By Lynda Kiernan, Global AgInvesting Media

New Zealand-based, large-scale dairy business, the Van Leeuwen Dairy Group, announced it is selling nine dairy farms in South Canterbury through a deal that includes 3,509 hectares of freehold land, irrigation rights, infrastructure, and an offtake contract with Oceania Dairy. 

The decision to sell follows substantial growth for the business over recent years, a capital restructuring, and a shift in focus for the business toward its robotic farming operations.

Located in Morven, South Canterbury on the South Island, Van Leeuwen Group milks 12,550 head across nine dairy sheds and four freestall robotic milking barns, according to the company website. 

The properties being divested will be sold by Colliers International, which will be gathering international expressions of interest.

“The portfolio offers strong projected returns that are expected to be particularly appealing to institutional and corporate investors,” said Ruth Hodges, national director of rural and agribusiness, Colliers.

Richard O’Sullivan, rural and agribusiness director with Colliers, added, “The farms currently produce some 1.84 million kilograms of milk solids and further gains in production are available to an incoming purchaser via improvements to irrigation infrastructure.” 

The farms being sold are all located within 30 minutes of each other, and are comprised of six traditional pastoral dairy farms, and three dairy support locations in Morven, Ikawai, and Waihaorunga representing 1,973 hectares of dairy farmland, and 1,708 hectares of milking platform, 159 hectares of leased land, and 1,536 hectares of dairy support land, according to Suff. 

Operational systems on the farms have been traditional, pasture-focused seasonal dairy farming systems employing a mostly grass-based level 3 system. Together with the means of irrigation, and a temperate regional climate without a real threat of drought, pasture growth rates are expected to remain steady from one season to another.

As dairy alternatives pose significant challenges to dairy production in many leading markets, entry into, or expansion within the New Zealand dairy industry at this time looks positive.

In its report, Situation and Outlook for Primary Industries released in December 2019, New Zealand’s Ministry for Primary Industries forecasts that the country’s dairy export revenue is expected to climb 8.4 percent to NZ$19.6 billion for the year ending June 2020.

Furthermore, strong global demand and a weakening New Zealand dollar are expected to drive continued export revenue growth, which will lead to higher farmgate prices and profitability. 

And in the short term, the ministry stated that strong demand from key Asian buyers, mixed with soft international supply growth, will lead to global markets supporting strong prices and resiliency – leading to its positive adjustment of milk solid payouts for the 2019/2020 season to NZ$7.25 per kilogram of milk solids.

“Historically, during times of crisis, food production remains absolutely core and investment flows to these types of assets,” said Hodges.

“The long-term outlook for dairy proteins is still very strong. New Zealand’s production is not increasing, meaning supply in the future will remain tight and prices firm.”

The possible channels of exposure are also flexible, as prospective buyers can acquire and operate the farms directly, or acquire the farms as a passive investment in conjunction with a long-term leaseback deal to establish an outside management relationship.

“The net yield on investment has been independently forecast at up to 7.3 percent on an owner-operator basis and 4.24 percent on a passive leaseback basis,” said Hodges. “The strength of these returns, and the sheer scale of the portfolio, add up to a truly unique offering for the New Zealand market.”

 

– Lynda Kiernan is editor with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, and HighQuest Group’s Oilseed & Grain News. She is also a contributor to the GAI Gazette. She can be reached at lkiernan@globalaginvesting.com.