Remind me why we own this?

Landcorp has reported an operating loss of $9.4 million for the year to June.

The result compared with a $4.9 million operating profit the previous year, itself an 84 percent decline on the previous year.

Statutory profit was $11.5 million, reflecting the one-off receipt of $7.4 million from land sales and unrealised “revaluation movements on items such as livestock, farm properties and financial assets, e.g. co-operative shares”, a spokesman for the company said.

“It’s been a tough year for the entire dairy sector, so our result is solid in that context,” said chief executive Steve Carden. “The result would have been lower without the progress already being made to strengthen our farming systems” and its high value Pamu product range. . . 

The loss isn’t unexpected with dairy prices so low and sheep meat having had a pretty ordinary year but remind me again why we own this company?

Landcorp owns or leases  376,942 hectares of land. Its 140 farms and 1.6 million stock units makes it New Zealand’s largest farming operation.

It has a good reputation for staff management and training, animal welfare, genetics, other farming practices and environmental sustainability.

But does that justify state ownership of the company when its total asset value in its half year report to December 2015 was $1,846.4m?

There is a case for the crown owning land to use for treaty settlements.

There’s also a very strong case for reducing that huge investment in Landcorp by gradually selling farms to free-up money to spend it where the need for, and value from, investing it are greater.

That won’t happen.

All the parties on the left are philosophically wedded to the idea of state ownership even though the government, investors and taxpayers are all better off after other partial privatisations.

National is philosophically supportive of the idea but good philosophy and policy are sometimes bad politics and it has other priorities on which to concentrate.

Why do we still own the company? Politics.

5 Responses to Remind me why we own this?

  1. pdm` says:

    The grapevine tells me that Landcorp is putting 6 to 8 of it’s holdings on the market at the end of this year. I know one of them but not the others.

  2. Mr E says:

    I tend to agree there is a strong case against state ownership of farm land.

    However.

    My opposition to state ownership is strongest when the main reason is to underpin an industry that is never likely to succeed privately. eg rail.

    In the case of Landcorp – a loss by this enterprise will be a stark reminder to the Government and hopefully the public that farming is tough.

    Of course they shouldn’t need an investment in farming to know that – but I am hoping it helps.

    Farming in NZ has succeed despite being presented with an uneven playing field. And NZ has turned this challenge into an opportunity. Productivity, profitability and by in large sustainability has occurred in the absence of subsidies, when the globe has subsidised to achieve a lower standard.

    But there are growing productivity challenges as farmers are faced with limits, and our ability to remain internationally competitive could face challenges.

    Grow more and do less, poses challenges. Especially when our marketing faces undue risks due to over zealous environmentalist activity.

    Having public interest in this challenge has value.

    I think Landcorp also poses an opportunity to help towards reducing the Rural Urban gap.

    A frustration I have with Landcorp is it’s activity in secret deals with cooperatives. I have heard the argument – and I don’t buy into it.

    If the arguement stood true, that scale entitled some – more – then there should be a sliding scale based on scale. Of course there is not.

    Cooperatives either need to treat all the same or all individually. At the moment – we have the haves and have nots. I think this situation needs to end – and I would prefer the Government were not part of it.

  3. Freddy says:

    The thing is HP, Landcorp hasn’t stuck to its knitting.
    Landcorp has become too big in Dairy, not its core activity !
    With sheep+beef they are quite innovative but with dairy there are plenty of outfits that can do it as well or better, Fonterra is arguably doing Landcorps job in the dairy sector, and Landcorp is just another player. Bail out of dairy by all means but save the core business, they’re worth it !!!

  4. They took an unintelligent stand by ruling out PKE completely. You can get sustainably produced PKE (see Woodfords latest piece) and a loss making farm should consider this option as a cheap, flexible, but quality feed.

  5. JC says:

    My family had an unbroken association with the old L&S Dept from the 1880s and with the farming corporation till around 2000.. so around 110-120 years of contract work.

    Even so I couldn’t really say when the organisation had fulfilled its core mission of land development for sale to individual farmers but perhaps sometime around the 1960 when land development tools became efficient and cheap enough to allow keen young couples to go into debt with a good chance of future success.
    Then again, my father in law broke in his farm from 1946 after being demobbed from the Tank Core without any Govt assistance.. perhaps it was his time with tracked machines in the desert warfare that saw his first farming move to make a deal with a young bloke with a bulldozer. he provided feed and found in exchange for cheap scrub crushing in the Ruahine foothills.

    Whatever, the restructuring of the 1980s was overdue recognition that the age of raw land development was over.. that breaking in marginal land to produce 9 ewe equivalents/ha propped up with subsidies was unsustainable and a poor use of resources.

    The resultant farm corporation was, like the Forestry Corp seen as a halfway step to full privatization. However, whilst there was political support to sell off the forestry entity the same wasn’t true of farming.. so it has persisted as a sort of bastard child of the 1980s reforms.

    I can speak to some epic tales from the 1950s of what was going on behind those newly developed green paddocks.. lets just say that when people my age and older speak wistfully of a kinder and more generous New Zealand of yore they are often describing what the Western world would now unambiguously call theft and corruption.

    Landcorp is a vastly different beast from those old days, its miles more efficient and honest but its not really a farming operation so much as its a political parking lot awaiting a government with the will and mandate to do something useful with it.

    And be assured of this.. the nostalgia for some of the institutions and practices of the past may be genuine but in effect its a call for a return to incompetence, dishonesty and corruption.
    Landcorp is a million miles from this scenario but I’m afraid being honest but poor isn’t acceptable either.. it should either go out of existence or be given an entirely new mandate. Whatever, there’s little justification for it to own farms on the present scale.

    JC

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