Bernard Hickey has a good analysis in the Herald on the Crafars. It follows about three years of increasing publicity for undoubtably the worst farmers in the country.
The results of their poor approach to the environment on and around their farms will take years to remediate.
And their shocking approach to animal welfare does run the risk of ruining NZ’s good international reputation in the area.
What has now become clear is that the sale of their farms is inevitable but that the probable firesale is overshadowing the farm property market in the central north island at least. Banks will be worried not just about the Crafars’ debts but the loss of farmers’ equity in properties more generally.
My solution. Use Landcorp. As a SOE it can have a social responsibility role. Jim Sutton the Chair and Chris Kelly the CEO are both drier than a Hawkes Bay drought but in the end pragmatic and very good at hard negotiations. They could work with the banks that effectively own the farms now to do a bulk deal that would save the banks millions in transaction costs and staff time.
Lets make it clear. I don’t think these farms should be in Landcorp’s hands in the longer term. There is development that needs to be finished. Environmental safeguards to be put in place. Stock quality to be improved.
That is Landcorp’s area of expertise. As in their previous incarnation (Lands and Survey) they have been doing this for over 100 years.
And then the farms should be sold on the market – over a period of years – in an orderly manner.
Well done Trev a bloody good idea, whilst the Crafars’ are probably not bad small farmers they seem to totally lack the skill set and any form of infrastructure required to run a multi million dollar operation.
The next question to be asked is why did the bankers not have someone on their staff with at the very least some farming skills to watch over their investment, or is it just a case of “all care no responsibility”.
Even the thickest amongst us could see this was train wreck going somewhere to happen.
100% onboard with this idea.
Sorry, Mr Mallard but it’s stoopid idea.
The people who should immediately take over these farms are the people who really own them, namely the banks. Long ago they should have foreclosed and taken over as mortgagee in situe, appointed competent managers for each property and arranged orderly disposal of the assets over a one or two year period.
That’s the way things should be done. Land corp would not have the staff or the resources to run this show. It would simply end up doing the job the banks should have done – contracting our temporary management.
Good idea Mr Mallard. The government should just dip into its pockets and add $200 million to Landcorp’s balance sheet.
Apart from where this money might come from or whether Labour has costed this proposal, it is about as dizzy as paying double the odds for a train set in my view.
Landcore should definitely take over the farms due to the criminal operations that the Crafar’s have been running. They shouldn’t pay the banks a cent, after all, profiting from someone else’s illegal practices is illegal. The banks can try to get the money back off of the Crafar’s but they’ll probably have to accept the simple reality that when you loan someone money you’re taking the risk that you’re not going to get it back.
Tim as the Crafars have found you don’t need $200m equity to buy that those farms – in fact given the current situation mightn’t need much equity other than for development costs. Certainly Landcorps credit rating and borrowing costs much higher and lower than Crafars. The government could probably agree to defer a year or twos dividend and I’m sure the arrangement could end up being very worthwhile to the crown financially, as well as economically (remembering the effects of farm price reductions) and environmentally.
They’ve acted recklessly, endangering animal welfare, the environment, our image, and now potentially the value of other people’s farms. Isn’t it about time that we got something back from them for this? Wouldn’t letting the banks take over and liquidate only see the money flowing back into private hands?
That is true of the cash position Mr Mallard, but as you know Landcorp has only two options, to pay with cash or to raise debt to purchase the Crafar farms. That’s an extra 200 million the government has to come up with. Of all the demands on the government’s purse, I don’t think it should be a priority.
The liability for the Crafar properties should rest with the Crafars, in my view. Failing that the liability should rest with the banks. Just as I don’t think the government should be bailing out Toll Holdings by paying twice what Kiwirail was worth, I don’t think the government should be bailing out the Crafars or the Banks for their business decisions. There isn’t any evidence that if the banks did have to call in the Crafar debt that it would result in a fire sale of dairy properties.
Well, you can all stop arguing now. Receivers have been appointed today.
Sensible proposal from Trevor but lets not forget that banks have fuelled the fires that are now putting the heat on more than just the Crafers. They expect us to pay a premium for risk then bail them out when they take a loss. They are as much to blame as the Crafers themselves.
The banks have thrown the Crafar’s into receivership but are they going to take responsibility for cleaning the farms up?
Exactly.
Damien OC and DTB, precisely how is it that banks expect to be bailed out when they take a loss? Is this the latest Labour myth?
Well, considering I’m not associated with Labour I’ve no idea why you’re blaming Labour for the idea even though it was a Labour MP who was suggesting that the government bail out the banks.
But as to exactly how, I believe that a few weeks ago the OCR was dropped quite considerably to boost the economy but the banks kept their rates high. Their excuse was that their overseas financing still required us to pay higher interest rates. This directly means that they required us to bail them out of the losses that they made in their overseas investments.
You fool, they are not investments. They are loans and our banks are the borrowers. That’s where they get the money to lend to suckers who write gibberish on blogs.
If I was the highly paid public relations person for the greedy foreign banks I would be putting forward the idea that Landcorp should buy the Crafar farms.
That idea is so stupid that the foreign banks would not have the cheek to put it forward.
Put all the farms on the market and the market will decide what they are worth. And if that price is a damned sight less than what the farms were worth then welcome to the world of economics.
The Crafars and their bankers took a big punt on future dairy prices. They deserve as much sympathy as I deserve for my big punt on Daffodil in the Kelt Capital Stakes.
Trev, if the govt did what you said , and on the face it seems a reasonable idea, you’d be crying foul about the govt bailing out their big buisness banking mates.
Let the banks take the hit.
Not suggesting the banks get bailed at all. Though they might not lose as much as they would otherwise. All I am suggesting is there is a need for competent management quickly, that Landcorp has the biggest pool of talent in this field in the country, and that an orderly sale process would be better than a firesale as far as other landowners are concerned.
And if I was the receiver I would be talking to Landcorp now – if not about ownership then certainly about management – though I think receivers tend to get paid by the hour so the incentive to sort might not be that great. (apols Michael that might cost me a beer sometime)
Well that is sure a dopey idea, but it does give us a clue as to where the bulk of Crafar’s debt might lie. Comrade Jim’s beloved peoples bank? And who says Landcorp is “capable” have a look at their balance sheet!! It just about makes the Crafar’s look solvent. But of course, Landcorp is owned be the taxpayer, as such, “solvency” is simply not in their vocabulary.
Trevor, when did New Zealand become North Korea? Federated Farmers has no truck with poor animal welfare/environmental management but until receivership, there was nothing anyone could do (aside from the regulatory processes in train). Unless you are saying that private title isn’t worth anything and that would seriously concern my organisation and most New Zealanders. Mr Hickey’s demand to ‘shut down the Crafar’s’ is a recipe for dictatorship. He is saying that if you don’t like a business or the people running that business then ‘government should shut it down’. What next, suspension of Habeas Corpus? As for Landcorp, you, as a former Minister, ought to know that receivership is a statutory process. If the 20 farms in receivership fit with Landcorp’s commercial strategy then the ball lies in its court.