KEY POINTS:
A New Zealand firm is growing gold kiwifruit south of Rome, PGG Wrightson is setting up farms in Uruguay and Fonterra has a big dairy project planned for China.
Kiwi farming is embarking on a big OE and senior agriculture figures say the overseas investment wave is ready
to swell as available land here dwindles.
Opotiki Packing and Coolstorage set up its 8ha, Zespri-supplying kiwifruit operation in Italy six years ago.
The multi-million-dollar business is described by Tauranga sharebroker and company director Neil Craig as "certainly the largest in Italy" of its kind. Opotiki Packaging also has a 60ha Californian operation.
Last year, Craig's firm ABN Amro Craigs also played a role in PGG Wrightson's New Zealand Farming Systems Uruguay offer, which raised $105 million for beef and dairy farming in the South American country.
Federated Farmers president and dairy farmer Charlie Pedersen says the amount of farmable land in New Zealand is finite but there is plenty of land with good potential overseas.
"We've kind of had a flirtation with Australia for some time, we've had a flirtation with South America for some time and I think you'll only see that trend increase."
People were looking to see where New Zealand farming systems could be implemented profitably.
Increasing regulation to protect the environment in New Zealand could exacerbate the trend, he believes.
"Capital will go where it gets the best return and if the ability to get a return is getting tougher in New Zealand then the capital will shift somewhere else."
If profits are repatriated, the capital exodus needn't be such a bad thing for New Zealand, Pedersen says.
New Zealand Trade and Enterprise agritech and biotech sector manager Don MacLean agrees environmental pressures could help limit available land and drive farmers overseas, with urban sprawl and lifestyle blocks adding to the pressure.
"The only way New Zealand can actually expand its primary products base is for our farmers and/or corporates to actually move offshore."
Retaining control of New Zealand-developed knowledge is important, he adds.
Lincoln University professor of farm management and agribusiness Keith Woodford thinks the international farming wave is building as land prices plateau after a period of rapid growth for the agricultural sector.
"It's related to this idea that the Kiwis have ridden the wave here ... and so they really are looking for the next wave."
A shortage of capital in South America is an ongoing problem, says Woodford, as it's hard for people there to borrow money using land as security. "The combination of Kiwi capital with local knowledge is a pretty powerful one."
Craig Norgate, deputy chairman of PGG Wrightson, is another who believes in a swelling wave of overseas investment.
"I think it's 3 to 5 years of a slow picking up of pace and then I think, if it all goes well, we could see quite an explosion of offshore assets owned by New Zealanders in general really."
He sees potential for more beef and dairy investment in South America, but believes other countries will eventually attract Kiwi attention. "Australia and South America make the most sense - dairy, and to a lesser extent beef, at this point in time. But we'll see other countries."
A syndicate that he won't name has invested in a New Zealand-style dairy operation in the southern US.
"They're seen as rock stars up in the US in terms of what they're achieving."
However, Norgate believes Asia will be a lot harder to crack. Dairying, says the former Fonterra CEO, is where New Zealand's farming systems have a competitive advantage - in temperate climates.
That made China a more difficult task.
"It's not to say that we can't take pieces of our farming jigsaw and apply them up there. But it's a little harder for the average punter."
Lincoln's Woodford notes New Zealand's temperate farming systems make expansion into some areas - such as the United States and Europe - more difficult due to weather extremes.
PGG Wrighton's Uruguay project aims to take advantage of cheaper land and increased productivity through applying New Zealand techniques, and Norgate says there needs to be a similiar fundamantal economic reason for going overseas rather than just "diversification".
On who will fund the expansion, Norgate believes it will be a mixture of sources but notes the banking sector has been "happy to lend to good clients off the back of their New Zealand assets where the banks can see that what the clients want to invest money in makes sense".
Fonterra, which has production facilities around the world, has plans for its own dairy farm milking up to 3000 cows in China. It's due to start operating next year.
Part of the rationale is that Fonterra needs to be on the ground in China to best take advantage of the huge growth expected in dairy. It also wants a source of good quality raw milk for its big San Lu joint venture. But the farm could also be a forerunner to more such investments around the globe.
The co-op's general manager of sustainable milk growth, Mark Leslie, says Fonterra has been looking hard at where it can get milk to support its global consumer businesses.
Options other than Fonterra farms will naturally be considered, such as getting milk overseas from other Kiwi operators establishing production units.
But Leslie has no sense yet of just how much more milk Fonterra could source overseas.
The crystal-ball gazing into expanding overseas supply comes as Fonterra reviews its capital structure. Leslie says it makes sense to look at the two issues together given the capital that may be required for overseas expansion.
But Federated Farmers' Pedersen sounds a warning, saying if farming overseas was easy everyone would do it. "It's somewhat difficult doing things in other countries and it takes a while to learn that, and we haven't all got that much time."
Lincoln's Woodford says for every farmer who has invested in South America there's probably 40 who have decided it's too big a step.
Meanwhile, kiwifruit grower-controlled Zespri has been licensing people to grow Zespri gold in a range of other countries, such as Chile and Italy.
About 1300ha producing some 3 million trays a year have been established overseas, with plans for another 200ha. It's hoped that by 2015 this land will produce about 22 million trays, roughly matching the anticipated domestic output then.
The objective was to supply key customers in Europe and Asia throughout the year to stop them being poached by competitors, said Ian Boyd, general manager of Zespri global supply.
PGG Wrightson's Norgate says Zespri's development points to the possibility of other New Zealand horticultural operations overseas.
New Zealand Trade and Enterprise's MacLean says there have been inquiries to his organisation from apple, flower and vegetable growers about expanding overseas, as others look to establish complementary operations so they can supply clients all-year round.
He won't give specifics but says millions have been spent by various organisations going overseas.
However, Craig doesn't expect there'll be a surge of foreign investment by Kiwi horticulturalists - rather there'll be "opportunist" moves.
"I can't see where there's a strategic edge like in dairy farming in Uruguay whereby there was a clear opportunity.
"I can't see anywhere in horticulture that arbitrage is great enough for the risk involved."
Craig believes dairy farming is probably the one pastoral farming area where New Zealand has a true edge that can be exploited overseas. And he believes people trying to milk offshore opportunities in dairy need to be of the size of the PGG Wrightson deal to help them overcome the disadvantages of being far from home.
