Landcorp making transformation

Copper Road, near Waitahuna, has been sold by Landcorp. Photo: Stephen Jaquiery

A value chain approach must be part of the solution for Landcorp and all New Zealand farming amid the ever-present challenge of volatility for commodity producers, the country’s biggest farmer says.

"We certainly see the impact in Pamu [Pamu Farms of New Zealand is Landcorp’s brand name] revenues and earnings from year-to-year and, more generally, we see volatility growing as the drivers of demand and supply become even more uncertain in globalised markets," chairwoman Traci Houpapa and chief executive Steven Carden said in the annual report released this week.

In September, the state-owned enterprise announced an improved net profit after tax of $51.9 million on revenue of $233.5 million for the year ended June 30, compared with a $11.5 million profit on revenue of $210 million the previous year, largely attributed to low milk prices.In their report, Ms Houpapa and Mr Carden said the company was now into the fourth year of transformation, away from traditional commodity-producing agriculture and into a business focused on natural foods, nutrition products and fibre of the quality and provenance valued by "millions" of consumers.

The company was "hard at work" on the transformation and it had some exciting value chain initiatives under way although not all were ready yet for public disclosure.

"Across our business, we are looking at how to better differentiate what we produce and to move beyond commodity market pricing."

Initiatives with A2 milk, grass-fed milk and conversion to organic milk supply on some dairy farms were part of the strategy. So were fixed price supply contracts for lamb, beef, venison and wool.

Its wool supply partnership with the New Zealand Merino Company was especially beneficial as spot market prices for wool tumbled during 2016-17.

Overall, the company expected to be farming fewer animals in future, and to have a stronger focus on plant-based products for food and nutrition.

There would be future products and value chains based on ideas and on land uses beyond today’s business.

Non-traditional uses for farms would be investigated. Honey was an obvious possibility, given the extensive areas of manuka and other native vegetation.

Current investigations included new uses for sheep milk as more discoveries arose around its qualities.

Three properties, including two livestock farms, were sold during 2016-17 under its capital recycling strategy.

Those sales contributed $1.2 million to this year’s EBITDAR. The two farms sold were the 1508ha Copper Road property, 10km north of Waitahuna, and Burkes Creek (1019ha) on the West Coast. Two other South Island properties were subject to conditional sale agreements.