Market will see off Shanghai Pengxin – eventually, English says

Finance Minister Bill English (TV3)
Federated Farmers president William Rolleston

Last Tuesday Finance Minister Bill English declared himself pretty relaxed about the potential sale of one of New Zealand largest, most valuable farms to Shanghai Pengxin.

Now it seems his quietude about the Lochinver Station issue is at least partly down to his belief the Chinese company is unlikely to hack it in NZ in the long-haul.

On Friday Mr English told a gathering in Hamilton his personal view is that corporate farming entities, whether local or overseas-owned, don’t tend to survive in the long term.

That’s because of the “low return on assets” that farming delivers – just 1-2%, not including capital gains.

"Prices peak,” he said. “When they start falling, the syndicates and the shareholders want to sell out. And if I was them I would, too, because if you don't live it and love it, you'll end up asset-rich and cash-poor.”

Ticking off New Zealand Dairy Farms, Tasman and the Hubbard and Solid Energy “empires” as examples of corporates bailing out of the sector when the going’s got tough, Mr English said of Pengxin, "These guys, as much as they might not be saying it, they'll come and go. The owner-operator works. The Waikato's testament to it."

Federated Farmers national president William Rolleston agreed with Mr English – up to a point.

"You don't see many corporates holding farms on an intergenerational scale,” he said. “But you can't be completely complacent about it."

And although he didn’t want to get into a debate with Mr English, his shareholding minister, Landcorp CEO Steve Carden said he backed the long-term prospects for corporate farming.

"We've been around for 27 years,” Mr Carden said, “and we've only ever lost money in one of those years."

Shanghai Pengxin’s application to purchase the 13,800 hectare Lochinver property near Taupo is currently being considered by the Overseas Investment Office

Since it was revealed by Conservative Party leader Colin Craig at a Grey Power meeting a week-and-half ago, the sale of NZ farms to overseas interests has become an election issue, with Labour, the Greens, New Zealand First and the Conservative Party lining up to oppose such sales.

NZ First’s Winston Peters has adopted the strongest stance, saying he’d make blocking the sale a bottom line for supporting the next government and vowing to buy back strategically important farms sold to foreigners.

In 2012 the government controversially approved the sale of the 16 central North Island Crafar farms, which total almost 8000ha, to Shanghai Pengxin.

And earlier this year the Chinese company took a 75% stake in the 4500 hectare Synlait Farms in Canterbury, a deal that included 12ha of conservation property.

Prime Minister John Key has warned other parties about the danger of trying to make political hay from the issue by rushing to judgement about the Lochinver Station sale.

"The government would almost certainly be open to legal action if they pre-judge the decision made by the Overseas Investment Office without knowing the facts," Mr Key said.

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