November 4, 2025 • 23 mins
With Fonterra’s sale of global consumer and associated businesses, Mainland Group, to Lactalis now approved, many shareholder farmers will soon receive a sizeable capital return, alongside strong milk prices. So, what’s the smartest move when opportunity knocks?
In this episode of Talking Dairy, Jac McGowan talks with financial commentator Martin Hawes and MBS Advisors director and rural accountant Nigel McWilliam about how to make confident, practical decisions that strengthen both your farm and your family’s future. From paying down debt to investing off-farm - or simply taking a well-earned break - they share grounded, no-nonsense advice on how to plan for the long term, reduce pressure, and make choices that fit your goals.
Thank you to Martin and Nigel for joining us on this episode. Find out more about them below:
Have feedback or ideas for future episodes? Email us at talkingdairy@dairynz.co.nz
Stay up to date with advice, latest research, tools and resources. Read, browse, scroll, listen, or be there in person. Visit dairynz.co.nz/get-connected
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
SPEAKER_00 (00:01):
Kiora and welcome to Talking Dairy.
I'm your host Jack McGowan fromDairyNZ.
It's great to have you with us.
The decision is made andFonterra's sale of its global
consumer and associatedbusinesses to Lactilis has been
approved by shareholders.
At the time of this recording,Fontera must decide how much of
the proceeds will be returned toshareholders.
(00:23):
It could be up to$2 per share,which equates to around$350,000
for the average farm.
Combined with strong milkprices, this presents Fonterra
shareholder farmers with a rareand exciting opportunity.
But it also raises a question.
Many have been pondering forsome time.
What will I do with it?
With opportunity comes choice,and with choice, pressure.
(00:46):
In this episode, we're exploringpractical strategies to help you
make confident, informeddecisions.
Joining me are Nigel McWilliam,Director and Rural Accountant
from MBS Advisors, and MartinHawes, one of New Zealand's most
well-known financial authors andcommentators.
Now before we get started, weneed a disclaimer.
(01:07):
The content in this podcastincludes general commentary and
should not be consideredinvestment advice.
Certain transactions, such asthose involving futures,
options, and high yieldsecurities, carry significant
risks and may not be appropriatefor all investors.
We advise seeking independentlegal or financial guidance
before making any investmentdecisions.
(01:28):
Tina Kurua and welcome Martinand Nigel.
Now, Martin, you have recentlyretired from providing financial
advice to clients, includingfarmers, and are now focused on
writing and public speaking.
How long did you practice as anadvisor and how do you spend
your time now?
SPEAKER_02 (01:47):
As a financial advisor, I think I practiced for
about 20 years.
I stepped down from that aboutfour or five years ago.
And now I'm concentrating on mywriting and my speaking.
So I do a weekly column andwhat's called Stuff Mastheads,
and that's the main old stuff: newspapers, the press, the (02:04):
undefined
Waikapa Times, the Post.
My column goes into the SouthernTimes and the Nelson Papers, and
so they go quite widespread.
So that's my big thing withwriting.
Although I've pretty much alwaysgot a book or two on the go over
(02:25):
my career, 24 books.
I will do the 25th in the comingmonths.
And when that's done, I won'twrite more books.
I do a lot of speaking work toseminars around the country.
A lot of those are for ForsythBar, which is a big house, used
to be a sharebroking firm, butthey would call themselves
financial advisors now.
(02:46):
And I've done a lot of those forfarmers because Forsyth Bar has
a special relationship withfederated farmers.
I've done a lot through farmingover the course of my life, born
in Timor, and just abouteverybody had an ankle or
something in a farmingsituation.
(03:08):
When I was about 20, I leftuniversity.
I was I was dying to go farming.
But back in those days, I justcouldn't see how I could find
$100,000 to buy a farm.
But um I can't wait through.
SPEAKER_00 (03:24):
So did you ever manage to buy a farm or you
decided that wasn't for you?
SPEAKER_02 (03:29):
When I've got the money, I really wanted a high
country farm and I could haveafforded to buy one.
I just couldn't in those days.
I just couldn't see how I couldmanage all the losses because in
those days Orino was so popular.
High country farms were losing alot of money, and I I couldn't
see how I could keep it going.
SPEAKER_00 (03:48):
And Nigel, you grew up on a farm in Southland.
You've been a rural banker andnow an accountant based in the
Waikato with many farmingclients.
Tell us a little bit more aboutyour journey to where you've got
to now.
SPEAKER_01 (04:00):
Yes, I'm from Tokenui, down in the deep
Catlands, on a ship and beeffarm down there, raised.
And yeah, went through Lincolnand great university.
His education opened my eyesfrom there, joined the rural
bank.
So ten years in banking and thenoverseas president.
And then uh whether I saw thelight or crossed to the dark
side, not quite sure yet.
(04:21):
But I jumped into the accountingstream and was very fortunate to
be given an opportunity here inthe Waikato.
Kelly Dip Rose gave me thatopportunity and I really thank
him for that.
That was twenty-three years agowith the brief to open an office
in Morrisville.
And uh we opened an office herewith my PA twenty years ago,
twenty-six staff with my fellowdirectors here.
(04:42):
Basically grew the book fromnothing to that scale by hard
work and graft.
During that time, I I've beeninvolved with equity
partnerships and dairy, seen thegood, bad, and the ugly with
that.
As I said, I came to Morrisville25 years ago.
I was only going to be here fortwo years, but you meet good
people and you stay, and that'sexactly what I've done.
And the Waikato is about 10degrees warmer than Southend, so
(05:04):
again, another good reason tostay.
SPEAKER_00 (05:06):
Nigel, let's start with what you're seeing on the
ground.
With the prospect of the capitalreturn and high payouts, are
farmers changing their spendinghabits for better or worse?
And are they coming underpressure to spend their money
from product and serviceproviders who know their bank
balances are looking strong?
SPEAKER_01 (05:24):
There's definitely more optimism out there.
There are a lot of wise headsthat have got the Frontier
shares for a start.
So they're not young farmers, uhpeople who've been around a
while.
They probably bought shares for$6 in the first place.
So there's some pragmatism thereand quite a bit of
conservativism.
And so they're looking at thebalance sheet first.
So balance sheet resilience isthe key one, paying down debt
(05:44):
against those shares, and thenfrom there looking what actually
makes the money in theirbusiness.
SPEAKER_00 (05:50):
Martin, when farmers get a lump sum like this, what's
a good framework for decidingwhat to do with it?
SPEAKER_02 (05:57):
Really good question.
And it's a tricky one because Icould sit down with each and
every farmer and I think I couldcome up with a solution for
them.
It's really a matrix of age,what they're thinking about in
terms of succession, what mightbe burning on the farm to be
(06:17):
fixed, in other words, you know,for a reinvestment back into the
farm.
Any thoughts of retirement?
The final one would be when didthe family last have a treat?
Like, you know, trips like that.
We might come back to thatlater, because I I do think
that's a um uh an important one.
So you've got this thing of agesuccession, how close to
(06:39):
retirement are you?
If you took a 58-year-oldfarmer, they would look at their
options, and their options arebasically to pay down some debt,
maybe reinvest back into thefarm, buy some piece of plant
and equipment or uh stock orsomething, or invest off farm.
And if you take that 58-year-oldfarmer, getting fairly close to
(07:04):
retirement, that farmer might bebest to invest off-farm, because
off-farm investments are liquid,doesn't make the farm bigger.
So if you invest in more plantand equipment and you've got one
of the two all hoping to takethe farm, the farm has just got
a little bit bigger.
Whereas with off-farminvestments, it hasn't.
(07:28):
And as I said before, theliquid.
I think off-farm investmentsshould be at the top of the list
for that 58-year-old, becausethat family need to get familiar
with portfolio investmentbecause sooner or later, and it
might be sooner, they are goingto be doing that anyway.
They're going to have anotherlump sum when they sell the farm
(07:50):
or the child takes over.
And they need familiarity withthat.
SPEAKER_00 (07:56):
Under what conditions might a farmer of
their age choose to invest onthe farm instead?
SPEAKER_02 (08:04):
I think if there was something burning, one thing
investing on farm, and I'm sureNigel would be the same on this.
I would be banging the tablesaying, tell me the return that
this on-farm investment is goingto make.
Is it just a nice to have?
And farmers are a canny lot,they you know, they don't tend
(08:24):
to do this.
I'd like a number.
So what do your figures showthat if you do this, you know,
what additional return are yougoing to get?
You could then take a youngerfarmer, somebody who's, say, 42,
not really thinking aboutretirement at all, maybe
purchased the farm not too longago, carrying a fair bit of debt
(08:47):
still.
And I know farmers have gottheir debt down, but there'll be
a few still who they mighteither pay off debt, which is a
pretty simple thing to do, thatmight make the bank happy, or
they might invest on farm andexpect that to increase their
return.
I do think younger people needto concentrate their wealth to a
(09:11):
particular thing, to be verygood at that, but to try to grow
that and make use of that tomake them wealthy.
As you get older, you need todiversify.
SPEAKER_00 (09:20):
And is it still true to say in farming that investing
in capital repayments probablyhas the best return?
Or is that not always true?
SPEAKER_02 (09:30):
It probably is mostly true, but then you've got
to risk adjust that.
Because you know, you'reinvesting on farm, you're
growing the amount of on-farmassets that you've got.
That means you are putting moreand more money on the red thread
square.
Now that's about the end of mygambling um analytics because I
(09:52):
don't know much about gambling,but that they're putting more
and more money into the samething.
There does come a time when youwant, as a backstop, some money
off farm.
The other thing is I'm oldenough to know and I've watched
farming for long enough.
Farming is a cyclical thing, andit always has been, it always
(10:13):
will be.
At the moment, they're enjoyingreally good times, and I hope
they celebrate that and make themost of it.
Because the next step, at somepoint, whether it's a year or
whether it's five years or tenyears, I don't know.
But at some point it's going toturn down again.
And those who have taken stepsto future-proof themselves, they
(10:37):
will be the winners when marketsturn down and may well be able
to.
There's an old saying, buy andgloom, sell and boom.
And so when things turn down, ifyou've got the wherewithal to
buy the neighborhood.
SPEAKER_00 (10:53):
Nigel, let's talk about the farm itself.
Capital expenditure and RM canbe a bottomless bucket.
You may want to improve thestaff houses, put new milking
facilities in, new farmbuildings.
If a farmer does want to investback into their business, what's
the best way for them to decidewhere that money goes?
SPEAKER_01 (11:13):
You try and look at for the like Martin said, uh,
the return on investment, right?
So straight away.
Looking at what reduces stressand what will add value to the
farm.
But what we're looking at withour price, we're asking this
question with the two dollars,have been for a long time.
There's three buckets that we'relooking at really.
There's this putting money inthe stability bucket, that's the
(11:33):
balance sheet resilience piece,and also a rainy day fund
because we've got a high advanceright now.
And if the payout should godown, there's going to be a not
a lot of money for next winter.
And that's when the$2 turns up,is actually April, May next
year.
And that might be really usefulto actually use that as a
working capital, as almostexpensive for a little while.
(11:53):
It is a balance sheet item atthe end of the day, the return
of capital.
So we want to keep it on thebalance sheet so it's there next
year.
So we either want to reduce debtor buy another asset
effectively.
But let me go back to thatbucket analysis.
We're looking at balance sheetresilience, and then we look at
productivity as well.
So it's investing in yourinfrastructure, as we talked
about before, making sure thatthe capital spend actually
(12:15):
reduces cost or reduces labor.
And then right at the start ofthe discussion Martin talked
about family, and that's theother part that we like to
invest in is reward the peoplethat have got you this far, put
it that way.
That may be a little bit ofsomething that's just a reward
for the tough years that they'vehad, and something they can
touch when there's tough yearsahead as well.
That might be a new kitchen or afamily holiday, or even
(12:38):
supporting children to buy ahouse.
This could be a deposit for ahouse for children, right?
And it's ideal lump sum ifyou're talking$100,000 each for
each of three children, put itthat way.
So that's what we're talkingabout right now.
SPEAKER_00 (12:53):
Nigel, are there any tax implications farmers need to
be aware of with this capitalreturn and and the high payout?
SPEAKER_01 (13:00):
There's no tax to worry about with the capital
return.
So it's a return of capital,it's a balance sheet item.
It's tax free.
So that lands has a tax-freereturn.
So that's awesome.
Obviously with payout, there isuh tax implications and
obviously there's increasedpayout.
But there's a opportunity hereto use tools like income
equalization where they can movethis payout forward into another
(13:21):
year, especially if they've usedsome of that share capital as a
deposit on another farm wherethey've borrowed more debt.
So they've got more debt goingforward and they can actually
push income now into that highdebt year and then pay less tax
on it.
So there's some smart tacticaltiming planning that needs to be
done as well.
SPEAKER_00 (13:38):
Obviously, they should be talking to their
accountant about that.
SPEAKER_01 (13:41):
Yes.
Talk to the accountant earlyabout that.
Yep.
SPEAKER_00 (13:45):
Martin, talk to us about diversification, how to do
it well.
You already mentioned sort ofbalancing the risk of investing
in things you don't know aboutversus the risk of putting your
eggs in one basket that you doknow about.
SPEAKER_02 (13:59):
I've lived in New Zealand all my life.
I'm a proud New Zealander.
I couldn't live anywhere else.
But I'm not going to put all mymoney here.
We have a small, very brittleeconomy that could easily break.
And the I hate to say this to afarmer group, but I'm going to
say it anyway.
That I think you need to imaginewhat would happen if New Zealand
(14:20):
got foot and mouth disease.
Foot and mouth disease, I think,would be the worst thing that
could happen to New Zealand.
Our currency would plummet.
Any imported stuff that we couldafford to buy anymore would be
horrendously expensive.
There'd be job losses all overthe place.
It would be an absolutedisaster.
There'd be no winners out ofthat, but the only people who
(14:41):
would get through it well wouldbe those who had money offshore,
who had invested offshore.
Now, I'm not asking and doingthat sort of diversification for
you to take less returns,because in fact, for the last
30-odd years, we've had thismajor tech boom going on.
It's had various forms, and it'snow largely in the AI form.
(15:05):
But there have been someabsolutely fabulous returns.
If you look at Amazon, Amazonlisted on the US share market 27
years ago.
And if you had said to me 27years ago, look, Amazon's
listing, should I buy someshares, I would have said, well,
it's a bookshop.
Over that 27 years, Amazon hasproduced on average 33% per
(15:27):
annum.
Apple is about the same.
Barkcha Hatterway, not even atech company, is about 20%.
So there have been someabsolutely fabulous returns.
Now that's for just the oddthing.
I wouldn't be recommending thatat all.
(15:47):
I'd be recommending farmers togo to a financial advisor, get
them to draw up a plan for howthey should invest a certain
amount of money and to have thatdiversified.
It should be diversified acrossall of the asset classes.
So it's got shares, it's gotlisted property that's
commercial property that'slisted on the share market,
(16:08):
fixed interest investments, andsome cash.
It's got geographicaldiversification.
It's all over the place.
It's diversified by industriesbecause technology is not just
computers and so on.
It's medical devices, it'sbiotech, it's clean tech.
There's a whole range ofdifferent things that are going
on in the world, which arereally making very good money at
(16:30):
the moment.
Because only really two bigoff-farm investment questions.
What amount of risk are yougoing to take?
You know, are you going to be abalanced and so on?
And who's going to manage it?
About five or six years ago, Idecided after 50 years of
managing my own investments, notto manage them anymore.
And it's really freed up mylife.
(16:53):
I'm getting older and I'm able,you know, I'm traveling at the
moment.
Yeah, I don't want to have to bewatching what markets are doing
and what my portfolio is doingand that sort of thing.
So 99% of farmers, maybe 99.5%of farmers, ought to have
somebody managing that money forthem.
They're busy enough with thefarm.
(17:15):
They need to concentrate ontheir big wealth-creating asset
and let somebody else look afterthe stuff that they know about.
I talked about familiaritybefore.
There's a bit of a people makethe sign of the cross and they
shudder uh at handing theirmoney over to somebody.
Getting the feel of that with arelatively small amount of money
(17:37):
is a very good idea before thefarm gets sold and that
relatively small becomes areally large amount of money.
I'd be very keen for olderfarmers, particularly those who
are well settled, to find alocal financial advisor,
somebody they trust with a firmthat they know to get
(17:57):
diversified.
SPEAKER_00 (17:58):
And obviously not trying to pick winners like
Amazon ourselves.
SPEAKER_02 (18:03):
No, they'd be in the portfolio, but the farmers
themselves probably shouldn't bedoing it.
They should be leaving that tosomebody who knows about that.
I don't do this anymore.
I'm in Greece at the moment.
There's somebody back inChristchurch who's just had a
hard day looking after myportfolio.
I hope he's enjoying a glass ofwine.
It's in the evening in NewZealand.
(18:24):
But, you know, I just decided Idon't have the time, effort, or
energy to do everything.
SPEAKER_00 (18:30):
Nigel, what about using the capital return for
land purchases or expansion?
Cow prices are very expensiveand land prices rising.
Is now the right time for thatkind of purchase?
SPEAKER_01 (18:42):
Expansion can still be right for the right operator
at the right equity.
Don't lose sight of the returnon investment, of course.
So I mean some of the bank'scriteria are around, yes, it
will support you to purchaseland, but you also have to have
a stock contract as well.
So it's just maybe just havingto buy those expensive stock
right now is just a cost of thetransaction, unfortunately.
(19:03):
But that's just the way it is.
It's just timing of business.
So if you want that land, you'rejust going to have to do that
and and make it work.
But expansion isn't necessarilyabout hectares.
It can be about growth on farmwith regards to uh investing in
feed systems or genetics andthose sorts of things on farm.
So uh getting bigger is notalways better.
(19:24):
It's about making sure you'renot scaling your problem either,
so making sure you're actuallydoing well on farm for a start.
So you've got to make the farmpurchase decision with all those
other considerations, not simplybecause you've got a windfall
that enables you to pay adeposit.
SPEAKER_00 (19:40):
Martin, you've said at the start, and actually a
number of times, investing isn'tjust about money, it's about
enjoying life and enjoying thejourney.
And it might be time for areward for those farming
families that work long hoursand they're juggling workload
and family time.
What about using some of thisfor experiences like family
holidays or trying to improvetheir balance in life?
(20:02):
You've said that's a valid partof the plan.
Tell us more.
SPEAKER_02 (20:06):
Yes, I would say this is more than just a reward.
I think it's a reminder.
You know, what is this allabout?
Why are you working 60 hours aweek or whatever, risking all of
your quite significant capitalto run this farm?
You're doing it ultimately for abetter life for both of you and
(20:28):
for the children as well.
I uh, you know, I really likeNigel's about, you know, putting
aside a deposit for each of thechildren.
So you might put$50,000 intoeach of their KiwiSaver
accounts, because they can onlyget that out to buy their first
house.
Can I just give a wee warning aswell?
This comes from years ofexperience, that you might
decide to pay down debt securein the knowledge that you could
(20:51):
draw back down again if thingsgot bad.
When things get bad, banksusually um put a zipper over
their lending.
It gets very hard to borrowmoney.
You might have four milliondollars of debt at the moment,
pay that down to three milliondollars, hoping to pull that
back out.
If there was a major downturnagain and you needed that money,
(21:13):
you may not be able to pull itdown because banks' lending
criteria might be different.
SPEAKER_00 (21:19):
And so that's what you're talking about how shares
are liquid in a way that perhapsyour capital is no longer liquid
once you've repaid it.
SPEAKER_02 (21:28):
Yes, the whole diversified portfolio is liquid.
You can, you know, if you'vedone that with a financial
advisor, you can pick up thephone and say, look, I need that
money or I need a part of thatmoney or whatever.
The only thing, there's a littlebit of hesitation there.
You don't want to sell thatwhile it's down.
If there was a downturn ininternational markets, for
(21:50):
example, at the same time asthere was a downturn in dairy in
New Zealand.
Now that would be purelycoincidence.
You know, I don't think it'scausative, but that could
happen.
You don't want to sell then ifyou don't absolutely have to.
SPEAKER_00 (22:06):
That's it for this episode of Talking Dairy.
We've covered a lot today andhopefully given you some food
for thought.
A big takeaway for me is howimportant it is to start with
your goals, both for your farmbusiness and for your family.
And as Martin said, seek advicefrom someone who understands
your business and is alignedwith your values, make decisions
(22:26):
that feel right for your stageof life and business.
Thanks so much to NigelMcWilliams and Martin Hawes for
sharing their insights.
We really appreciate it.
Thank you for listening, andwe'll catch you next time.
Matiwa.
If you'd like to get connectedwith DariNZ's latest advice,
(22:48):
research, tools, and resources,whether it's reading, scrolling,
listening, or in person, you canvisit dairynz.co.nz forward
slash get dash connected, anddon't forget to hit follow to
keep up to date with our latestepisodes.
As always, if you have anyfeedback on this podcast or have
some ideas for future topics orguests, please email us at
(23:09):
talkingdairy at dairynz.co.nz.
Thanks for listening, and we'llcatch you next time on Talking
Dairy.
Kiora and welcome to Talking Dairy.
I'm your host Jack McGowan fromDairyNZ.
It's great to have you with us.
The decision is made andFonterra's sale of its global
consumer and associatedbusinesses to Lactilis has been
approved by shareholders.
At the time of this recording,Fontera must decide how much of
the proceeds will be returned toshareholders.
(00:23):
It could be up to$2 per share,which equates to around$350,000
for the average farm.
Combined with strong milkprices, this presents Fonterra
shareholder farmers with a rareand exciting opportunity.
But it also raises a question.
Many have been pondering forsome time.
What will I do with it?
With opportunity comes choice,and with choice, pressure.
(00:46):
In this episode, we're exploringpractical strategies to help you
make confident, informeddecisions.
Joining me are Nigel McWilliam,Director and Rural Accountant
from MBS Advisors, and MartinHawes, one of New Zealand's most
well-known financial authors andcommentators.
Now before we get started, weneed a disclaimer.
(01:07):
The content in this podcastincludes general commentary and
should not be consideredinvestment advice.
Certain transactions, such asthose involving futures,
options, and high yieldsecurities, carry significant
risks and may not be appropriatefor all investors.
We advise seeking independentlegal or financial guidance
before making any investmentdecisions.
(01:28):
Tina Kurua and welcome Martinand Nigel.
Now, Martin, you have recentlyretired from providing financial
advice to clients, includingfarmers, and are now focused on
writing and public speaking.
How long did you practice as anadvisor and how do you spend
your time now?
SPEAKER_02 (01:47):
As a financial advisor, I think I practiced for
about 20 years.
I stepped down from that aboutfour or five years ago.
And now I'm concentrating on mywriting and my speaking.
So I do a weekly column andwhat's called Stuff Mastheads,
and that's the main old stuff: newspapers, the press, the (02:04):
undefined
Waikapa Times, the Post.
My column goes into the SouthernTimes and the Nelson Papers, and
so they go quite widespread.
So that's my big thing withwriting.
Although I've pretty much alwaysgot a book or two on the go over
(02:25):
my career, 24 books.
I will do the 25th in the comingmonths.
And when that's done, I won'twrite more books.
I do a lot of speaking work toseminars around the country.
A lot of those are for ForsythBar, which is a big house, used
to be a sharebroking firm, butthey would call themselves
financial advisors now.
(02:46):
And I've done a lot of those forfarmers because Forsyth Bar has
a special relationship withfederated farmers.
I've done a lot through farmingover the course of my life, born
in Timor, and just abouteverybody had an ankle or
something in a farmingsituation.
(03:08):
When I was about 20, I leftuniversity.
I was I was dying to go farming.
But back in those days, I justcouldn't see how I could find
$100,000 to buy a farm.
But um I can't wait through.
SPEAKER_00 (03:24):
So did you ever manage to buy a farm or you
decided that wasn't for you?
SPEAKER_02 (03:29):
When I've got the money, I really wanted a high
country farm and I could haveafforded to buy one.
I just couldn't in those days.
I just couldn't see how I couldmanage all the losses because in
those days Orino was so popular.
High country farms were losing alot of money, and I I couldn't
see how I could keep it going.
SPEAKER_00 (03:48):
And Nigel, you grew up on a farm in Southland.
You've been a rural banker andnow an accountant based in the
Waikato with many farmingclients.
Tell us a little bit more aboutyour journey to where you've got
to now.
SPEAKER_01 (04:00):
Yes, I'm from Tokenui, down in the deep
Catlands, on a ship and beeffarm down there, raised.
And yeah, went through Lincolnand great university.
His education opened my eyesfrom there, joined the rural
bank.
So ten years in banking and thenoverseas president.
And then uh whether I saw thelight or crossed to the dark
side, not quite sure yet.
(04:21):
But I jumped into the accountingstream and was very fortunate to
be given an opportunity here inthe Waikato.
Kelly Dip Rose gave me thatopportunity and I really thank
him for that.
That was twenty-three years agowith the brief to open an office
in Morrisville.
And uh we opened an office herewith my PA twenty years ago,
twenty-six staff with my fellowdirectors here.
(04:42):
Basically grew the book fromnothing to that scale by hard
work and graft.
During that time, I I've beeninvolved with equity
partnerships and dairy, seen thegood, bad, and the ugly with
that.
As I said, I came to Morrisville25 years ago.
I was only going to be here fortwo years, but you meet good
people and you stay, and that'sexactly what I've done.
And the Waikato is about 10degrees warmer than Southend, so
(05:04):
again, another good reason tostay.
SPEAKER_00 (05:06):
Nigel, let's start with what you're seeing on the
ground.
With the prospect of the capitalreturn and high payouts, are
farmers changing their spendinghabits for better or worse?
And are they coming underpressure to spend their money
from product and serviceproviders who know their bank
balances are looking strong?
SPEAKER_01 (05:24):
There's definitely more optimism out there.
There are a lot of wise headsthat have got the Frontier
shares for a start.
So they're not young farmers, uhpeople who've been around a
while.
They probably bought shares for$6 in the first place.
So there's some pragmatism thereand quite a bit of
conservativism.
And so they're looking at thebalance sheet first.
So balance sheet resilience isthe key one, paying down debt
(05:44):
against those shares, and thenfrom there looking what actually
makes the money in theirbusiness.
SPEAKER_00 (05:50):
Martin, when farmers get a lump sum like this, what's
a good framework for decidingwhat to do with it?
SPEAKER_02 (05:57):
Really good question.
And it's a tricky one because Icould sit down with each and
every farmer and I think I couldcome up with a solution for
them.
It's really a matrix of age,what they're thinking about in
terms of succession, what mightbe burning on the farm to be
(06:17):
fixed, in other words, you know,for a reinvestment back into the
farm.
Any thoughts of retirement?
The final one would be when didthe family last have a treat?
Like, you know, trips like that.
We might come back to thatlater, because I I do think
that's a um uh an important one.
So you've got this thing of agesuccession, how close to
(06:39):
retirement are you?
If you took a 58-year-oldfarmer, they would look at their
options, and their options arebasically to pay down some debt,
maybe reinvest back into thefarm, buy some piece of plant
and equipment or uh stock orsomething, or invest off farm.
And if you take that 58-year-oldfarmer, getting fairly close to
(07:04):
retirement, that farmer might bebest to invest off-farm, because
off-farm investments are liquid,doesn't make the farm bigger.
So if you invest in more plantand equipment and you've got one
of the two all hoping to takethe farm, the farm has just got
a little bit bigger.
Whereas with off-farminvestments, it hasn't.
(07:28):
And as I said before, theliquid.
I think off-farm investmentsshould be at the top of the list
for that 58-year-old, becausethat family need to get familiar
with portfolio investmentbecause sooner or later, and it
might be sooner, they are goingto be doing that anyway.
They're going to have anotherlump sum when they sell the farm
(07:50):
or the child takes over.
And they need familiarity withthat.
SPEAKER_00 (07:56):
Under what conditions might a farmer of
their age choose to invest onthe farm instead?
SPEAKER_02 (08:04):
I think if there was something burning, one thing
investing on farm, and I'm sureNigel would be the same on this.
I would be banging the tablesaying, tell me the return that
this on-farm investment is goingto make.
Is it just a nice to have?
And farmers are a canny lot,they you know, they don't tend
(08:24):
to do this.
I'd like a number.
So what do your figures showthat if you do this, you know,
what additional return are yougoing to get?
You could then take a youngerfarmer, somebody who's, say, 42,
not really thinking aboutretirement at all, maybe
purchased the farm not too longago, carrying a fair bit of debt
(08:47):
still.
And I know farmers have gottheir debt down, but there'll be
a few still who they mighteither pay off debt, which is a
pretty simple thing to do, thatmight make the bank happy, or
they might invest on farm andexpect that to increase their
return.
I do think younger people needto concentrate their wealth to a
(09:11):
particular thing, to be verygood at that, but to try to grow
that and make use of that tomake them wealthy.
As you get older, you need todiversify.
SPEAKER_00 (09:20):
And is it still true to say in farming that investing
in capital repayments probablyhas the best return?
Or is that not always true?
SPEAKER_02 (09:30):
It probably is mostly true, but then you've got
to risk adjust that.
Because you know, you'reinvesting on farm, you're
growing the amount of on-farmassets that you've got.
That means you are putting moreand more money on the red thread
square.
Now that's about the end of mygambling um analytics because I
(09:52):
don't know much about gambling,but that they're putting more
and more money into the samething.
There does come a time when youwant, as a backstop, some money
off farm.
The other thing is I'm oldenough to know and I've watched
farming for long enough.
Farming is a cyclical thing, andit always has been, it always
(10:13):
will be.
At the moment, they're enjoyingreally good times, and I hope
they celebrate that and make themost of it.
Because the next step, at somepoint, whether it's a year or
whether it's five years or tenyears, I don't know.
But at some point it's going toturn down again.
And those who have taken stepsto future-proof themselves, they
(10:37):
will be the winners when marketsturn down and may well be able
to.
There's an old saying, buy andgloom, sell and boom.
And so when things turn down, ifyou've got the wherewithal to
buy the neighborhood.
SPEAKER_00 (10:53):
Nigel, let's talk about the farm itself.
Capital expenditure and RM canbe a bottomless bucket.
You may want to improve thestaff houses, put new milking
facilities in, new farmbuildings.
If a farmer does want to investback into their business, what's
the best way for them to decidewhere that money goes?
SPEAKER_01 (11:13):
You try and look at for the like Martin said, uh,
the return on investment, right?
So straight away.
Looking at what reduces stressand what will add value to the
farm.
But what we're looking at withour price, we're asking this
question with the two dollars,have been for a long time.
There's three buckets that we'relooking at really.
There's this putting money inthe stability bucket, that's the
(11:33):
balance sheet resilience piece,and also a rainy day fund
because we've got a high advanceright now.
And if the payout should godown, there's going to be a not
a lot of money for next winter.
And that's when the$2 turns up,is actually April, May next
year.
And that might be really usefulto actually use that as a
working capital, as almostexpensive for a little while.
(11:53):
It is a balance sheet item atthe end of the day, the return
of capital.
So we want to keep it on thebalance sheet so it's there next
year.
So we either want to reduce debtor buy another asset
effectively.
But let me go back to thatbucket analysis.
We're looking at balance sheetresilience, and then we look at
productivity as well.
So it's investing in yourinfrastructure, as we talked
about before, making sure thatthe capital spend actually
(12:15):
reduces cost or reduces labor.
And then right at the start ofthe discussion Martin talked
about family, and that's theother part that we like to
invest in is reward the peoplethat have got you this far, put
it that way.
That may be a little bit ofsomething that's just a reward
for the tough years that they'vehad, and something they can
touch when there's tough yearsahead as well.
That might be a new kitchen or afamily holiday, or even
(12:38):
supporting children to buy ahouse.
This could be a deposit for ahouse for children, right?
And it's ideal lump sum ifyou're talking$100,000 each for
each of three children, put itthat way.
So that's what we're talkingabout right now.
SPEAKER_00 (12:53):
Nigel, are there any tax implications farmers need to
be aware of with this capitalreturn and and the high payout?
SPEAKER_01 (13:00):
There's no tax to worry about with the capital
return.
So it's a return of capital,it's a balance sheet item.
It's tax free.
So that lands has a tax-freereturn.
So that's awesome.
Obviously with payout, there isuh tax implications and
obviously there's increasedpayout.
But there's a opportunity hereto use tools like income
equalization where they can movethis payout forward into another
(13:21):
year, especially if they've usedsome of that share capital as a
deposit on another farm wherethey've borrowed more debt.
So they've got more debt goingforward and they can actually
push income now into that highdebt year and then pay less tax
on it.
So there's some smart tacticaltiming planning that needs to be
done as well.
SPEAKER_00 (13:38):
Obviously, they should be talking to their
accountant about that.
SPEAKER_01 (13:41):
Yes.
Talk to the accountant earlyabout that.
Yep.
SPEAKER_00 (13:45):
Martin, talk to us about diversification, how to do
it well.
You already mentioned sort ofbalancing the risk of investing
in things you don't know aboutversus the risk of putting your
eggs in one basket that you doknow about.
SPEAKER_02 (13:59):
I've lived in New Zealand all my life.
I'm a proud New Zealander.
I couldn't live anywhere else.
But I'm not going to put all mymoney here.
We have a small, very brittleeconomy that could easily break.
And the I hate to say this to afarmer group, but I'm going to
say it anyway.
That I think you need to imaginewhat would happen if New Zealand
(14:20):
got foot and mouth disease.
Foot and mouth disease, I think,would be the worst thing that
could happen to New Zealand.
Our currency would plummet.
Any imported stuff that we couldafford to buy anymore would be
horrendously expensive.
There'd be job losses all overthe place.
It would be an absolutedisaster.
There'd be no winners out ofthat, but the only people who
(14:41):
would get through it well wouldbe those who had money offshore,
who had invested offshore.
Now, I'm not asking and doingthat sort of diversification for
you to take less returns,because in fact, for the last
30-odd years, we've had thismajor tech boom going on.
It's had various forms, and it'snow largely in the AI form.
(15:05):
But there have been someabsolutely fabulous returns.
If you look at Amazon, Amazonlisted on the US share market 27
years ago.
And if you had said to me 27years ago, look, Amazon's
listing, should I buy someshares, I would have said, well,
it's a bookshop.
Over that 27 years, Amazon hasproduced on average 33% per
(15:27):
annum.
Apple is about the same.
Barkcha Hatterway, not even atech company, is about 20%.
So there have been someabsolutely fabulous returns.
Now that's for just the oddthing.
I wouldn't be recommending thatat all.
(15:47):
I'd be recommending farmers togo to a financial advisor, get
them to draw up a plan for howthey should invest a certain
amount of money and to have thatdiversified.
It should be diversified acrossall of the asset classes.
So it's got shares, it's gotlisted property that's
commercial property that'slisted on the share market,
(16:08):
fixed interest investments, andsome cash.
It's got geographicaldiversification.
It's all over the place.
It's diversified by industriesbecause technology is not just
computers and so on.
It's medical devices, it'sbiotech, it's clean tech.
There's a whole range ofdifferent things that are going
on in the world, which arereally making very good money at
(16:30):
the moment.
Because only really two bigoff-farm investment questions.
What amount of risk are yougoing to take?
You know, are you going to be abalanced and so on?
And who's going to manage it?
About five or six years ago, Idecided after 50 years of
managing my own investments, notto manage them anymore.
And it's really freed up mylife.
(16:53):
I'm getting older and I'm able,you know, I'm traveling at the
moment.
Yeah, I don't want to have to bewatching what markets are doing
and what my portfolio is doingand that sort of thing.
So 99% of farmers, maybe 99.5%of farmers, ought to have
somebody managing that money forthem.
They're busy enough with thefarm.
(17:15):
They need to concentrate ontheir big wealth-creating asset
and let somebody else look afterthe stuff that they know about.
I talked about familiaritybefore.
There's a bit of a people makethe sign of the cross and they
shudder uh at handing theirmoney over to somebody.
Getting the feel of that with arelatively small amount of money
(17:37):
is a very good idea before thefarm gets sold and that
relatively small becomes areally large amount of money.
I'd be very keen for olderfarmers, particularly those who
are well settled, to find alocal financial advisor,
somebody they trust with a firmthat they know to get
(17:57):
diversified.
SPEAKER_00 (17:58):
And obviously not trying to pick winners like
Amazon ourselves.
SPEAKER_02 (18:03):
No, they'd be in the portfolio, but the farmers
themselves probably shouldn't bedoing it.
They should be leaving that tosomebody who knows about that.
I don't do this anymore.
I'm in Greece at the moment.
There's somebody back inChristchurch who's just had a
hard day looking after myportfolio.
I hope he's enjoying a glass ofwine.
It's in the evening in NewZealand.
(18:24):
But, you know, I just decided Idon't have the time, effort, or
energy to do everything.
SPEAKER_00 (18:30):
Nigel, what about using the capital return for
land purchases or expansion?
Cow prices are very expensiveand land prices rising.
Is now the right time for thatkind of purchase?
SPEAKER_01 (18:42):
Expansion can still be right for the right operator
at the right equity.
Don't lose sight of the returnon investment, of course.
So I mean some of the bank'scriteria are around, yes, it
will support you to purchaseland, but you also have to have
a stock contract as well.
So it's just maybe just havingto buy those expensive stock
right now is just a cost of thetransaction, unfortunately.
(19:03):
But that's just the way it is.
It's just timing of business.
So if you want that land, you'rejust going to have to do that
and and make it work.
But expansion isn't necessarilyabout hectares.
It can be about growth on farmwith regards to uh investing in
feed systems or genetics andthose sorts of things on farm.
So uh getting bigger is notalways better.
(19:24):
It's about making sure you'renot scaling your problem either,
so making sure you're actuallydoing well on farm for a start.
So you've got to make the farmpurchase decision with all those
other considerations, not simplybecause you've got a windfall
that enables you to pay adeposit.
SPEAKER_00 (19:40):
Martin, you've said at the start, and actually a
number of times, investing isn'tjust about money, it's about
enjoying life and enjoying thejourney.
And it might be time for areward for those farming
families that work long hoursand they're juggling workload
and family time.
What about using some of thisfor experiences like family
holidays or trying to improvetheir balance in life?
(20:02):
You've said that's a valid partof the plan.
Tell us more.
SPEAKER_02 (20:06):
Yes, I would say this is more than just a reward.
I think it's a reminder.
You know, what is this allabout?
Why are you working 60 hours aweek or whatever, risking all of
your quite significant capitalto run this farm?
You're doing it ultimately for abetter life for both of you and
(20:28):
for the children as well.
I uh, you know, I really likeNigel's about, you know, putting
aside a deposit for each of thechildren.
So you might put$50,000 intoeach of their KiwiSaver
accounts, because they can onlyget that out to buy their first
house.
Can I just give a wee warning aswell?
This comes from years ofexperience, that you might
decide to pay down debt securein the knowledge that you could
(20:51):
draw back down again if thingsgot bad.
When things get bad, banksusually um put a zipper over
their lending.
It gets very hard to borrowmoney.
You might have four milliondollars of debt at the moment,
pay that down to three milliondollars, hoping to pull that
back out.
If there was a major downturnagain and you needed that money,
(21:13):
you may not be able to pull itdown because banks' lending
criteria might be different.
SPEAKER_00 (21:19):
And so that's what you're talking about how shares
are liquid in a way that perhapsyour capital is no longer liquid
once you've repaid it.
SPEAKER_02 (21:28):
Yes, the whole diversified portfolio is liquid.
You can, you know, if you'vedone that with a financial
advisor, you can pick up thephone and say, look, I need that
money or I need a part of thatmoney or whatever.
The only thing, there's a littlebit of hesitation there.
You don't want to sell thatwhile it's down.
If there was a downturn ininternational markets, for
(21:50):
example, at the same time asthere was a downturn in dairy in
New Zealand.
Now that would be purelycoincidence.
You know, I don't think it'scausative, but that could
happen.
You don't want to sell then ifyou don't absolutely have to.
SPEAKER_00 (22:06):
That's it for this episode of Talking Dairy.
We've covered a lot today andhopefully given you some food
for thought.
A big takeaway for me is howimportant it is to start with
your goals, both for your farmbusiness and for your family.
And as Martin said, seek advicefrom someone who understands
your business and is alignedwith your values, make decisions
(22:26):
that feel right for your stageof life and business.
Thanks so much to NigelMcWilliams and Martin Hawes for
sharing their insights.
We really appreciate it.
Thank you for listening, andwe'll catch you next time.
Matiwa.
If you'd like to get connectedwith DariNZ's latest advice,
(22:48):
research, tools, and resources,whether it's reading, scrolling,
listening, or in person, you canvisit dairynz.co.nz forward
slash get dash connected, anddon't forget to hit follow to
keep up to date with our latestepisodes.
As always, if you have anyfeedback on this podcast or have
some ideas for future topics orguests, please email us at
(23:09):
talkingdairy at dairynz.co.nz.
Thanks for listening, and we'llcatch you next time on Talking
Dairy.
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