Farmers cautiously optimistic about Silver Fern Farms buyout
There are concerns Chinese investment in Silver Fern Farms won't trickle down to the farmers who supply the co-op with its products.
Chinese company Shanghai Maling on Tuesday got approval from Overseas Investment Office to buy half of the meat exporter, setting up a new co-op in the process.
Waikato University agribusiness expert Jacqueline Rowarth says farmers will be pleased with the benefits the deal will bring.
"There's going to be access to high-end markets in China that we wouldn't have had otherwise," she told Paul Henry on Wednesday.
The new co-op will keep its packaging and processing jobs in New Zealand, and adhere to New Zealand standards of food safety, animal welfare, environmental regulations and work conditions.
Prof Rowarth says farmers' enthusiasm for the deal will remain tempered however until it's clear they'll reap some of the financial rewards.
"The slight concern is whether this all comes true, and whether the value of that premium outlet actually filters back... to the shareholders themselves, because we have the slightly less than dominant half," she says.
"The parent company could still start talking about where the value goes, and whether the dividend reaches the farmer."
She points to Synlait's recent payout as evidence farmers might not benefit even if the company does better. Synlait is 39 percent owned by Bright Food, Shanghai Maling's parent company.
"Bright is one of the investors in Synlait, and Synlait has just doubled its profitâ€¦ but Synlait is not a cooperative, and the milk price paid to farmers who supply Synlait was $3.91, which was slightly above Fonterra's - so the value there hasn't returned to the New Zealand farmer."
Farmers are generally optimistic at the moment that dairy prices will continue to rise. They've gone up at the last four GlobalDairyTrade auctions.
"If farmers aren't optimistic, eternally optimistic, they're generally not in farming," says Prof Rowarth.