Minister of Finance Bill English has doubts about the long-term future of Shanghai Pengxin.
"My own personal view is in the long run - this applies to Kiwi as well as offshore - corporate farming entities don't survive.
"And I know that sort of runs against the trend but I've seen the cycle two or three times," said English.
The Chinese company is attempting to get approval from the Overseas Investment Office to purchase the 13,800 hectare Lochinver Station in the central North Island.
Farming is a "low return on assets" business, English said to a group of businesspeople during a visit to Hamilton last week.
He said not including capital gain, returns are around 1 or 2 per cent.
"Prices peak. When they start falling the syndicates and the shareholders want to sell out. And if I was them I would too, because if you don't live it and love it you'll end up asset rich and cash poor. "We've seen Tasman come and go, New Zealand Dairy Farms come and go, the Hubbard empire come and go, Solid Energy's empire has just been sold off without anyone noticing but the locals in the last few months. These guys [Pengxin], as much as they might not be saying it, they'll come and go. The owner-operator works. The Waikato's testament to it."
Federated Farmers national president Dr William Rolleston said "I think that he's probably got a point."
He said family farmers can "trim the fat" in hard times.
Rolleston said many family farms are intergenerational, but corporate farms usually aren't.
However, he said Pengxin could be an exception.
"You can't be completely complacent about it."
Labour leader David Cunliffe said the prospect of Pengxin liquidating its assets wasn't a sufficient excuse for the government, considering it had approved land sales of more than a million hectares to overseas buyers.
"Second issue is it's not a very good way to treat international investors to say ‘You're welcome here because we know you're going to go bust'."
He said the balance in the industry is shifting towards corporate farming.
Cunliffe said a contributing issue could be the lack of capital gains tax, where large-scale farmers are able to buy new farms and offset the interest costs against cash they would otherwise have to declare. "What that means is that people are farming essentially for capital gain instead of profit."
Rabobank's director of dairy research Hayley Moynihan said she couldn't comment on company-specific issues, but she didn't expect corporate farming to disappear.
She said there were large farming companies that were around today and have been around for several years.
"Certainly the family-owned businesses have been the core of New Zealand's farming success, but there are a variety of different models that are now becoming established."
- Waikato Times