Farm Ireland

Tuesday 20 February 2018

Foreign investors to put €50m into Irish dairying

Caitriona Murphy

Caitriona Murphy

A group of foreign financiers is examining the possibility of investing up to €50m in Irish dairy production, it has been revealed.

The Irish agri-investor Jim McCarthy has been approached by the group to assess the feasibility of buying into dairy farms here.

Speaking at the Irish Farm Managers' Association conference in Tipperary last Wednesday, Mr McCarthy said there was serious international interest in the Irish dairy sector.

While he declined to comment on the nationality of the investors, he told the Farming Independent that the group had already invested €350-400m in a range of agricultural sectors around the world.

"While they could invest in dairy production in a number of countries, they would prefer to invest in an older, more mature, grass-based market like Ireland," Mr McCarthy said.

He added that land ownership rules in some countries, such as New Zealand, made it difficult to invest in dairying.

It is understood that the investors want to partner with Irish dairy farmers by buying land from or in conjunction with farmers, with a view to expanding the dairy business.

"These people have no interest in getting into processing, retailing, co-ops or wholesaling," said Mr McCarthy.

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"They want to get involved in dairy farms and own land."

Joint-ownership arrangements, where the investors would own 49pc of the farm business and the farmer would retain 51pc, are being mooted.

"They know nothing about farming and they don't want to manage the farm," said the investment manager.

"They want to partner with good dairy farmers who can manage the business well for them."

Mr McCarthy was at pains to point out that his research on behalf of the investors was in the very early stages.

"They just want to know if it would be feasible and what barriers or restrictions could be in the way if they wanted to invest in Ireland," he said.

Based on current land prices of around €10,000/ac, an investment of €50m in Irish dairy farms could equate to some 5,000ac of land.

However, this pales in comparison to some of the land deals that Mr McCarthy and other land investors have already closed.

Earlier this year, an agricultural company founded by Mr McCarthy and London-based investor Mark McLornan was sold for $83m (€65m).

Set up in 2006, Fondomonte owned and operated three farms in Argentina, totalling 30,000ac.

It was sold to Saudi Arabia's largest food company, Almarai, just ahead of a vote by the Argentine parliament limiting the purchase of prime farmland by foreigners.

As the global population continues to expand, food security has made agricultural land a high-profile target for foreign investment around the world.

East Asian countries such as China, South Korea and Gulf states like Saudi Arabia, Qatar and the United Arab Emirates are among the biggest investors in foreign land, as well as private investors from the EU and US.

Just last month, Chinese investment company Shanghai Pengxin was given the green light for a controversial NZ$210 (€121m) deal to buy nearly 20,000ac of New Zealand dairy farms on the country's North Island.

However, the UN's FAO has just issued guidelines on land ownership rights in an attempt to address the issue of "land grabbing" by sovereign investment funds.

Indo Farming