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Jamie Mackay: The Country host on dairy prices dropping in fourth consecutive auction · Best of Business

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  Speaker 1: You're listening to a podcast from News Talk zed B.
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  Speaker 1: The Rural Report with MSD Animal Health, Home of selve X,
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  Speaker 1: and plus b Ends It's only Salmonella Vaccine.
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  Speaker 2: Jamie McKay, host of the Countries of the Fello Jamie.
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  Speaker 3: Hello, Either, I don't think you'd catch nicol or welli's balling,
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  Speaker 3: would you?
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  Speaker 4: M Nah?
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  Speaker 2: I don't think so. No, I think, And you've just
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  Speaker 2: struck on something there that we've been discussing in the shows.
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  Speaker 2: Takes a certain woman to cry, I think. But listen,
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  Speaker 2: tell me what's your understanding of why Land Corp. Gets
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  Speaker 2: into funny things like milking deer. Are there rules that
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  Speaker 2: force them to do that or do they just do
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  Speaker 2: it because I think it's a fun idea.
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  Speaker 3: No, I think they've kind of got a mandate And
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  Speaker 3: I don't know if this is a written mandate or
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  Speaker 3: in legislation to be a bit of a guinea pig
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  Speaker 3: for farming for the nation. And they are doing some
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  Speaker 3: good stuff, they're probably doing some stuff I disagree with.
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  Speaker 3: And I think my good friend Grant McCallum, Laura told
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  Speaker 3: me he's suggesting they should be having a profit at
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  Speaker 3: two hundred million, which is what ten percent of the
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  Speaker 3: a ten percent return on their asset value of I
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  Speaker 3: think nearly two billion. I think Grant might be being
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  Speaker 3: a wee bit tough on them there, simply because there
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  Speaker 3: would be a number of farming benures. In fact, not
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  Speaker 3: many would make a ten percent return on capital invested.
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  Speaker 2: What is a standard return, let's say on assets? Right,
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  Speaker 2: a return on assets? What would be standard?
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  Speaker 4: Oh?
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  Speaker 3: Look, I mean she's five or six percent. I would
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  Speaker 3: say if you could do that in farming, you would
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  Speaker 3: be doing pretty well. I mean you might get that
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  Speaker 3: in a dairy farming operation. The kiwi fruit might be
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  Speaker 3: a bit higher, but sheep and beef traditionally have been
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  Speaker 3: lower than that, at like two or three percent.
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  Speaker 4: But Palmu or land Corp.
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  Speaker 3: I get confused, what they call themselves these days are
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  Speaker 3: way below that, and there is a question on whether
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  Speaker 3: they're relevant and whether they're a good use of our
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  Speaker 3: tax payer money.
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  Speaker 4: But there is an issue with selling them.
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  Speaker 3: Of course, if we did sell Parmu would effectively flood
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  Speaker 3: the landmarket and probably make farmers across the board properties less.
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  Speaker 4: But certainly at the moment.
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  Speaker 3: They would argue they're having a better a year this year,
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  Speaker 3: but I would question their farming profitability and weather during
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  Speaker 3: these tough times. And I just heard you talking about
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  Speaker 3: deficits and what have you. Whether the government needs to
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  Speaker 3: be in the business of farming, because let's face it,
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  Speaker 3: the government isn't as good at doing business as private enterprise.
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  Speaker 3: So ultimately, I don't think we should be in the
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  Speaker 3: business of land corpor palm. Who remember it was lands
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  Speaker 3: and surveys back in the days, and they used to
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  Speaker 3: settle young farmers on ballot blocks.
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  Speaker 4: Maybe they need to go back to something like that.
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  Speaker 3: I don't know, but even that heather is effectively a
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  Speaker 3: subsidy for the farmers who were settled.
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  Speaker 2: You worried about the dairy price.
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  Speaker 3: I've got to weave a skin in the game myself,
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  Speaker 3: And you know, like commodity prices are always cyclical.
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  Speaker 4: In ten dollars, where.
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  Speaker 3: We are at the moment and where we will finish
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  Speaker 3: up for this season when they finally announce it in September,
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  Speaker 3: it'll be ten dollars. It might even be a wee,
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  Speaker 3: but more is a really good price. And I just
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  Speaker 3: think you can't defy gravity forever. I'm involved in a
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  Speaker 3: dairy farming partnership and I know that we fixed a
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  Speaker 3: thirty percent of our milk at nine point fifty and
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  Speaker 3: I was happy with that. So I'm I'm a big fan,
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  Speaker 3: Heather of taking the taking the things you can't control
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  Speaker 3: into your own control eye fixing milk price and fixing
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  Speaker 3: interest rates, because it cuts out a couple of the
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  Speaker 3: things you can't control, because you can't control international commodity
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  Speaker 3: prices and you can't control the weather when you're farming.
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  Speaker 3: So look, I did hear expert comments commentary yesterday from
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  Speaker 3: someone on ENZX saying, no, this is just a bit
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  Speaker 3: of a blippe's this time of the year when there's
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  Speaker 3: a lot of milk coming on in the Northern Hemisphere
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  Speaker 3: in there and Fonterra. I spoke to Anna Pellaree, the
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  Speaker 3: chief operating officer on yesterday's show, and she said to me, no,
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  Speaker 3: we're still good with ten bucks, so they probably know
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  Speaker 3: more about it than me.
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  Speaker 4: But you know, a bird in the hands worth two
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  Speaker 4: in the bush. Jamie, good to talk to you.
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  Speaker 2: Look after yourself, Jamie McKay, host of the Country. Look,
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  Speaker 2: I'll just talk you through return on assets, right so
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  Speaker 2: at the moment, the return on asset that you would
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  Speaker 2: get that this is basically what we were just talking about, Jamie.
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  Speaker 2: And know how much money, how much money these guys make,
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  Speaker 2: given that they've got twelve assets of two billion dollars
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  Speaker 2: as Land corp Standard return in the good years, a
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  Speaker 2: return on assets for a dairy farm would be six
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  Speaker 2: to eight percent. Some say they can get it up
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  Speaker 2: to twelve percent, but let's just let's be conservative and
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  Speaker 2: be fair. So you're looking at six to eight percent,
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  Speaker 2: and this is in the good years, and we are
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  Speaker 2: in the good years right now, right, and sheep and
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  Speaker 2: beef farms you should be in the good years doing
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  Speaker 2: about five percent. So dairy and remember land Corp's doing
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  Speaker 2: all this right So, sheep and beef good year you
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  Speaker 2: should be getting about five percent, Dairy you should be
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  Speaker 2: getting about eight percent. Corp is getting about three percent.
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  Speaker 2: So they are quite obviously underperforming and can do better.
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  Speaker 2: How much better, I don't know. Probably don't hold out
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  Speaker 2: hope for the slot.
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