Landcorp eyes lift in returns

Landcorp chief executive Steven Carden says it is increasingly shifting away from commodity supply to premium niche products.

"Essentially we want to capture the value in how we farm and what we produce and we're diversifying to make the best use of our capital, land and expertise," he told Rural News.

"This involves continually reshaping our business and investing in various parts of it, from current farms and operations through to new enterprises like the Spring Sheep milk joint venture.

"We regularly update our shareholding ministers on our strategy and plans."

His comments were in response to the Government saying the SOE will not get any new capital to spend on its farms — part of a more rigorous process for new investment.

Finance Minister Bill English told the DairyNZ Farmers Forum in Hamilton that Landcorp, a poor investment, was facing the same problem as other dairy farmers – low milk payout.

"It is dealing with a significant drop in earnings against a base of debt which will be a stretch to manage," English told 800 farmers.

"It's a low returning investment; we have a billion dollars tied up in that organisation and it pays taxpayers very little, in some years nothing, so it's a poor investment."

Landcorp is bracing for an $8-$12 million loss this year, largely reflecting recent downward revisions to forecast milk payments. Despite the loss the Government is committed to retaining Landcorp, part of its $270 billion balance sheet. 

English says in the past the Government was under-equipped to understand the risks, but now has a "corporate treasurer" set of disciplines across the whole balance sheet.

"We now have a much more testing process for new investment, so Landcorp, for instance, will not get new capital.

"They wouldn't be able to put a proposal to meet our hurdle rate... there aren't too many SOEs that can; it's all getting tighter.

"From here on Landcorp will be managed in normal farming style — what you are used to."