Ingredients, added value and lower costs lift profits
Fonterra earnings and profit are well up for the first half of this financial year.
New Zealanders should be encouraged to invest in Kiwi farming; its relatively easy and it can be done with a few thousand dollars; so it's an investment for everyone from farm hands to farm owners and even townies.
Certain shares on the New Zealand Stock Exchange are referred to as 'agrishares'; these are companies that earn most if not all their income from farming in this country. It is not hard to see the public distaste for banks these days and there are major issues with trust and banking processes; the fact that the bulk of the banks' profits go offshore adds to an already heated topic. Interest rates are so low, great for mortgage holders, bad for cash deposits.
Therefore agrishares should be seriously looked at as an investment, with most paying a decent dividend in the process, creating another way to keep money in New Zealand. If New Zealanders are so worried about our banking profits going offshore then maybe we should look at other asset classes than property or just cash in bank.
The changing face of farm ownership takes in a wide sector of business areas these days. Corporate farming is growing which brings farmers in contact with the urban world, an uneasy relationship at best in the past. However corporate farming allows people from city areas to become involved in farming through investment and this brings economic benefits to both sides.
Agrishare companies cover most forms of farming so the money generated will go back into farming and especially vital areas such as research and development (R&D). While companies will always look for new ways of doing things it is important not to forget our own businesses and what we're doing, not always looking at someone else or looking to do things the same as someone else. These are the influences that drive change and innovation.
Innovation in farming technology drives investment and trade; looking at such growth in this area it is exciting to see these changes. When locals invest in agrishares the important money needed for R&D comes from within the country. R&D does require extra government funding and this is often sought via the international financial markets which of course adds to our already expanding international debt.
Another good example of domestic investment in New Zealand farming is the proposed Trading Amongst Farmers (TAF) scheme. This will allow local investors to have the opportunity to buy investment units in certain parts of Fonterra. It works well here as Fonterra holds the clear majority of the company and a new financial product is created whereby individual Kiwi investors are able to own a part of the process, investing their money back into New Zealand by investing in and supporting New Zealand farming. This is what creates jobs in New Zealand and will keep jobs in New Zealand.
In addition to this there are also exchange traded funds (ETFs). These are investment funds that hold a number of shares. An ETF can be put together for a specific industry i.e. an ETF that has all agrishares in it. From there the individual investor can buy units in the fund similar to buying units in the proposed TAF scheme. Shares within these funds can be tailored to the individual's needs. Your financial advisor will have information on these.
Agrishares are a little simpler; they can be purchased through any sharebroker but as always you should seek the guidance of a trusted financial advisor before entering into any financial market investment.
• Francis Wolfgram has 15 years experience in financial markets, primarily in London and Sydney.
