Landcorp conversion to plough on without irrigation

Chris Kelly

A giant dairy and pastoral farming conversion north of Taupo is still on track to begin dairy operations next season, despite a major setback over irrigation.

However, state-owned Landcorp - the country's biggest corporate farmer and Fonterra's second-largest shareholder - said lack of irrigation on the land would hit dairying productivity.

Last week, regional council Environment Waikato declined permission for Wairakei Pastoral to take up to 83,000cu m of water a day from the upper Waikato River to irrigate pasture converted from forestry land. Irrigation helps ensure good year-round grass growth.

The water request from Wairakei Pastoral - which involves some of Auckland's best-known and wealthiest businessmen - related to just over 1500ha. An appeal against the rejection of the applications had not been ruled out.

However, Landcorp chief executive Chris Kelly said the overall 25,000ha conversion project would carry on regardless of whether water rights were granted.

Landcorp would progressively develop the land for farming on behalf of the owners and then take a long-term lease to farm the land itself.

Kelly said Landcorp was due to invest more than $100 million over 18 years. Dairy farming on the land is due to start next season, with three 600-cow herds being run at Broadlands, near Reporoa.

However, Kelly said a lack of irrigation would hit dairying productivity on the land that had missed out on water rights.

Landcorp estimated it could get about 800/kg of milksolids a hectare each season without irrigation.

That would climb to about 1400/kg of milksolids with irrigation, although the extra production would not all be extra profit because of the expense of irrigating.

Despite the setback, Kelly said he would still be comfortable with 800kg/ha of milksolids.

"In fact we based all our assumptions on not having irrigation. We would never embark on a project on the assumption that we would automatically get irrigation rights."

Besides lower productivity, fewer cows could be farmed on the land, meaning lower demand for labour and infrastructure in the area.

Under the arrangement with Wairakei Pastoral, Landcorp would be responsible for purchasing the Fonterra shares required for dairy operations to supply Fonterra.

Landcorp has been looking at selling the rights on capital gains to some of the Fonterra shares it holds to the embryonic Dairy Investment Fund to help pay for the new shares needed.

Kelly said it was possible the land might supply Fonterra rival Open Country Cheese, although Open Country's processing facilities were too far away at present. "But who knows what will happen in future." Landcorp recently announced it was shifting production from eight of its Waikato farms - equal to about one-quarter of its supply - from Fonterra to Open Country

Landcorp's $100 million-plus investment estimate for north of Taupo included cash for extra Fonterra shares, and the outlay required could change significantly if such share purchases were not required, Kelly said.

Meanwhile, the other dairy venture which had water rights turned down last week, Plateau Farms north of Taupo, asked to take up to 27,000 cumecs per day from the Waikato River and up to 19,008 cumecs from the Pueto Stream.

Director Alan Crafar said they were considering appealing but seeking consent had been expensive - "all for nothing with no comeback".

Irrigation would significantly improve productivity on Plateau Farms' 800ha leased property north of Taupo, he said.

The land was producing about 400kg of milksolids a hectare each season now, but that could have climbed towards 1000kg with irrigation.

Environment Waikato turned down the applications primarily because of the potential impact on electricity generation.