Mallard on Crafar
January 18th, 2012 at 4:00 pm by David FarrarA few people are discussing whether Red Alert should be closed down. Just in case it is, I’ll respond now to a blog from Trevor Mallard on the Crafar farms:
And to make it clear, it is my view that there is no reason whatsoever to sell these farms offshore. To anyone.
That’s an interesting view, but that is like me having a view on who Sam Morgan should have sold Trade Me to. Labour do not own the Crafar farms. The Government does not own them. The taxpayers do not own them.
The reason the farms may be sold offshore is because someone offshore offered the owners more money for them.
Landcorp could probably hock off a couple of its non core farms and then buy Them all using its very strong balance sheet to raise debt finance for the balance.
Yes they could. And all they have to do is offer more money than any other bidder. Nice and simple, and that way the owners do not end up out of pocket, just so politicians feel better.
The Overseas Investment Act has criteria on which a sale to non-residents should or should not be approved. The Crafar farms are a small fraction of the farm land sold to non-residents and approved under the last Labour Government. One can have a sensible debate about amending the criteria, but a poling of banning all sales is just appealing to xenophobia and racism. I can guarantee you if it was an Australian farmer bidding for the farms, we’d be rolling out the welcome mat.
Tags: Crafar, foreign investment, Trevor Mallard
January 18th, 2012 at 4:10 pm
I wouldn’t be rolling out the welcome mat if the buyers were Australian.
Vote:January 18th, 2012 at 4:38 pm
Well it’d have to be some sort of underarm motion.
Vote:January 18th, 2012 at 4:45 pm
I left a few bits of my opinion (and researched some actual facts) for Mr. Mallard, and all it comes across as is trying to convert xenophobic and sinophobic (fear of the Chinese, incase anyone didn’t know) feeling into anti-John Key sentiment. He was happy to accuse me of being John Key’s help on the Night Shift (actually I’d love to be on the PM’s payroll… but I digress). Most of these types of transactions, numbering up to millions of dollars, go under the media’s radar – I know of many – but the information is largely made public.
Applicants with German, British, American and Australian owners have had their purchases approved in recent months, but this one has come right up into the media because of Crafar’s dramatic collapse and the fact that both of the interested overseas bidders so far have been Chinese. Most of Trevor’s scorn seemed to be based on his “source” who has alleged that Shanghai Pengxin (which he mistakenly thought was a Hong Kong based company) is owned by the Chinese Govt.
Mr Mallard is seriously underinformed in this area.
Vote:January 18th, 2012 at 4:49 pm
Here: ( http://www.linz.govt.nz/overseas-investment/decisions ) you can see, in most cases, the amount in dollars, the hectares (for land), the location, the vendor, the buyer (and their nationalities). Some are “Confidential”, but most are not.
Vote:January 18th, 2012 at 5:08 pm
Trevor proposes selling state assets (Landcorp farms).
I thought Trevor and Labour were against asset sales , even the partial asset sales Trevor is proposing.
I suppose now the election is over their beliefs of a few months ago are out the door.
Vote:Labour wonder why they are so despised.
Perhaps if they could stand for something and then remember that something ,they may have a chance
January 18th, 2012 at 5:36 pm
David, you just don’t seem to ‘get it.’
It’s not the farms which are the issue. They are just a distraction, a Trojan horse, if you like.
It is the access to processing and end production facilities which are part of the purchase proposal which should be opposed and disallowed. Can you begin to calculate the cost to New Zealand should a Chinese operated outfit export their product under the ‘clean green NZ’ brand – piggy backing for free on Fonterra’s hard earned reputation – only to find, dear oh dear, fifty little froggies and dings have died from poisoning due to ingestion of contaminated baby formula?
These buggers don’t need to buy farms to get milk, anyway. All they have to do is offer a better price than that of Fonterra.
Vote:January 18th, 2012 at 5:50 pm
“That’s an interesting view, but that is like me having a view on who Sam Morgan should have sold Trade Me to.”
Big difference, David, big difference. If you don;’t know what that difference is, one day someone may explain it to you.
And by the way, there are restrictions to whom New Zealanders can sell to, to overseas buyers. It’s not a free-for-all. Look up the MFAT website.
Vote:January 18th, 2012 at 6:14 pm
1% is right never mind the rest as long as we make heaps of money.
Vote:Never mind the chinese who are a bunch of despots
and are likely to vertically integrate the lot
Never mind that NZ is being hollowed out by the greed of the 1%ers
It is just plain sick
January 18th, 2012 at 6:23 pm
I initially supported an attempt by Landcorp to buy what is a significant bloc of the annual turnover in farmland as an orderly marketing move but with 3 main provisos
1 they immediately commenced a sale process to divest themselves of the properties.
2 They only “maintained” the properties with no further Development.
3 the also divested them selves of the other properties in their badly performing portfolio.
Events have overtaken them and now the “empire builders” playing farming with OPM want to take on the management of the block when the Chicoms complete the purchase.
Adolf’s concerns on the Fonterra connection trouble me as well.
Homepaddock regularly highlights the poor performance of Landcorps farming operations and in a word it is abysmal.
Vote:January 18th, 2012 at 6:55 pm
“It’s not the farms which are the issue. They are just a distraction, a Trojan horse, if you like. It is the access to processing and end production facilities which are part of the purchase proposal which should be opposed and disallowed.”
Adolf is spot on. Overseas sales are fine in principle. HOWEVER, with some notable caveats, of which this proposition involves three – NZ land, NZ branding, and unique NZ knowhow.
I’d be equally thoughtful if it were the Aussies or the Irish.
Vote:January 18th, 2012 at 7:26 pm
The issue of the Crafer farms sale has been about one thing….bigoted, xenophobic, economically illiterate racism.
Had it been white people offering to buy the farms the response from the low brow foaming leftists would never have been what it has with the threat from the “Yellow peril”. Their tiny minds can only picture endless lines of bandy legged,bucktoothed,conical capped coolies taking the farms away to China bit by bit in wicker baskets only pausing long enough to kidnap the odd virgin of the white race to debauch later over a cup of green tea or two.
Vote:January 18th, 2012 at 8:11 pm
“One can have a sensible debate about amending the criteria, but a poling of banning all sales is just appealing to xenophobia and racism.”
“Property Council chief executive Connal Townsend said debate about the future ownership of the 16 Crafar dairy farms appeared to have tapped a racist vein, when the real issue was New Zealand’s willingness to value its own landholdings and provide certainty to people who can commit capital, generate local employment, and encourage economic growth.”
http://www.scoop.co.nz/stories/PO1007/S00062/overseas-investment-necessary-for-new-zeala
“Chinese economy we all know about…
Chinese government says it’s time to grow offshore…..
Let’s take a good selection of New Zealands “products” over….
“We’re all New Zealanders, we all love the country so I think it’s healthy for us to have the debate and make the right decisions for our country…. but hey!…. young people coming through see it as “our planet” rather than “our country”
http://static.radionz.net.nz/assets/audio_item/0011/2385074/mnr-20100824-0842-More_than_800-million_dollars_worth_of_property_on_display-m048.asx
People voted for John Key because he comes across as like Jim Hickey (matey, one of us, good bloke). Muldoon said the people don’t know their politicians they just think they do. It is time people woke up to nationals hegemony with the rat-bags of realestate.
Vote:January 18th, 2012 at 8:16 pm
Red Alert should never be closed down!
That would be like National selling an ASSET, Once it’s gone it’s gone forever. Besides, what would Trevor and Clare do for anger management?
The blog? has been quite sad really with very few posts, and those posts attacking National and John Key. I think the people who are allowed to comment on Red Blert are down to about 50 from all NZ, the rest are BANNED.
When will the Labour Party learn? not for a long time I hope
Vote:January 18th, 2012 at 9:15 pm
There is a much better red alert post from curran where she sticks it to DPF and in one of the replies actually puts down in writing that DPF is wrong to interfere with a legitimate Labour party medium in reference to the documentary. Is tv3 and NZOA part of the labour party now.
Vote:January 18th, 2012 at 9:39 pm
I see David Farrar has his limits!:
“Likewise foreign investment is good, but that doesn’t mean one would want to sell off say 50% of farm land in a year.”
Vote:http://www.kiwiblog.co.nz/2010/07/herald_on_foreign_investment.html
January 18th, 2012 at 9:40 pm
John Key struck an odd note when he observed last week that he would be concerned if large tracts of New Zealand land were being sold to foreign investors. “Looking four, five, 10 years into the future, I’d hate to see New Zealanders as tenants in their own country, and that is a risk, I think, if we sell out our entire productive base, so that’s something the Government will have to consider,” he said.
Vote:http://www.kiwiblog.co.nz/2010/07/herald_on_foreign_investment.html
January 18th, 2012 at 10:17 pm
What on earth makes *these* 16 random farms so durn special?
It’s not like they had some sort of sophisticated system where they ran as a single, highly-profitable unit or anything – the guy proudly proclaimed he only used a farming diary to keep track of stuff, not to mention his multiple breaches of the pollution laws.
Vote:January 18th, 2012 at 10:47 pm
The only thing that made them special was the high-profile collapse of Mr Crafar’s (relatively) large business, and his outing for his poor environmental and animal welfare standards. Then the fact that the recievers want to sell the whole lot as one bunch, which has meant that NZers can’t afford to buy, or aren’t interested in buying the poorer farms that are included (the standards are quite varied across the 16) – so it has been left in the situation that the Chinese are outbidding any local interests.
Vote:January 18th, 2012 at 11:00 pm
Valuing our land based on foreign investment attracted here by our lack of a CGT means greater foreign debt.
Every Kiwi buying a farm will have to pay more and thus borrow more to farm.
Every extra dollar paid and then spent in mortgage cost is one dollar less to invest in the farm and added value products.
One reason we do not have much investment in added value product development is that farmers are hard pressed to service their land cost let lone invest profits in such development.
No wonder we lack real economic progress when we reduce ourselves to scrambling for the last dollar we can scrounge out of foreign investor buy up of our remaining assets.
Vote:January 18th, 2012 at 11:13 pm
SPC,
If we had CGT, it would affect both domestic and foreign investors. I think your theory requires a little more work [unless, perhaps, your goal is for us to simply reduce overall economic activity in the area we have most specialisation in, thus reducing our economic advantage and overall wealth and GDP?]
Vote:January 19th, 2012 at 12:14 am
No theory involved.
By the way your suggestion that higher land value and greater foreign owneship of it increases our economic advantage/wealth/GDP is absurd.
The receivers of Crafar Farms are acting fror lenders to Crafar – foreign banks. The consequences of foreigners bidding up farm values impacts on all people trying to buy a farm – a high foreign debt to New Zealand results.
To slowly restate the facts.
1. The lack of a CGT is attractive to speculators. Foreign investors will prefer to buy land where there is no CGT. Our lack of one compounds the higher land value resulting from allowing foreign investor buy in.
2. There is no increase in economic activity from higher land value. But there is a higher foreign debt to finance local ownership by Kiwi farmers.
3. The higher the cost of land to those farming the less profit results, the less profit that results, the less money available to farmers for agricultural activity, such as development of added value products, thus less economic activity and less wealth creation.
Vote:January 19th, 2012 at 5:47 am
The Australians, Canadians, Germans and Americans have minimal restrictions on the foreign ownership of their local based assets (land or equities). The more restrictive the foreign ownership requirements are, the more impoverished a country is. Some of the poorest and most corrupt countries have the most severe foreign ownership restrictions.
New Zealand throughout its long history has always lacked sophisticated capital raising markets. Substantial capital of the type needed to develop the vital infrastructure of the country or to build large industry capacity to affect real foreign exchange income could only ever be done by the government or large offshore companies. When one considers the freezing industry, long one of the huge drivers of NZ prosperity through most of the 20th century, almost all the capital to build the freezing works came from Britain. Until Britain joined the EU in 1968, British industry and capital dominated NZ’s economy and its markets. Australian companies similarly dominate today. Did British majority ownership of the freezing companies impoverish New Zealand? To the contrary – they brought vast amounts of capital needed to develop what became a vital industry that neither the government nor NZ companies could access.
In the case of land, it can’t be exported. It is trapped asset class in that it cannot be removed. In the case of a large dairy farm, the benefits of the farm and all that it can offer the economy of NZ and treasury of its government is unchanged whether it was bought by a New Zealand, French or Chinese company. This is because:
1. The GST on the sale is payable regardless of the domicile of the owner.
2. The tax on the capital gain to the selling company (current owner) is payable regardless who buys it.
3. The farm must employ local workers to milk the cows and run the farm and these workers spend their wages in the NZ economy and their PAYE is paid to the gov’t regardless of the domicile of the new owner.
4. The farm must contract with local businesses to maintain its plant and equipment. Those business in turn pay GST, taxes, PAYE and wages to their workers and profits to their owners (all spent in NZ mostly) again regardless of the domicile of the new owner.
5. The products produced from the farm (wool, meat, dairy, fruit etc) are sold to NZ based (or controlled) food distributors or single desk marketers (eg Fonterra or the Wool Board). These goods have a long and established distribution channel that the products will follow regardless of who owns the company. If the owners were German and say owned a chain of German supermarkets and wanted to directly sell the produce from their NZ farm, how is NZ disadvantaged? All the various NZ based businesses will still be involved in the pickup, storage, partial processing and exporting of the product as if the owners were 100% NZers.
6. The last issue and that is the most contentious is where the profits of the new owners flow. Those opposed to foreign ownership of NZ assets argue that these profits flow offshore. They forget that with the tough Foreign Owned Corporation tax rules that the tax on the profits will always be paid in New Zealand so the IRD does not miss out on the taxes on the profit from the farm even if the owners are foreign. The foreign country’s treasury may (depend on tax treaties) credit the tax that their domestic corporation has paid in NZ. In the case of China it is likely that additional taxes may be payable in China. If Chinese taxes are lower, then the NZ tax payer is not liable for the difference. The only likely difference between a NZ or non NZ owned company that would own a large dairy farm might be that the foreign owned company might (and that is only a might) employ a foreign General Manager. That is one high salary position that might not be filled from NZ. That is hardly a deal breaker.
So now we are left with two issues:
Vote:(i) The net or after tax profit is spent by the foreign owners in their country and not NZ. However the net after tax profit of New Zealand companies who do business in foreign countries are repatriated to NZ and spent in NZ. If we restrict foreign ownership of our assets then we invite a tit for tat retaliation from the country or countries who like to buy NZ assets who may restrict the ability of NZ nationals and companies from investing in their country. This is called a trade war and every trade war ends in tears or at least in impoverishment in comparison with free trade. The reciprocal tit for tat trade barriers that erupted after the US passed the Smoot Hawley Act in 1931 helped plunge the world deeper in the Great Depression.
(ii) Opponents claim that a company from a country like China may treat its assets, staff and property in NZ with the same disdain that they might be inclined to in China. The problem with that argument is that the farm, regardless of who owns it, is subject to NZ law. The workers on the farm must be treated in accordance with NZ labour laws or the owners and managers face prosecution. The animals must be similarly treated within NZ law. Discharge, waste and other environment issues are similarly governed by statute and breaches bring fines and penalties. Quality must be maintained on the farm in order for the end product to be of sufficient quality to not only pass NZ food inspection standards but be comparable to the products produced by similar size and style farms otherwise the vital marketing intermediaries that any foreign owner would most likely use would refuse to handle contaminated or substandard product. So even if the Chinese owners wanted to cut corners, they would have very limited room to do so and anything detrimental arising from such practices would soon catch up and NZ regulators would pounce. It would be easy for the government to build into any foreign ownership approval a more rigorous oversight regime to ensure such lapses never happen – all paid for by the foreign owners.
January 19th, 2012 at 7:08 am
The other option if we don’t want the Chinese owning the farms but would be to sell to the next in the line Micheal Fay, the corporate parasite,
Vote:Think back to the fucking over the country took over NZ rail and all the shifty shit that went on there we may want to rethink the deal with the Chinese, at least we know we are going to get dealt to by them, whereas with Fay you won’t realize you’re being fucked until he disappears back to the sunshine (smiling) after having striped the assets and sold it to the Chinese after the govt has bought it back.
January 19th, 2012 at 8:09 am
Just a fucking idiot. When in doubt borrow to buy an asset at a price exceeding that providing an acceptable return. Why?
Votes of course.
In principle its no different from those pinko hacks supporting the the wharfies. Mallard is simply too fucking stupid to realise that this type of bullshit is part of the case for privatisation of publicly-owned assets so that arseholes like him can’t exercise political control over commercial decisions.
He is also too fucking stupid to realise that the punters at large are bored to death with the Crafar farms and are more interested in their own lot.
Vote:January 19th, 2012 at 8:50 am
Kiwi in America gives a very clear summary of the Crafar farms sale issue but there is one thing to add.
Why do NZders never consider the options of leasing land – or better still Joint Ventures. Why not think about a jv where Landcorp owns 51% and the remaining 49% goes to the highest bidder.
Vote:January 19th, 2012 at 9:05 am
@SPC
I am not suggesting that foreign ownership increases economic activity, I am suggesting that additional costs on businesses does suppress economic activity. My point was about a CGT. While the devil is in the details, in the absence of any details, we can only work on the basis that it is an additional cost burden for the business.
It is attractive to investors – domestic as well as foreign. It is purely speculative to label them speculators.
Current land prices are considered high and are a result of the perceived returns farmers can gain from farming activities. I don’t see any evidence that they are skewed by foreign ownership as yet. Foreign ownership could distort land prices if we allowed them to purchase large blocks of the country – we have overseas investment rules to manage that. The sale of the Crafar farms is unlikely to distort the general market price.
The higher the costs to business, the less profit results. As noted above, in the absence of details, a CGT is an additional burden on the farmer, reducing profit. The CGT would also reduce their net wealth by undermining the value of their current land holdings.
While it could be argued that the lower cost of land resulting from a CGT could enable more people to start farming, or existing farmers to expand, thus increasing economic activity, there are some gotchas to that:
1. If the land to be purchased is already farmed, it does not increase economic activity – it is merely substituting one owner for another [there could be some efficiencies applied to increase yields if it is one farm expanding]
2. The lower value of the land may, itself, be a barrier to financing the land purchase if the additional CGT costs impact annual returns greater than the decrease in land value – it could distort the business plan to the extent that banks are less willing to lend, or will only lend a lessor percentage of the land value.
3. Equally, the reduced value of current holdings and the reduction in equity as a result, could be a barrier to existing farms expanding
Higher costs on business lead to shifts in the application of capital – if returns are affected to the extent that better returns on capital can be achieved elsewhere the result will be less growth, or a reduction, in farming activities [hence the point about reducing economic activity overall in an area of specialisation - farming. Certainly the Greens would be happy to see that come about.]
Vote:January 19th, 2012 at 9:07 am
Minette
Joint ventures in dairy are called sharemilkers and there are 100′s if not 1000′s such business’s being run now. Potentially with a sale of these farms there are 26 sharemilking farms for young New Zealanders to go onto.
Vote:January 19th, 2012 at 12:17 pm
***but a poling of banning all sales is just appealing to xenophobia and racism. I can guarantee you if it was an Australian farmer bidding for the farms, we’d be rolling out the welcome mat.***
So what? Is wanting the All Blacks to beat other countries xenophobia and racism? It’s quite normal and healthy for families to support their own, and by extension people from their communities and country to favour their own interests.
The stupid Margaret Thatcher idea that “there’s no such thing as society”, that there are simply atomized individuals rather than communities, needs to be challenged.
Vote:January 19th, 2012 at 8:32 pm
China has nearly one-fifth of the world’s population and only 7% of the world’s arable land
Vote:January 19th, 2012 at 8:39 pm
http://www.chinadaily.com.cn/china/2008-02/29/content_6497796.htm
27.45 billion hectares) as of October 31, 2006
Which is quite alot of arable land, a few farms in NZ are going to make SFA of a difference
The Arable land (hectares) in New Zealand was 471000.00 in 2009
We are but a pimple on the arse of the world
Vote:January 19th, 2012 at 9:00 pm
scrubone (1,037) Says:
January 18th, 2012 at 10:17 pm
What on earth makes *these* 16 random farms so durn special?
I have returned for a swansong comment to srubone.
I will tell you what makes these 16 filthy farms special..
Several of them discharge cowsh into the Tararua stream which in turn discharges the cowsh into the mighty Mohaka, which in turn lays a lovely algael growth on the pristine gravel spawning redds, which in turn desroys the ability of nymphyl growth, which means that trout, tuna and any number of bullies etc cannot feed, which in turn means that the river eventually dies.
Crafar and those that gave permission to convert land really only suitable for growing pine into dairying need fucking with a rather large red hot poker.
I put my hand up to volunteer as the inserter!
It matters not if the Chinese or the Sri Lankens own the farms….they are filthy blights.
Vote:January 20th, 2012 at 3:03 pm
New Zealands population is tiny; the Crafar farms are tiny; New Zealand is only .07% urbanised; immigration doesn’t affect house prices (but returning expats do). All you have to do is eliminate zoning and let the free market operate.
“However, fluctuations in grain output since 1979 provide a warning against sanguinely assuming that even seemingly low rates of required growth will be achieved in the future. Production reached historic peaks in 1984, 1990 and 1998, only, in each case, to stagnate or collapse later on. For the time being, it is premature to assume that China has attained a new trajectory of sustained output growth.
… And then hits a wall
More fundamentally, however, in its pursuit of such growth, China faces severe resource and environmental constraints. For example, population pressure, urbanization and rising prosperity have resulted in the loss of some of China’s best farmland. Since the mid-1990s, China has suffered a loss of about 8.3 million hectares of arable land, or about 6.5 percent of the country’s total arable area. The implied loss of output is even greater than this contraction implies, since the process of net land contraction conceals the disappearance of disproportionately large amounts of land in the most fertile regions of coastal China, where economic growth and structural change have been most marked. Land degradation, through desertification and the creation of enormous dust bowls, has also become a major problem.
The Chinese state will be faced with an additional challenge: water. Farming is by far the most water-intensive industry. Under the pressure of mushrooming demand, China faces serious water shortages, which are exacerbated by the uneven distribution of existing supplies. In particular, the North China Plain, where much of China’s wheat and cotton is produced, is severely deficient in water, thanks to the depletion of surface water supplies and underground aquifers through over-pumping. A recent report issued by the Earth Policy Institute in Washington, DC estimates that some 130 million people in China are fed with grain that is produced by over-pumping. When the aquifers are exhausted, the output impact will be severe.
Meanwhile, the shrinking glaciers of the Qinghai-Tibetan Plateau region, declines in the run-off of major river systems, increased incidence of drought in Southern China and rising coastal sea levels – all highlight adverse effects of climate change that are potentially damaging to farming.
Natural disasters too continue to pose a serious threat. In February 2011 the FAO” …. etc
Vote:http://www.isn.ethz.ch/isn/Current-Affairs/ISN-Insights/Detail?lng=en&id=128073&contextid734=128073&contextid735=127105&tabid=127105
January 20th, 2012 at 3:16 pm
When you allow a global property market you increase the demand and hence the price; I don’t know why the economically literate don’t get that. You can use the line that the land is not yours (ie the owners) and therefore he/she should be free to get the best price, but since when did citizens have the right to do whatever they like with their land? They have had the right to occupy but not absolute rights of ownership.
If it is “my planet, not my country” as the Harcourts man in Shanghai says, perhaps we should allow open borders so Bangladeshis, (Afganistanis, Sub Saharan, Africanis and Punjabis) can come here in large numbers to look for work, when the worlds poor flow in and people fill the streets at night we can see close up the reality of those policies as poor New Zealanders live on the streets and productive farmland is concentrated amongst the wealthy.
Vote:January 20th, 2012 at 4:06 pm
Great post hj
Vote:January 20th, 2012 at 4:39 pm
Scorned
Vote:The whole xeno thing is just so tired now..It is such superficial thinking and is largely an attempt to shut down discussion..
The Chinese are loathed all over the world where they have aggressively bought up land and assets. Africa , Sth East Asia , the Pacific etc…Ask yourself ..Why are they loathed?
I can’t be bothered going into detail , suffice to say , I have been married into a large Chinese clan for decades.
It is very simple really.
Tibet or not Tibet?