Pamu could help farmers buy their first farms

Under the remit, Pamu, or Landcorp Farming, will provide equity funding and go into partnership with "selected and qualified young farmers." Photo / 123RF

New Zealand First wants to use state-owned Pamu Farms' $2.2 billion balance sheet to develop funding pathways for young farmers to help them buy their first farm.

List MP Mark Patterson, the party's spokesperson for agriculture, said farm ownership in NZ has become increasingly difficult for young people, who historically could have worked their way into a farm on the back of hard work.

The sheep and beef farmer - who will represent the party in Otago's newly formed Taieri electorate for the September election - said there is no longer an "obvious pathway" into farming, with "blockages including land price inflation and considerably tightened lending requirements."

Patterson submitted the 'NZ First farms' remit at this weekend's party conference, receiving a positive endorsement from the 150 party delegates in attendance.

Under the remit, Pamu, or Landcorp Farming, will provide equity funding and go into partnership with "selected and qualified young farmers."

He said the intention isn't to sell Landcorp farms, "we just want to use their balance sheet to leverage lending - with Landcorp taking an equity stake in the first farm or orchard."

This could also help the farmer into share milking or share farming arrangements, and assist with building up working capital. "It's often the hardest to get that first $100,000, so it's not just buying farms, it's supporting that ability to get the business up and running also."

He told BusinessDesk that he wanted to get the idea "across the line" with the party first before approaching Landcorp.

Landcorp, which has a portfolio of 115 owned or leased dairy, sheep, beef, sheep and wood farms across about 376,000 hectares, has forecast higher than expected earnings to June 2020 on the strength of a positive season for milk, sheep and beef. It expects full year earnings before interest, tax, depreciation and revaluations at about $78 million.

Genuine concern

"But I am genuinely concerned that there are no real avenues to get into ownership, so we need initiatives to help genuine farmers buy into an industry which is already tough, but has underpinned - and will continue to underpin - the country's prosperity," Patterson said.

Data from the Real Estate Institute of NZ show that, for the three months through May, sales of rural properties had tailed off by almost a third year-on-year, while the median price for all farms sold had climbed by 4.4 percent to $23,221 per hectare.

The top end of that was for horticultural farms, which are generally smaller, and had increased almost 10 percent to an average of $236,000 per hectare from $215,000 for the period. Dairy farms, by contrast, had fallen by almost a fifth to $24,400 per hectare, reflecting more constrained bank conditions and expectations of lower milk prices for the coming season.

Institute rural spokesperson Brian Peacocke, said while the covid response had been reflected in the declining sales numbers, these had also been impacted by "restricted lending" policy within the banking sector where obtaining finance for farm purchases is becoming an "increasing frustration for the farming sector."