Land and cash lure farmers over Ditch

Some dairy farmers are selling up and heading for Australia to take advantage of cheaper land and stronger cashflows.

While no hard figures were available yesterday, Dairy Farmers of New Zealand vice-chairman Lachlan McKenzie believed losses were limited, with no "mass exodus".

But it was a worrying sign if any "young, vibrant people who are obviously going to be the future of our industry" left.

"If we get a percentage of them that are attracted to better prospects in Australia that is of concern to us."

McKenzie said in Australia recently he had met dairy farmers who had migrated in the past two years.

They "certainly believe they've done a lot better over there than if they'd stayed on and tried to do a similar thing in New Zealand".

Waikato Federated Farmers president Peter Buckley said he had heard of about six or seven dairy farmers in his region recently who were looking to sell and were considering going to Australia, mostly Victoria.

About a dozen from the Waikato and nearby regions were thought to have migrated in the past year.

Buckley said the lure of Australia was the cheaper land, equivalent costs "and they've got money left over for themselves to do something".

One farmer calculated if he sold up, cashed in Fonterra shares, shifted to Australia and put in a sharemilker on his land, he would have roughly A$2 million ($2.4 million) to invest. "Here it's all tied up in his farm."

Better immediate cashflows were tempting in Australia despite the fact land sales there attracted capital gains tax when farmers left the industry.

Buckley said the rising Fonterra share price, expected to head towards $7 mid-year, was also a factor tempting some to cash up.

NZ Dairy Farmers chairman Frank Brenmuhl said of the better cashflows in Australia: "They're getting paid more [for milk] over there without a requirement for capital input into the dairy company they supply."

But as land values were not rising as fast in Australia "it becomes a choice in terms of whether you want capital gain here or greater cashflow ... it really depends on where they are in their investment cycle and the stage that they're at with farming".

Neil McLean, of Waikato's Agricultural Business Consultants, said dairy farmers needed to do their sums before jumping the Ditch and think about long-term wealth creation from their New Zealand farms, including land price appreciation. "I think it's running ahead of Australia."

McLean, a Fonterra Shareholders Council member, said a recent study suggested Tasmanian dairy farmers got higher gross income but had higher costs.

Operating expenses on the farms were about 75 per cent of gross income in Tasmania, as against 55 to 60 per cent in New Zealand.

One Waikato farmer who has decided to stay put after looking at Victoria and elsewhere said: "You've got to look underneath the table cloth."

He became concerned at Australia's drier summers and potential irrigation problems.

New Zealand Federated Farmers president Charlie Pedersen said he had recently met four Australian farmers who had migrated here because of "more reliable climate".

Australians could expect a drought every five years of a severity a New Zealander would see perhaps once in a lifetime.

It meant Australian bankers required farmers to have significantly higher equity-to-debt ratios.

Drought is also said to push up the price of grain feeds used in Australia.