Tuesday, 19 September 2017

Landcorp May Shrink in Size

An Excellent Proposal

Every so often we have the pleasure of driving the Rotorua-Taupo road.  We always take great pleasure in the scenery--and in particular, the farms lining both sides of the road in parts of the drive.

The only splotches of rain on that particular parade are the knowledge that the farms are owned by the Landcorp, an organ of the State.  Like all state owned and directly operated businesses they are inevitably subject to the slings and arrows spitting out of the fads and fashions popular with the government of the day.  Not so long ago, when forestry was in the doldrums, large swathes of this state owned land--then a pine forest--had the trees harvested and the land converted to dairying.

These new dairy farms came into production perfectly timed to coincide with a cyclical dairy downturn.  This is normal with government owned enterprises: little--yet self-important--bureaucrats making decisions with our money, without the severe discipline of  market risk.  State farmers are, in the end, cosseted from such things.  Consequently, they end up making commercial decisions in a grandiose, cavalier manner.  Nine times out of ten they destroy value.

Consequently, we did a few fist-pumps when we heard of the NZ Government's intention (should National be re-elected) to sell off such farms.
National will direct Landcorp to offer farms to young farmers because "there is no clear public good coming from Crown ownership and little financial return to taxpayers".  Primary Industries Minister Nathan Guy said the young farmers would have to "work the land" for five to 10 years, after which they could lease the farms before buying them.  It was envisaged about 100 young farming families would benefit from the programme.

"Not all of Landcorp's around 140 farms will be sold. Many are subject to Treaty claims and others have a right-of-first-refusal for Iwi – and these rights will of course be respected. Some of Landcorp's larger farms will be divided into smaller units more appropriate for first-time owners," Guy said.

Federated Farmers president Katie Milne said it was an "exciting prospect" for young farmers.
It was a slightly "back to the future" policy because in the days of the Department of Lands and Survey farmers went into a ballot each year for farms.  "I know of a few farmers who won the ballot and were able to buy a farm. I remember when my father and mother used to enter the ballot every year, although they never won anything." . . .

Guy said the young farmers would have the opportunity to buy the farms "at market rates" when they had built up enough capital after leasing them.  The farms would be awarded on a lease-to-buy arrangement, with leases awarded by a panel and ballot, and prioritised towards young farmers who had experience at running a farming operation, and had not already had sole ownership of one before. The leasee would be required to work the farm continuously themselves for at least five years before being able to buy it, or longer if they need more time to build up capital.

New Zealand Young Farmers chief executive Terry Copeland said the announcement was great news.  "We welcome any opportunity for young people to get access to farm ownership. There's been significant barriers in recent years with the high cost and limited opportunities to get into the farm ownership model and I can see this as being a very positive thing for the next generation of farmers coming through."  [Stuff]
If this is able to be rolled out, it will make the Rotorua-Taupo drive even more enjoyable.

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