Chinese to start dairy farming in New Zealand

Shanghai Pengxin, the Chinese company which spent the last 18 months waiting for final approval to buy a large New Zealand farm, says it is delighted the Supreme Court has refused to allow a further legal appeal by iwi (an aboriginal group), and that there is now no obstacle to the purchase being concluded before the end of the year.

Describing the purchase of Crafar Farms as  “an unbelievably protracted process”, the company says it never considered giving up at any stage, and looks forward to a positive relationship with the dairy industry and the local communities in which it will shortly be a corporate dairy farmer.

“Over time, we hope we will demonstrate many benefits in New Zealand and China working together and maximising the opportunities available for New Zealand’s largest industry in China,” says the company.

The purchase will be in the name of Milk New Zealand Holding Ltd, a subsidiary of Shanghai Pengxin. The farms will be managed by a joint venture company, Milk New Zealand Farm Management Ltd (“MNZFML”) a 50/50 joint venture with Government-owned Landcorp, which will be the managing partner.

Landcorp chief executive Chris Kelly says the next stage is a period of due diligence where an inventory of the physical assets of each farm will be checked and the herds reviewed. The various management contracts and share-milking contracts which the company will take over from the Receiver, will be activated before the transaction is settled.

“All going well, we expect to take over the running of all the farms early in December,” says Chris Kelly. “Our early priority will be to begin the upgrades necessary if we are to meet our increased production targets and to commence the environmental upgrades which have been agreed with the Overseas Investment Office. We are also required to establish a dairy training school on one of the properties so will be involved in planning that.”

Chris says MNZFML intends to spend some $15.7 million on the properties in the first three years.

For the time being, Milk New Zealand will continue to supply the milk production from its farms to Fonterra.

But , with finality of ownership now achieved, Milk New Zealand Holding is able to make progress on its options to process milk production from the farms and create a range of high value consumer products for sale in China. Spokesman Cedric Allan said this may be a contract arrangement with a New Zealand supplier or a joint venture with a New Zealand company. Milk New Zealand Holding has set aside a marketing budget of $100 million in China in the first five years.

Final steps will now be taken to form MNZFML and appoint directors and a chairman, who will be announced shortly.

Cedric says Milk New Zealand remained interested in acquiring further dairy farms if the right opportunities arose, and is still prepared to continue discussions with the iwi wishing to buy two of the Crafar farms.

“We’re prepared to talk, but it has to be on a commercially realistic basis. We have no interest at all in conducting negotiations through the media.

“We are inviting a Maori business delegation to visit China this year talking about more opportunities with wider iwi.

“Milk New Zealand will set up a head office in Auckland soon.”