Pastoral Dairy Investments

[Aaron]

I read in the herald this morning about this investment fund and downloaded the prospectus when I got into work but couldn't be bothered wading through the 88 pages.

Can anyone put the kibosh on this opportunity before I read all about it. Normally I don't like investment funds where there is a middle man clipping the ticket all the time.

Could be an opportunity for all those Kiwis unhappy about chinese buying NZ farms.

Not actually an NZX company yet.

[CJ]

Basically you will pay fees to the company which will pay fees to the manager who will pay fees to the sharemilker. I think they use MyFarms as their manager who will probably give the best farms they identify to the the Germans or the NZ Superfun (I think they are their managers) so you wont get the cream of the crop.

It will have many people clipping the ticket much like some of the syndicated property investments.

My comments are based on others in the NBR website so should be taken with more than a grain of salt.

[macduffy]

In the past I've bemoaned the lack of opportunities for retail investors to be involved with NZ farming but have now accepted that, with the possible exception of particularly large scale operations, farming just doesn't lend itself to NZX - type listed investment. As well as the ticket clipping described by CJ, there are the listing fees, register/ transfer costs, statutory meeting costs, directors/secretary fees, registered office costs etc. And then there's the "Head Offfice" empire building risk if Marketing, PR, PA's etc are deemed to be a necessary part of promoting the fund or company.

So I haven't read the prospectus and won't be investing.

[blockhead]

And it is relying on capital growth to get its returns to a reasonable level, I wouldn't mind betting dairy farms are just off the top of the cycle at the moment so growth there might be an optimistic prospect.

[Newman]

I read in the herald this morning about this investment fund and downloaded the prospectus when I got into work but couldn't be bothered wading through the 88 pages.

Can anyone put the kibosh on this opportunity before I read all about it. Normally I don't like investment funds where there is a middle man clipping the ticket all the time.

Could be an opportunity for all those Kiwis unhappy about chinese buying NZ farms.

Not actually an NZX company yet.

For those who do not have experience in dairy farm investment it would be good to gain the experience by put money into Pastoral Dairy Investment. A few years later they would realise how foolish they are now to accuse Chinese buying farmland. Farm syndicates managed by Roger Dickie would tell you the reality of investing in dairy. You can get their financial reports form government’s Companies office. If you want to go a step further, examine the financial results of Open Country Dairy and you would realise how hard the milk-processing business is. If dairy is such a wonderful investment, as many idiots believed when they blindly oppose Chinese to purchase farms, Australian banks would buy all farmland in NZ and stop lending to other sectors. Bankers are smarter than most people think they are!

[Major von Tempsky]

Newman, if you are correct then I look forward to the Chinese investor, who is one of the richest in China and didn't get there accidentally, pulling out of the Crafar deal :-)
And Sir Michael Fay....

[Newman]

Newman, if you are correct then I look forward to the Chinese investor, who is one of the richest in China and didn't get there accidentally, pulling out of the Crafar deal :-)
And Sir Michael Fay....

You would make money from dairy if your cost of funding is 2% per year and you have supermarket business in China, or you got land free from your father.

Do you believe Fay would buy land and hold it long? If he got Crafar at $170m he would sell it to Chinese for $210m next day.

I would encourage you to invest in Pastoral Dairy to make a contribution to the financial success of the middle men involved. Time would tell who is right.

[CJ]

The difference is probably that the Chinese have excess cash looking for a long term home (just look at the amount they have in depreciating US treasury's to see that any investment will do) compared to Kiwis who gear up paying interest rates over 7%.

Forest/ farming etc are long games so are perfect for the Chinese and the big pension funds like Harvard, not listed investments.

[Billy Boy]

I agree with CJ & Newman
Dairy Farming is for the experienced, and those (on the job) learning the trade. It is a science.
I would feel very uncomfortable with a number of "Queenstreet suits" clipping the
ticket and highlighting their disclaimers.
BB

[troyvdh]

Ive always wondered what happened ...did those Mr Dickie investments actually deliver...gee the ads appeared in the listener etc......being lazy here what would have happened if one had put say $10000 in 10 years ago......
what i do find quite sad is that on the face of it investments touted like this sound very logical and prudent ,,,you know given all the hoopla around dairying.....the average bloke...say nearing retirement feeling fairly chuffed/proud at the amount of money accummulated over a life time of working...makes a decision.... in say a day or to (compared to hours spent doing overtime)...fronts up to a fancy bloke/building with glossy brochures...is treated as a very important person...I could go on....I still remember going along to Money managers in the mid/early 90's and being told to ditch all my rentals and buy "unit trusts"..... little pompous prick he was...

have just gone to the Dickie website...try as i may I cannot find past performance information....

[Aaron]

5% of Milk Production for farm supervision
.85% of capital invested corporate cost
1.5% Farm purchase fee (could be a conflict of interest if buying MyFarm farms) Also German company has first dibs on farms to be bought before PDI
12.5% of capital gains on sale of farms (A bit confused on this as it depends on returns of 8% or more)
Investment is through limited partnerships possibly with other co-investors.
I don't know about liquidity on the unlisted site but I guess this would be a long term investment anyway
A 5.6% dividend yield based on a payout of $6.50Kgms and 420Kgms per cow. Although their illustrative example seems to have missed electricity costs which would only reduce it to 5.3% (assuming $20,000 electricity) A drop in payout would be bad news as operating costs are not likely to decrease with the payout.
With a 10% expected return you will be relying on a 5% capital gain each year. Apparently MAF doesn’t expect the payout to go below $6.50 for the next 3-4 years in fact it forecasts a 6% increase in 2013 8% 2014 10% 2015 (such nice even growth makes you realise how unreliable forecasts can be)
Rural Equities Limited based on the 2011 financial statements has a 1.8% (5.5/310)dividend from a record year for dairy and sheep and beef(NTA $3.95 with a current price of $3.10 though). Not sure about management costs, not a lot of detail on this from a quick glance over the 2011 financial statements.
Still bearish and in the deflationist camp in the near term. Looks like the western world will follow Japan but continued money supply increase must eventually cause problems. Would make rural land look good if hyper inflation took over. I guess hyper inflation also sorts out the global debt problem real quick (shame about the savers though, of which I am one currently) that is provided interest rates can continue to be suppressed by central banks.
Procrastinating at this stage not sure if REL or PDI is better or if shareholders end up losers if we don’t get inflation.

[elZorro]

Looking at efficiency, forestry should be more profitable than dairy farming, as there is only one 2% conversion efficiency stage, not two. We purchased Arbour Forestry units for our children, these will be ready for them when they're about 30-35. But not with $100,000 return, more like $40,000 at this stage, although we only put in $9000 or so, each. We have also purchased an older block on the secondary market, this might be milled in the next few years, but a cyclone clobbered 8% of the trees a few years back, no insurance. Recently Arbour management bought the only surviving sawmill in the area, ready for all these trees. Now that's what I call clipping the ticket. I just hope they'll be polite about it.

[elZorro]

Hi Snapiti, in our case I think that the land can be replanted in trees, depending on what the shareholders decide to do. Arbour always looked to be a bit more friendly than most, I visited the office to check.

[Billy Boy]

I seam to recall that MAF was floating the idea that
once land was used for trees then that became the zoning.
Trees forever !!!
I'm not sure if this idea went passed the proposal stage's or not.
It came under the "rural zoning scheme" (I think).
Once a sheep farm, then always a sheep farm. Dairy, forestry. etc...
I recall Fed Farmers kicking up a stink and making comments like
"Are Reg Council burocrates going to tell farmers what they must farm ??"
I have been away for a bit so not right up with play as yet.
Anybody ??
BB