Milking greener pastures – Kiwi dairy Investments in LatAm

by Dave

The Amuls of the world should follow.

In barely three years, New Zealand Farming Systems Uruguay, Wrightson’s stockmarket-listed investment vehicle, has acquired 36,500 hectares of land and leases a further 3500ha. It has spent heavily on new pasture grasses, irrigation, roads, fencing, reticulated water supply to each paddock, milk sheds, staff accommodation, training and the other infrastructure needed to bring New Zealand-style pastoral dairying farming to the country.

It reckons it is already the largest dairy farmer in South America, and by the second quarter of next year, it plans to be milking 23,000 cows. Competition has forced up land prices. The cost of buying and converting land to dairying is nearly double that of the first purchases. But a cost of, say $10,500 per hectare, is less than 25% of New Zealand prices.

Wrightson is hopeful prices will stabilise at less than 50% of farm income, say US17-18c on a milk price of US35c.

Wrightson has already spread its climate risk by buying in three regions of Uruguay.
It’s now looking across the border in southern Brazil where land is cheaper and more plentiful. Kiwis are also investing elsewhere in Brazil but the adaptation challenges are greater as they head north.

You can find similar stories of gutsy investments by Kiwi farmers in Chile. One day that will be likely true of Argentina. It has plenty of land and agricultural infrastructure to support a big increase in dairying.

Even an established dairying region such as Goias state, southwest of Brasilia, is much hotter and drier than New Zealand. Land costs are roughly one-eighth but heavy investment in irrigation is required. Nonetheless, one Kiwi investment group that started up in the area last year expects to be cashflow positive in 2009 and to have recouped its investment by 2014.

Northeast of Brasilia, the high plains of Bahia state present bigger risks but potentially bigger rewards. Virgin land cleared, worked and ready to plant costs $900 per hectare, a local farm consultancy says, less than one-fiftieth of the cost here.

Technorati Tags: , , , , ,