Finance with Don Fraser Fraser Farm Finance

In the early 1970s, I was a rural banker in the State Advances Corporation and the ownership model then was to go 50:50 share milking; pay off the debt, go bigger, pay off that debt, then sell half or more of the cows and purchase a modest farm with Rural Bank money.

We often ran out of funding and clients had to wait for the following year's funding to the Rural Bank from the government. In those days, nearly every farm was owned by individuals, all farming 120 to 350 cows. The rural communities were buzzing with positive activity as were the local schools.

What has happened in the intervening period?

Well, banks have had plenty of money and they have encouraged their clients to buy up the neighbours. Some even did better than that and purchased many farms to farm large dynasties.

These dynasties were created with borrowings from a bank, which is essentially debt. Most will, but some may not survive. Dare I mention the Crafar saga! These farms are now being sold to Chinese interests with Landcorp share milking on them. In this model, we have sold the land to offshore interests and we have placated the locals with Landcorp share milking on them (for the meantime). Is this what we want?

In New Zealand, we now have some individual farming operations that are so large that there is no way the family can manage it or take it over. More than that, the amount of money required to purchase the same is beyond our banking operations. Banks are now trying to keep exposure to individuals down, so they may well be sold to offshore investors.

We see a lot of foreign ownership coming into that fantastic dairy area of Southland. Germans and Americans are all showing their keenness to acquire our amazing dairying land.
Then there is the multiplier – for an individually-owned dairy farm, you can take the gross income and multiply that by about six (the multiplier) which indicates how much money flows back into the local economy. If the land is owned by overseas investors and profits are repatriated back to their country of origin, the multiplier reduces possibly down to three, maybe even lower. The continued flow of money by overseas interests away from New Zealand is watering down our local economy.

I realise that farming is a capital intensive business and land is very expensive, but the question begs – can we afford to see our farms continually sold to foreign ownership and what do we do to stop that trend or slow it down?

Put that question on top of the likelihood of the world running seriously short of food, and you will see what foreign ownership of our land really could mean. Will they build their own factories, process the milk and send it straight back home and vertically integrate the business?

I appreciate I have not given many solutions to the problem here, but this issue is alive and well, but stays under the radar. Talk to any individual farmer to know he is very concerned about the situation.

I see that the Green Party are ‘grand-standing' this issue and I must say I support them on it.

I believe foreign farmers can lease as much of our land as they like, but should not be able to own too much of this finite and precious commodity.

If you look at the model for the land that Maori have had returned, it is going into a title that cannot be sold without consent from the court.

We need to remember that land is the basis of New Zealand wealth and our prosperity.

So, in summary, the inability of Kiwis to now purchase our own farm land will see the continuation of foreign purchases. One day, when there is a world food shortage, we will wish that we had been more precious about our most valuable asset – land.

These are the opinions of Don Fraser of Fraser Farm Finance. Any decisions made should not be based on this article alone and appropriate professional assistance should be sought.

Don Fraser is the Principal of Fraser Farm Finance and a consultant to the Farming Industry. Phone 0800 777 675 or 021 777 675. A disclosure document is available on request.