Dairy farm syndicates attractive but . . .

MyFarm is predicting an increase in investment in dairy farm syndicates this year.

MyFarm Director Andrew Watters says: “The industry is entering a positive cycle in 2013, benefitting from rising global milk prices and greater investor focus on the sector.

“The successful $525 million capital raising by Fonterra in December highlighted the attractions of dairying, but at the same time revealed the complexities of investing in the sector in New Zealand. Only by investing in dairy farms can investors benefit from rising milk prices.”

In the year to December 2012 73 New Zealanders invested a total of $35 million in four new My Farm managed dairy farm syndicates and eight established dairy syndicates. This compares with $43.9 million in 2011, when 81 New Zealanders invested into 12 new dairy farm syndicates and 2010 when 68 investors invested $44 million into 9 new syndicates. . .

The successful float of Fonterra Shareholders Fund units has increased interest in dairying investment and the expected increase in milk prices this year will make dairying a more attractive investment.

MyFarm has a good reputation but not all farm syndicates are.

There have been successes but there have also been some very expensive failures.

Reasons for that include paying too much for farms, having too little to invest in improvements which would boost production as well as problems with both governance and management.

There is money to be made in dairying but there’s no easy money and like any other investment it comes with risks.

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