Kiwi genetics at stake in China deal

KIWI HELP: More than 100,000 Chinese sheep will get a genetic leg-up from New Zealand as part of an agreement between Landcorp and Shanghai Pengxin.
KIWI HELP: More than 100,000 Chinese sheep will get a genetic leg-up from New Zealand as part of an agreement between Landcorp and Shanghai Pengxin.

More than 100,000 Chinese sheep will get a genetic leg-up from New Zealand as part of an agreement between Landcorp and Shanghai Pengxin.

The conglomerate faces a last legal hurdle in its bid for the 16 North Island dairy properties that make up Crafar Farms, when the Wellington High Court tomorrow considers a second appeal from rival bidders led by Sir Michael Fay. Shanghai Pengxin's bid has had Overseas Investment Office approval twice, but a court overturned the first acceptance in favour of the Fay group.

Landcorp has signed on to a joint venture to manage the farms, but must wait for the legal hurdles to be cleared.

Chief executive Chris Kelly said the deal would allow it to enter China, where Shanghai Pengxin had access to 10,000 hectares of land for agricultural development.

"We're going to look at exporting genetic material. Shanghai Pengxin has about 100,000 sheep in China, and is looking to advance flock progress. It recognises that New Zealand has some superior genetics, and is keen to talk to us about spreading those genes through its flock."

He said the quality of China's sheep genetics was way behind New Zealand. "It's not always easy to distinguish between a sheep and a goat in China. What they're looking to do is have access to a secure supply of quality meat, which is what we produce, and they can't."

A scanner could be set up in China to measure meat yield, and genetic material could be sold outright, or through a royalty system. "We will make damn sure we protect revenue flows for New Zealand," Kelly said.

But Green Party co-leader Russel Norman said the country risked losing control of the value behind years of selective breeding. "Once we do that, there's no way to stop anyone in China continuing on with those genetic lines. That will be the objective in fact."

Kelly said the deal still hinged on the outcome of tomorrow's court case, which might not be known for some time. "My guess is that if they're unsuccessful, the Chinese will probably think again about whether they want to involve a New Zealand company in China," he said.

State-Owned Enterprises Minister Tony Ryall, who is responsible for Landcorp, said he was confident the board was acting in the company's best interests.

Meanwhile, the Sunday Star-Times can reveal that minutes of a board meeting last September show that under the "no surprises" policy, Landcorp told the Government a sale was unlikely before the election.

They show Kelly told the board Shanghai Pengxin was seeking approval, and that Ryall had been advised of Landcorp's interest in the bid, and in future collaboration.

"It was noted that the success or failure of the application would ultimately be a decision for the Government."

The Government has always insisted the investment office's decision was independent, and that there was no political interference.

Kelly said the board did not meet with Ryall, but information was passed through officials. Landcorp had been asked to provide a lot of information, suggesting a decision would take a long time. "It could have been that if the elections did not go National's way, maybe a Labour Government would have had a different view."

But he said Ryall had been kept at "arm's length", other than being updated on media coverage.

Ryall confirmed he was advised of Landcorp's possible collaboration with Shanghai Pengxin. "I cannot comment on their expectation of timing of any approval because I am not involved in that process."

Sunday Star Times