Landcorp-Shanghai Pengxin partnership of former Crafar farms lauded as a success
Landcorp's partnership to manage Shanghai Pengxin's 16 North Island farms is ending with both companies hailing the collaboration a huge success.
Shanghai Pengxin entered into the partnership with Landcorp, a state owned farming company, when it bought the farms previously owned by the Crafar family in the central and upper North Island in 2012.
The 50-50 joint venture had Landcorp acting as sharemilker and charged with developing and managing the farms.
The two companies celebrated the partnership at a recent ceremony held at one of those farms on the outskirts of Hamilton.
Landcorp chief executive Steve Carden said he had just started his role at Landcorp after leaving PGG Wrightson Seeds when the first board meeting for the joint venture took place.
Cultural issues had to be overcome and each party come to terms with a complex partnership agreement.
"And we were effectively trying to get going 13 run down and quite decrepit farms," he said.
"I'm not going to sugar coat this. I distinctively remember [business manager] Bruce Hunter at the very end of that meeting looking across the table at me as everyone was packing up to go and saying, 'I bet you wish you were back in the seed business now Mr Carden'."
He was right, he said.
Staff homes on the farm were in poor condition and some of the milking sheds were substandard. Milking took 13 hours to complete on some of the farms, Carden said.
The farms were now in a condition that New Zealanders could be proud of. About $22 million had been invested into the properties including new housing for staff, upgraded and properly lined effluent ponds and 300 kilometres of farm roading and fencing.
"All of this was occurring while farm staff were not only trying to manage these capital projects, but manage the farms themselves."
Shanghai Pengxin's New Zealand operating arm is listed in its website as Milk New Zealand. Shanghai Pengxin also own 55 per cent of Hunan Dakang.
Hunan Dakang's Theland Tahi Farm Group owns and operates the 16 farms in the Central North Island while Shanghai Pengxin's Purata Farms own and operate 13 dairy farms in Canterbury.
Landcorp's strategy in 2012 was to manage as many farms as it could around the country. That had changed and its strategy was to look beyond the farmgate and move into the value added space, Carden said.
"It's natural for us to step away from this partnership at the conclusion of the agreement and pursue our own strategy."
Hunter said the bulk of the $22m investment went into staff housing, where $4.5m was spent and $2m was spent upgrading effluent management on the farms. The farms had electrical issues and many of the houses would not have passed today's health and safety standards, Hunter said.
"They had to live in housing that was not suitable for human habitation."
Joint venture board chairman Rick Braddock said they had encountered some of the most challenging times in the dairy industry with payout volatility and drought.
"It's with great deal of pride and with gratitude to Landcorp that we have survived this difficult period, but flourished as the hard work of Tahi's team and the extensive capital expenditure programme has come to fruition."
The partnership had resulted in a greater cultural understanding between New Zealanders working on the Tahi farms and their Chinese partners with many of the farms hosting them as guests. Other New Zealanders could learn from their example, he said.
Braddock said milk products from the farms were being sold in 1000 supermarkets and were expected to ship 1900 containers of product this year. The joint venture was an example of how New Zealand and China could work co-operatively, he said.
The joint venture had achieved all of its goals. Staff were shifting to become Tahi employees and 80 per cent of the staff had stayed throughout the three years.
"We have made history to ensure the success of the first ever Chinese-New Zealand Government pastoral farming joint venture business," Braddock said.