AT LEAST $300 million worth of dairy farms across Australia have failed to sell or bring in capital partners after more than a year on the market, despite appetite for dairy processing assets.
The Chinese Investment Corporation, which had regularly been cited as a potential capital partner for Australia's largest milk farm, Van Diemen's Land Company, has walked away from a deal. National Australia Bank has been trying to sell a stake in the company to fund managers.
A NAB document obtained by The Australian Financial Review shows the farm, which covers 16,800 hectares in Tasmania, has a debt of $67 million.
The farm's major owner, New Zealand's New Plymouth District Council, also reported in its most recent financial accounts that the value of its shares in the controlling entity Tasman Farms reduced to $NZ135 million ($124 million) down from $NZ152.3 million in the previous year. The council said lower than expected returns in one of its funds was driven by a weak return from Tasman Farms. Other dairy farms across Australia are still yet to find buyers, such as Alan Fisher Pastoral Company's six farms near Warrnambool.
Charles Stewart Real Estate's Anthony McDonald declined to comment on the progress of the selling campaign. Raleigh Dairy farms in northern NSW and Lactanz Dairies in south-west Western Australia are yet to be sold.
Opteon dairy farm valuer Chris Ryan said there has been an oversupply of dairy farms for sale in Victoria.
"There are a higher number of dairy farms being managed by the banks," Mr Ryan said. "Since 2008 there has been a steady decline in values."
Commonwealth Bank handed Hines Dairy Farm, outside Warrnambool, to receivers last year and that farm reportedly sold for a discounted price of about $4.5 million. However, there remains a very small pool of buyers.
Dairy Australia's senior analyst Norman Repacholi said the main reason why institutional investors had focused on buying processors such as Warrnambool Cheese & Butter Factory rather than the farms was because of problems finding the right expertise.
"Institutional investors look at this from risk perspective – the farms are there but you need operational skills and that is very difficult to get. That has put a lot of people off. Whereas in the processing sector there is a deeper pool of labour," Mr Repacholi said.
Expert Steve Jarman said the problem in Tasmanian dairy was a matter of patience.
"A lot of institutional investors are focused on short-term returns and trading on the sharemarket and unfortunately miss the opportunities," Mr Jarman said.