Friday, 28 May 2010

Farmers - Not Peasants

To lose land is to lose sovereignty: This was the lesson Maori learned from Pakeha. Are all New Zealanders about to be taught the same lesson by the Chinese?

THE OUTRAGE was as plain as a Chinese pikestaff. Responding to Agriculture Minister, David Carter’s, comment that the sale of sixteen dairy farms to the Chinese-backed Natural Dairy (NZ) Ltd was "unlikely to go through", the company’s vice-chairman, Graham Chin, cut straight to the chase.

Not only were the Minister’s comments "completely unacceptable", snapped Mr Chin, but they also raised "serious questions as to how genuine and understanding the Minister of Agriculture is in relation to New Zealand’s trading and investment relationship with countries such as China."

Forget the "such as". Mr Chin was bluntly reminding our government that, along with all the international kudos and commercial opportunities, New Zealand’s highly prized Free Trade Agreement with the Peoples Republic of China also included a number of fundamental obligations and responsibilities.

Foremost among these is the New Zealand Government’s obligation to ensure that the same commercial opportunities made available to New Zealand investors in China are fully reciprocated in relation to Chinese businesses seeking to invest in New Zealand.

China will not tolerate a trading partner who attempts to have it both ways. If Beijing is willing to open doors for Fonterra, then Wellington must be equally hospitable to Mr Chin and his Hong Kong backers.

And it would be very foolish to suppose that Chinese officials will be fooled by New Zealand politicians attempting to wash their hands of all responsibility by pointing to the "independence" of our Overseas Investment Office (OIO). China’s ambassador will know as well as the Campaign Against Foreign Control of Aotearoa (CAFCA) spokesperson, Murray Horton, that the OIO hasn’t turned down a land purchase application in twenty years.

Once Natural Dairy’s application is granted, however, New Zealand’s farmers, and the politicians who represent them, are going to have to do some very serious thinking.

China’s purchasing plans for New Zealand are unlikely to stop at the Crafar family’s former properties. Indeed, Natural Dairy (NZ) Ltd’s principals have made it clear that their long-term objective is to construct a New Zealand-based, wholly-Chinese-owned, vertically integrated dairying operation in direct competition with Fonterra.

It must be as obvious to Chinese business interests as it is to this country’s Australian-owned banks that for more years than we care to admit, New Zealand’s dairy farmers have been in business not to sell milk, but to realise the enormous capital gains engendered by the ever-rising price of rural land.

With the global financial crisis having brought New Zealand’s rural property boom to an abrupt halt, a great many dairy farmers (and their bankers) are now stuck with properties their cows’ udders can no longer finance. Overextended in their rural lending, the Australian banks want to effect a quick exit from our agricultural sector with the minimum possible damage to their bottom-lines. They are looking for buyers of agricultural land, and, as luck would have it, the Chinese are looking for anyone with agricultural land to sell.

What is a Kiwi cow-cockey, technically insolvent and unable to borrow, supposed to do when Natural Dairy (or something like it) comes calling with an open cheque-book? As one veteran farmer of my acquaintance put it recently: "If a Chinese buyer offers me $3 million, cash, for my property – I’m not going to turn him down."

There’s only one way New Zealand can avoid losing, farm by farm, its core agricultural assets, and that is to make it illegal to sell agricultural land to anyone except the Crown.

Like the Maori before us, we face the prospect of seeing our most valuable taonga, land, and the key resource which will soon be worth even more than land, water, being sold out from under us. Only then will we discover, as they did, that losing one’s treasure means losing one’s sovereignty.

Turning our farmers into Crown Tenants, or, if they bridle at that term, into "Stewards" of the nation’s most treasured resources, would allow them to do what they do best: grow protein. Rather than farming for capital gain they could, once again, farm to feed a hungry world.

And to China’s inevitable protests our response should be:

"As a people, you have known the humiliation of being brought low by foreigners, but also the exhilaration of rising, proudly, to your feet.

"We are happy to be China’s farmers – but we will not be her peasants."

This essay was originally published in The Dominion Post, The Timaru Herald, The Taranaki Daily News, The Otago Daily Times and The Greymouth Evening Star of Friday, 28 May 2010.


Anonymous said...

Were I in charge of the New Zealand Superannuation Fund, I would be reaching for my metphorical chequebook very very quickly.

A purchase of the Crafar's farms (or any other peice of farming land) by the so called Cullen Fund is in my opnion, a no brainer really. The profits of our dairy industry ensuring economic security in retirement for our older citizens sounds like a damn good idea to me.


Anonymous said...

I agree with you completely, Chris. The sale of agricultural land to anyone but the Crown should be banned in law. This would also stop the sale of land to people who are New Zealand citizens in name, but who in reality have primary loyalties to their country of origin.

Labour are starting to address this issue- but with them unlikely to win the next election I can't see a law change happening for years. Key has said he is not in favour of regulation. But what would you expect from someone who made his fortune betting against New Zealand.

I wonder what will be left of the country in 4 1/2 years time. When New Zealanders finally realise we have been sold to the highest bidder and we are finished as a sovereign nation- can we try the politicians of the last few decades for treason?

Tauhei Notts said...

Chris, few city based commentators have your acute knowledge of the farming scene. Congratulations.
The sale of farm land in excess of ten hectares to anybody that is not a N.Z. citizen and resident must be stopped. And the sale of farm land to any company where 25% or more of the shares are owned by foreigners must be stopped. I am no left wing patsy, I'm an old Act party man, but have now come to realise that foreign owned land is not good for our country.
By restricting the farm land to Kiwis will reduce the price of land and make it once more affordable for frugal hard working Kiwis. The big losers will be the foreign banks who have lent too much to send farm land rocketing in price. And they will take some losses. How sad. Oh dear. Never mind.

BevanJS said...

Those farms and the people working on them will still operate under NZ law whoever the owner.

No government should think it a right to use money handed over to the state via taxes to gamble on potential greater earnings.

The word is govern not speculate.

peterquixote said...

Chris proposes and asks if :
To lose land is to lose sovereignty: This was the lesson Maori learned from Pakeha. Are all New Zealanders about to be taught the same lesson by the Chinese?
and the answer is yes Chris, this is the new world: and socialism and nationalism and parochialism and the Timaru Post is dead, and get ready

SPC said...

I would respond to this particular issue by allowing Landcorp to buy the farms. They however might need an equity partner - the Fund is ideal. Farmland is a rising asset value certainty and opportunities like this are rare.

However beyond managing the farms on behalf of the Fund, there is the opportunity to develop an integrated company - though that would complicate the nature of the farmland ownership and change the risk profile of the investment.

The wider issue of farm ownership is how farming has become a means to add asset value to the land, and profit from an untaxed capital gain, rather than a business trying to earn profits (on which tax was paid). And of course how allowing foreign investor participation has and would increase land values and our net foreign debt and diminish national advantage from improving terms of trade.

Rather than the reactive stance of only allowing sale to the Crown, why not an investment strategy? One not far from the origin of much of todays farmland - leasehold land.

Only the Crown becoming an equity partner (50% and taking over a relevant level of the debt farm by farm) reduces the extent to which farming is an investment rather than a business.

This allows a way for Fonterra to grow beyond its existing limitations - unable to be either an integrated company or raise sufficient capital as a co-op.

The government taking over a share of the equity of each farm would raise the capital Fonterra needs.

Though it would be best if Fonterra was split into two companies - North Island and South Island, to become competing operators in the global market. Each would have the resources to do some serious R and D and add value to their production.

The government of course would not hold any equity in Fonterra, just own half of the farmland and charge a rent/lease. This at a lower cost than a farm mortgage. The government of course would have a rising asset on its books (to the point where eventually we could have no net public debt) earning good revenue flow.

There would still be a need for a CGT to ensure tax fairness - farmers who added value to the farm (half they owned) would still gain (just pay some tax on it). Entry into farming would be easier (less burdensome in terms of capital and getting a bank loan as the amounts would halve).

Victor said...


You are quite right. But don't hold your breath.

BevanJS said...

SPC could I suggest that the NZ government does not in fact have a money tree. Neither should the government on our behalf borrow to buy into businesses that have already failed at least once.

"Only the Crown becoming an equity partner (50% and taking over a relevant level of the debt farm by farm) reduces the extent to which farming is an investment rather than a business. "

SPC said...


Farmland ownership is not a business. The money borrowed is matched by the asset purchased, so does not increase net debt. The value of the farmland will rise over time, ensuring that net debt of government would fall. The on-going cost of the government debt is covered by the lease/rent to the farmer.

Banks lend (mortgages) against home and farm property and do very well. Only buyers who enter the market at high values and who lose revenue flow cause bad debt risk, and they are a small minority of loans.

The government can legislate that lease/rent is paid before the mortgage to banks (held against the other half of the farm) is paid, reducing risk to near zero.

BevanJS said...

The only way to recover capital gain is to sell.

As Chris highlights...

" New Zealand’s dairy farmers have been in business not to sell milk, but to realise the enormous capital gains engendered by the ever-rising price of rural land"

Who would the government sell to?

Why would a farmer slave away without the prospect of a capital gain? Better to be a well paid employee of a well capitalised employer perhaps?

Anonymous said...

Even former ACT MP Deborah Coddington has called for Landcorp to buy the Crafar Farms, in today's herald....


Anonymous said...


There is a proverb that says 'the borrower is servant to the lender'.

The problem our farmers face, and in fact all New Zealanders face to a greater extent, is that if you borrow beyond your means, then ultimately you are at the mercy of those who lend you the money. They will decide when and to whom your assets are sold.

Personally, I don't see much difference if our family owned farms are sold to China or the State. Either way, the farmers will be reduced to peasant status.

To avoid this destiny, we all need to start living within our means, and reducing debt as fast as possible. This is the only way to retain our sovereignty.

Kind regards

Anonymous said...

"we all need to start living within our means"

That is code for "all those poor people should just go and live on the street"


SPC said...

Bevan JS

If the government owNed half of each farm, the farmer would be selling the other half whenever they chose to end farming it - thus extract a capital gain at that time (which should be taxed).

The government does not need to sell its half equity to extract capital gain - most farmers borrow against the rising value of the farm while farming it.

Farmland is valued from time to time - just
as houses are (rating). These values are confirmed whenever a farm is sold (or if, as proposed, half sold).

If the government is holding half the equity and leasing/renting it to the farmer, there is no need to sell it. The government is making a continuing (unrealsied) capital gain and the revenue it is earning is greater than the debt cost. Why would one sell?

If the government held $50M of farmland and it rose in value to $100M over a period and the lease/rent covered its borrowing cost over that time - then the rising value of the asset enables the government to borrow against an asset (lower debt costs?) or to lower net public debt to zero.

SPC said...

We don't reduce the debt held against our farms by allowing foreigners to own them - they will still be sending money offshore to repay the debts they incur buying our farms. They will just be sending the profits offshore as well - which means a worsening invisibles/BOP deficit.

Cactus Kate said...


yes Deborah remains on the political compass as confusing as ever. Bless.

Victor said...

Deborah may not be the only the right-wing dissident on farm sales. Fran O' Sullivan was making some interesting noises on Q&A this week.