Dairy farms fail to sell

24 Feb, 2014 03:37 AM
Comments
14
 
A lot of institutional investors are focused on short-term returns

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.

AFR
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READER COMMENTS

Cocky
24/02/2014 5:35:50 AM

The Chinese reportedly just paid ten million more than its worth for a sheep farm up the road from me so there is hope for the banks yet. Just a shame as a young farmer trying to get in, land values are still way over return from commodities even at these so called discount rates.
Rob Moore
24/02/2014 5:52:16 AM

Here is the perfect example of why we must have a PPP legislated. Producers get done over by the processors every time and need this trade practice - simple, fair, transparent, no favourites, BILL to pass OR there will be no primary industry in another couple of years - be like our ex car and rest of manufacturing. We need a simple rule - not a handout!
Bushie Bill
24/02/2014 12:25:04 PM

Robbie, old son, at least be honest with yourself. What you want is government interference to favour a particular segment of the market, the sector YOU have a financial interest in. How is that not a holding out your begging bowl asking for a handout?
argis
24/02/2014 2:05:26 PM

Here you go again, bushie bill, with your contradictory, "fork tongue propaganda". You argue in favor of your particular sector of the market (Labor, Unions), receiving a hand out (via inflated, regulated awards) and criticise Rob Moore for just trying to balance the ledger.
bronwyn
24/02/2014 7:01:19 PM

Isn't this story just more evidence that all forms of farming are no longer able to be thrown to the wolves on global market incomes, while having the burden of artificial domestic based regulations causing artificially high input and supply chain costs.
X Ag Socialist
24/02/2014 9:34:01 PM

Bushie Bill 24/02/2014 12:25:04 PM Robbie, old son, at least be honest with yourself. What you want is government interference to favour a particular segment of the market, the sector YOU have a financial interest in. ************ Bushie your co traveler thinks this is OK.... Jack Lang – Labor premier.Always back the horse named self-interest, son. It'll be the only one trying
Bushie Bill
25/02/2014 9:15:10 AM

One sentence, argie, one sentence posted by me to support your claim.
argis
25/02/2014 12:52:05 PM

Bushie, you forget that you break down every now and again and show your true colors with wild rants against the conservatives like Howard, Costello, Abbott and Hockey, Joyce and co. But not against your Labor/Union mates. You claim that we live in a wealthy country which can afford to pay its regulated award rates and over the top conditions and globally unsustainable workers rates of pay. Show me one sentence where you have attacked our protected, regulated, inflated arbitrary award system that is not global market based.
Rob Moore
26/02/2014 3:52:37 PM

So Bushie- you are trying to say that he who runs an auction - blatantly favour a buyer or a seller. I thought that this was a magic means to let everyone step up and set a ruling price on the day/ month (in the case of dairy).You bully boy reps from the controlling companies want the status quo forever but I am trying to impress on everyone that we have about 6-10 months before major collapse in several industries. Just because it hasn't been done before is no reason to be totally gutless and unoriginal.How bad does it have to get before everyone wakes up??
Deregul8
26/02/2014 8:09:51 PM

Bushie is right. The agrarian socialist cares little for anyone else except himself. Worse still he demands the hard work of others contribute to his own financial well being, no matter what the cost. You may need to google goolag argis where everyone is equal in the misery they feel.
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