Rural Trader Blogs

Are We Ready for a Foreign Dairy Empire?

It has been interesting to watch the reaction to Hong Kong listed company, Natural Dairy (NZ) Holdings, signal its intentions to swallow up all 29 Crafar farms. 

Natural Dairy's goal – to establish a vertically integrated dairy empire, from farms at the one end to the production and exporting of dairy products at the other.

I can understand much of the negative reaction to this “big fish” coming in and swallowing up farms. On the one hand, farms and farming is a way of life in New Zealand and perhaps the last of the truly family-based businesses around. A large dairy giant entering the market and setting up shop down the road is, on the surface, not an appealing prospect.

Then of course, there is the language used - “dairy empire”. The Chinese have been setting up empires for thousands of years. We know what the Chinese idea of empire is and it probably won't be small ($1.5 billion at last report). This prospect may be unsettling to the ideal that dairy farming in New Zealand is done by New Zealanders and at a scale we can comprehend.

Dairy worldwide is a huge business and New Zealand is a significant player in the industry for many reasons. We're not the biggest or the most efficient, but we are where many of the innovations have started, taken root and flourished. Can we really blame a foreign interest eyeing up our industry as a potential profit machine?

All our fears become exposed, no matter the market, when a large player decides to step in. What will such a move do to the price of land? Margins in the industry are not guaranteed to be as high as they have been in the latter part of last decade. It's understandable we fear external investment in what we have long thought to be our industry. 

Many would think that another market player taking over from the infamous Crafarms is a good thing in itself. The Crafars hardly have a squeaky clean track record and have long been a pimple on the face of Fonterra. The Overseas Investment Office will likely have the final say and at present, Natural Dairy Holdings is far from meeting the hurdles placed before it.