Dairy cows for hire in new scheme

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As dairy cows become less affordable, Christchurch's PGG Wrightson is giving farmers a chance to lease livestock.

PGG Wrightson Finance has launched a new livestock lease plan allowing farmers to access the capital tied up in their herds.

PGG Wrightson finance general manager Peter Engel said New Zealand had 3.92 million cows, worth about $7.83b. In the last 12 months, the value of a single dairy cow has risen from $1250 to $2000, making the capital value of an average dairy herd worth around $700,000.

The option could be used by farmers wanting to convert to dairy and those wanting to buy more land, who needed to free up some capital, or sharemilkers looking to expand quickly. It could also attract equity partners who wanted to buy out other partners.

The plan is based on a five-year lease, at a cost of 2.7% per cow per month. The cows go back to PGG at the end of the lease. Farmers would own the progeny, letting them build their herds.

Engel believed there would be demand for the option from existing dairy farmers, despite extra money expected to be floating around after a record payout forecast for this year.

"Some of the more aggressive ones are pushing the limits and for the next step in terms of expansion they need to get equity out of their stock to buy the next block of land."

Banks might not lend the farmers as much as they need, but the leasing option would free up some capital, Engel said.

"It improves the look of their balance sheet."

A couple of companies in New Zealand offered livestock leasing, but nothing existed with the same terms, Engel said.

The plan was designed as an operating lease, enabling the full cost to be tax deductible.

Shares of the listed rural services company yesterday closed 11c down at 213c.

Federated Farmers' dairy section chairman Frank Brenmuhl said it was an innovative scheme, which was not a bad option for farmers to evaluate.