Farmers may be reluctant to sell

Southern farmers will want to see cash before agreeing to sell their farms to a foreign company again, having been burnt once by a deal that turned sour.

Southland Federated Farmers president and dairy farmer Rod Pemberton said some farmers had previously been burnt when a Maori trust backed by Dubai interests agreed to buy several farms but never paid a deposit.

The deal subsequently fell over, but the experience could harden attitudes.

"They will want to see some cash on the table before committing themselves," he said.

A subsidiary of Hong Kong-listed Natural Dairy New Zealand, UBNZ Assets Holdings, has started looking for up to 100 Otago and Southland dairy farms to buy, should the Overseas Investment Office approve its intention to buy the Crafar family's 29 North Island farms which are in receivership.

Company spokesman Bill Ralston said should approval be granted, Natural Dairy New Zealand would take its stake in UBNZ from 20% to 100%, buy further farms in both islands and build dairy factories in the central North Island and Southland.

A company representative said the factory would be the size of Open Country Dairy's plant near Invercargill, which handles 200 million litres of milk a year supplied from 94 farms.

Mr Pemberton said there were few dairy farms for sale in the South, and for Natural Dairy to buy up to 100 would mean paying premium prices.

While he personally did not like the idea of foreign-owned companies buying New Zealand land, he accepted New Zealand companies and individuals were doing that in other countries.

Fonterra has invested in three farms in China, although a company spokesman said it did not own the land but was subject to land-use rights which were similar to a long-term lease.

New Zealand Farming Systems Uruguay had substantial land holdings in Uruguay and other individuals were investing in South America.

"Free trade agreements do work both ways," he said.

The interest by Natural Dairy showed food security was a significant issue, but one New Zealanders may have been slow to grasp, he said.

The federation's Southland dairy section chairman, Vaughan Templeton, said Southern farmers were not very supportive of offshore companies owning New Zealand land, and he believed their loyalty to Fonterra was getting stronger.

There was still plenty of room in Southland for new dairy farms, but if Natural Dairy was to contract milk supply, Mr Templeton said it may struggle unless it paid a premium milk price.

"There is a lot of loyalty and support for Fonterra, but in the end money talks.

If they are going to pay a decent milk price, in the end it would be pretty hard to ignore," he said.

Mr Templeton said New Zealand's low population and ability to feed 50-60 million people made it an ideal target for companies wanting to secure future food supplies.

It was also the reason Fonterra was addressing its capital structure, to ensure it had a strong balance sheet to resist foreign competition.