29 May 2015

Struggling farms could go offshore - analyst

12:56 pm on 29 May 2015

Dairy farms could fall into the hands of foreign buyers if banks foreclose on struggling dairy farmers coping with reduced income, an agricultural consultant says.

Agricultural consultant, Alison Dewes, said most farmers need between $6 and $6.50 a kilo to produce milk and service their debt.

Dairy cow north of Matamata.

Dairy cow north of Matamata. Photo: RNZ / Alexander Robertson

Ms Dewes said the country had a sub-prime agricultural market and the farming sector was very fragile.

New Zealand she said had a "one-trick-pony" mentality of producing more and more milk, and now over-extended and indebted farmers could lose their land if dairy prices stay low.

"I can't say who's going to buy those farms, but we can look at the history and the recent history of New Zealand, such as the Crafar farms, the Hart farms, Lochinver Station, Synlait ...so we potentially are at risk of having water and land falling into foreign ownership. "

She said at some point farmers would ask themselves if they had enough room in their balance sheet to allow another $1 million of working capital to get them through another two years.

Ms Dewes said it is common sense that there will be foreclosures, as people question why they are pouring water into a leaking bucket.

She said banks may be able to help, but farmers should also talk to trusted advisers who were not associated with the banks.

New Zealand First leader Winston Peters said the Government is refusing to address the issue by not setting up a register to track foreign purchases.

He said many farmers were massively overgeared and he suspected next year's payout could be far below the current forecast.

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