Selling the Farm(s)

"Natural Dairy bid still best offer - receiver"

So a huge Chinese company wants to buy a bunch of kiwi farms which are in receivership. An awful lot of people have come out of the woodwork decrying the sale of our homeland; Natural Dairy NZ (the Chinese-owned company) placed ads in the paper trying to convince kiwis it's a good idea; John Key warned that disallowing foreign ownership of dairy farms would force farmers off their farms and erode land values. Basically, a lot of people have been saying a lot of things.

I come down on the don't sell side of the debate and here's why. Natural Dairy wants to buy the farms from the receivers. For some reason, they weren't profitable enough to repay debts and make money, but Natural Dairy doesn't mind because it's got lots of money to spend to make them profitable ($1.5 billion already earmarked). As with any acquisition, Natural Dairy are taking a bet that the outlay they have to make in buying and operating the farms will be repaid by the income from the farms - and there's no reason why this isn't a pretty safe bet. The price of cheese and butter if nothing else should make it clear that dairy farming is an increasingly profitable business.

Once Natural Dairy have made the farms profitable again, they'll be worth more. So NZ would have to pay more than it was paid should we want to buy the land back. Given how small the likelihood is of a NZ company (or the government) having the money to buy them back off China, we are faced with a decision now which cannot be reversed. I don't think I'm being extreme or hysterical when I contend that once these farms are sold, NZ will never get them back. Not until the zombie apocalypse renders land titles useless, anyway.

I don't give a rats ass that the company is Chinese - I'd have as much of a problem with an Australian or a Brazilian or a Canadian or a Russian or a German company buying 0.5% of the dairy land in New Zealand - a statistic which, bizarrely, Natural Dairy bandies about as if it was small. Half a percent may not sound big, but 0.5% of New Zealand's population is still 22,000 people. Half a percent adds up pretty damned quickly.

Perhaps the communists were right. Perhaps we shouldn't trust individual people and private companies with the management of... everything. Why did these farms fail? Dairy prices are high and rising. Somewhere along the way someone in the controlling company started making bad decisions and what should have been liquid money wasn't enough to pay the bills. Now we have a widely dispersed collection of farms around the country which nobody in NZ has enough to buy - especially if they're bidding against China.

Natural Dairy has deep pockets and, since China IS communist, isn't a private company in the way we think of such entities. They have specifically outlined medium term plans to acquire more farms all over NZ. The most I can find out about Natural Dairy is that they are "backed by reputable large scale investors, primarily from Asia". They are currently under investigation by the Serious Fraud Office and one of the 3 NZ Directors of the project, May Yan Wang, had charges brought against her by the Companies Office relating to the management of a group of companies which collapsed into liquidation in 2008. Sigh. Not a great way to put your best foot forward.

What happens will happen, and I've never harboured any illusions of owning property in NZ. Perhaps a plot of land out by East Cape when I'm old at most. What does it really matter to me? I don't want kids anyway, so I suppose I shouldn't care whether or not they'd be able to own a dairy farm if they so wished.