Following the bankruptcy of Chile’s biggest dairy company, New Zealand farmers and investors stand to lose millions.
Since 2006, 18 New Zealand dairy and kiwifruit farmers and investors from Chile and here have invested over US$50m in Chilterra. The business entered “judicial reorganization” late last year owing US$60m to a bank consortium.
Chilterra boasts around 13,000 cattle, 7,200ha of cropland, and nine milking parlours. These farms are within 100km of Osorno, Southern Chile, famed for its dairy farming and New Zealand-like soils and climate.
Rural News sources say the enterprise fell owing to low milk prices, poor farm management, and rising input expenses. Relationship between main Chilean investor Ricardo Rios and NZ investors broke sour.
Early on, Chilterra fared well, but NZ and Chilean business partners disagreed as the firm required more money.
Sources suggest the firm was badly administered, NZ investors were kept in the dark, it borrowed heavily, and NZ farmers and investors had little or no influence in its operations.
Fearing retaliation, NZ farmers who invested in Chilterra won’t speak. The board was led by Waikato ag expert Mike McBeath and comprised numerous New Zealand farmers.
Rural News questioned McBeath without success.
Last June, after the company’s 2021 annual general meeting, NZ shareholders received an email confirming “negative working capital and negative results for the year”.
The emails reveal NZ investors were upset “with the collective performance of the board and Chilterra”.
Based on the financial accounts, they are quite worried about the business’s finances. Despite large discrepancies between actual and budgeted performance, no performance assessment has been done.”
New Zealand investors asked Chilterra directors to vote no confidence in the board.
According to the email, Chilterra’s financials “continue to show the same trends as in the past with significant growth in liabilities”.
Although this has been countered by considerable value rises, technical equity remains flat.
NZ farmers anticipate Chilean banks to sell farms to recover their losses, leaving investors nothing.
Success Story!
Not all New Zealand dairy ventures in China fail.
Chilean Manuka SA is 80% Kiwi-owned and owns 59 dairy farms, 70,000 animals, and 48,000 milking cows. Manuka generates 10% of Chilean milk.
Manuka founder Mark Townshend told Rural News that the firm is producing NZ levels of output per hectare – 1,100-1,300 kgMS/ha – at NZ equal production costs on lower-cost land assets.
“It has been a growth story starting with one man, Conall Buchannan, and one farm in 2005 and growing through a Chilean workforce of 600 people across the business today,” Townshend told Rural News. Success has been achieved by ‘kiwi control’ and hiring competent Chilean executives.
The Fonterra sale of Soprole in Chile has clarified things, argues Townshend.
Today, Chilean milk costs NZ$9.30/kgMS. Higher interest rates have tightened cash flows, but inflation is back to 5%.
Like NZ, Townshend argues large-scale farming in Chile requires low-cost milk production, competent management, and stakeholder support and involvement.
