Landcorp confirms it will scale back dairy conversion at Wairakei Estate
By Tina Morrison
March 7 (BusinessDesk) - Landcorp Farming, the state-owned farmer, confirmed it will scale back the conversion of former forestry land to dairy farming on leased land at the Wairakei Estate north of Taupo following a slump in milk prices and concern about the environmental impact.
New Zealand's largest corporate farmer "will significantly reduce dairy's footprint from the original plans and instead include alternative uses for the 14,500 hectares of former forestry land it leases from Wairakei Pastoral," the Wellington-based company said in a statement.
Landcorp has a 40-year lease to develop and farm the former forestry land, and since 2004 has developed 13 dairy farms with 17,000 cows over 6,400 hectares of the property. A new land-use model will see the eventual number of dairy farms and cows on the Wairakei Estate significantly reduced from the 39 originally planned, it said today.
"Under the new plan, the land leased from Wairakei Estate would be used for dairy (irrigated and dryland), dairy support, sheep milking and other potential uses being investigated," Landcorp said.
The land-use changes will lessen the impact on the environment and improve the profitability for Landcorp, it said. The company expects to spend between $25 million and $35 million less than originally planned on the development, improving returns, it said.
"This decision makes environmental and economic sense," said chief executive Steven Carden.
The change had the support of the land owners, Ross Green said on their behalf.
Landcorp expects to post a full-year net operating loss of between $8 million and $12 million in 2016, and forego paying a dividend to the Crown for a second year following a slump in milk prices.
An early economic assessment for the Wairakei Estate was based on milk prices of $7 per kilogram of milk solids. Since then, prices have slumped with Fonterra Cooperative Group, the country's dominant milk processor, forecasting a payout of $4.15/kgMS this season.