grant consent to Shanghai Pengxin to acquire the 16 Crafar farms, in the Central and North Island.

Shanghai Pengxin will run the 16 farms (covering 7,892 hectares), through Milk New Zealand Holding Limited, a wholly owned subsidiary of Pengxin.

New Zealand Land Information Minister Maurice Williamson and Associate Finance Minister Jonathan Coleman have said that the consent comes with stringent conditions.

“Twenty seven conditions have been imposed to ensure Milk New Zealand’s investment delivers substantial and identifiable benefits to New Zealand,” Dr Coleman said.

The conditions require Milk New Zealand to invest $16 million into the farms and to protect and enhance heritage sites.

“The combined effect of the benefits being delivered to New Zealand as a result of this transaction is substantial.”

Back in February, the government had to reconsider its approval of the sale after the High Court said that there was no real economic benefit from the sale to New Zealand.

Overseas investments of land, involving more than five hectares of farmland, must be approved by the OIO.

It is reported that Shanghai Pengxin put in a bid of NZ$210 million for the farms, whilst a New Zealand bidding group, Crafar Farms Purchase Group bidded NZ$171.5.

The decision is likely to be challenged by the Crafar Farms Purchase Group.

"It's a bad day for New Zealand," said Sir Michael Fay, a member of the bidding group. "Three out of every four New Zealanders are against selling these farms into foreign ownership."

Bruce Wills, Federated Farmers President said that the ongoing purchases of farmland from foreign investors is worrying New Zealanders.

"Many fear they will become tenants in their own land."

However, he said there were larger concerns, including the growth on forestry and lifestyle blocks.

“Given there’s 1.6 million hectares of dairy farms, overseas investors over that time bought less than one per cent. Even with a spike in the first quarter of 2012, less than 1.3 per cent of dairy land was consented to go into overseas hands.

“We are also missing the bigger picture by focusing on the former CraFarms farms. Landcare Research shows 873,000 hectares of farmland are now in less productive lifestyle blocks. That’s equivalent to 110 Crafar farms being taken up by our expanding cities.

“This is the big picture we should be looking at in this debate,” Mr Wills concluded.

Had the government not approved the deal, there are concerns about what affect it may have had on NZ-Chinese relations. China is currently New Zealand's second largest exporting nation and New Zealand seems keen to invest there.

Last week, Fonterra (a New Zealand owned co-operative) announced plans to develop two new large-scale dairy farms in the Hebei province. With two additional units, Fonterra has committed investment to five farms in the Hebei Province, in the north east of China, with two currently operational.

Combined, the five farms will have a herd size of around 15,000 milking cows producing 150 million litres a year.

Chief Executive Theo Spierings said the success of Fonterra's farming operations in China, and their future growth would not be possible without the support of local Government.

Charlotte Johnston, Editor

Charlotte Johnston - Editor

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