Southern Cross is breeding a new line of sheep for milking in New Zealand. Photo / Supplied
Chinese investment is supporting important innovation in agriculture in New Zealand. It is galvanising action in areas of primary industry that have had potential for years, but have been constrained by lack of investment.
The capital moving here typically receives returns only in the long term and carries a relatively high degree of risk.
Yes, these Chinese investors may purchase New Zealand land, but the opportunities being opened are significant. Jobs, businesses and new export sectors are being created by these investors who are prepared to wait patiently for a return.
Moreover, many innovative investments from Chinese organisations involve New Zealand expertise and part-ownership. Both sides are invested in successful outcomes.
Take for example China's Super Organic Dairy Company, led by Natalie Dang. In 2015 Super Organic Dairy, wholly owned by Shanghai investors, was carefully guided by our team at DLA Piper through an Overseas Investment Office (OIO) application to purchase the freehold interests of the 770-hectare Waikino Station (Kuratau) on the shores of Lake Taupo.
This investment involved a joint venture company, Southern Cross Dairy Sheep Technology, 30 per cent owned by two key New Zealand experts in dairy sheep genetics and 70 per cent by Super Organic.
Southern Cross was set up to hold the intellectual property, know-how and assets to breed a new line of sheep in New Zealand - sheep for milking - and ensure this high-demand industry is firmly established here.
Southern Cross is now operating on the new Waikino Station, which is presently in the middle of transformation from a sheep and cattle station to a sheep dairy farm.
Both Southern Cross and Super Organic Dairy will be at the forefront of dairying of sheep in New Zealand. Super Organic Dairy will entrench a viable genetic improvement programme into a fully functioning dairy sheep operation using special dairy sheep breeds imported from Europe and the Middle East.
This will be used to strengthen New Zealand's emerging dairy sheep industry, which, incidentally, has a smaller environmental footprint than its dairy cow cousins.
Further, sheep milk is experiencing more demand than it can supply.
Natalie Dang says the experience has been a learning process so far, and a new and worthwhile industry is being gradually established, generating Kiwi jobs.
Demand from Asia is particularly high because many in the region cannot tolerate cow's milk. Ewe's milk is also in demand throughout Europe and the Middle East.
These are potentially very large and unsatisfied global export markets, waiting to receive high quality, high-value milk product from free range, grass-fed flocks.
It is anticipated Waikino Station will help pave the way for rapid conversions into sheep dairy by farmers throughout the country because it will be a centre for genetics in this new industry.
Previously, the quality of dairy sheep stock in New Zealand has been an impediment to opening up farming in this niche, as has a proven template for highly productive sheep dairying farms.
Waikino initially used 1700 imported East Friesian embryos, brought into New Zealand in the late 1990s by visionary geneticist and dairy sheep pioneer Dr Jock Allison.
These embryos represent a high-quality, highly productive breed that milks very well. They were implanted into other breeds, and lambs were born in the spring of 2015.
They were delivered to Waikino Station in January 2016 and have formed the basis of a superior flock for further breeding.
Two other breeds of milking sheep are also being used - Lacaune (from France) and Awassi (Middle East). It is anticipated Waikino will cross-breed to establish a distinct New Zealand breed and genetic line.
Before its land purchase, Super Organic Dairy already had an established market for sheep milk products. Through Shanghai Blue River Food, it had been marketing sheep milk product in China for several years, sourced from Southland.
Greater demand and a change of ownership in Southland suppliers meant Super Organic Dairy looked for an alternative. It was introduced to Waituhi Kuratau Trust, which was farming under the name of Maui Milk Limited, and struggling to make secure inroads into export to Asia. The two joined forces in another joint venture arrangement.
Notwithstanding the joint ventures in place, the risks are high and as we've pointed out, no returns are expected for years. Instead, the Chinese owners are ploughing money into the operations at Waikino.
Specially designed milking parlours are being constructed. These are aesthetically pleasing and double as demonstration sheds, and as a promotional tool. Feed barns, feed silos and bunkers will be added, improved feed crops sown, and fertiliser applied.
This development has already started to create jobs and opportunities for businesses in the region,
When fully operational, more than 4000 sheep will be milked, and the enterprise is seeking yields of 400-600 litres per ewe - similar to yields of specialised sheep internationally.
Perhaps most important of all, this is an outstanding opportunity for other New Zealand farms to climb aboard with new products and new global markets. Like other Chinese investors in the agricultural sector (such as Yili/Oceana Dairy and Yashili), Super Organic Dairy is contributing to the success of a developing sector for New Zealanders.
It has wisely sought and listened to New Zealand-based advice from DLA Piper and others and is attuning to the differences in the way people do business here.
The challenges in relation to the OIO process diminish for companies which have a strong business case, and the prospect of great exports and the delivery of jobs. They diminish even more when appropriate advice on the OIO is sought.
?Martin Thomson and Terence Ng are Partners at DLA Piper in Auckland