27 Jan 2012

Shanghai Pengxin says farms require big investment

3:43 pm on 27 January 2012

Chinese conglomerate Shanghai Pengxin, which has been cleared to buy the Crafar farms in the North Island, says the company will spend substantially more than $200 million buying the land and livestock and upgrading the farms.

A spokesperson, Cedric Allan, would not confirm the sale price but says there will be a big investment in getting the 16 farms back in to "first-class condition."

He says the farms are in a rundown condition, are overstocked and have had very little investment in recent years and Shanghai Pengxin intends investing to address some of the environmental issues and increasing production by 10% over the next few years.

This included fencing off areas of wetland and native bush and getting rid of noxious weeds.

The ultimate goal, Mr Allan says, is to sell high-value product to China rather than keep exporting milk powder.

He says the next step in pursuit of that goal is to go into a joint venture or partnership with a local processor to produce what Shanghai Pengxin hopes is going to be a large volume of packaged products for sale to China.

He says the company was always confident of getting approval to buy the farms and says it has no issues with meeting the conditions laid down.

Meanwhile, Mr Allan says Shanghai Pengxin wants state-owned farming company Landcorp to manage the farms and the two sides will continue discussions over the next few days to finalise an agreement to manage the farms on the new owner's behalf.

Landcorp has confirmed it is keen to manage the 16 North Island dairy farms.

Chief executive Chris Kelly says about half Landcorp's total land, if Molesworth Station is included, is leased by Landcorp and run on behalf of the owners, including the Crown and other absentee owners.

"I see this as just another commercial opportunity to run farms as best we are able to on behalf of other owners and, as far as we're concerned, if Germans owned it or the Swiss or Chinese or whatever, we'd still be interested in running the farms because I think we can demonstrate that we can run large-scale farms reasonably effectively. "

Landcorp was among unsuccessful bidders to buy the Crafar properties.