January 23, 2008

PGG Wrightson offers livestock lease plan to New Zealand dairy farmers

New Zealand dairy farmers can gain access to the capital tied up in their cows, which are currently worth US$7.83 billion nationwide, through PGG Wrightson's livestock lease plan, the company announced.

PGG Wrightson General Manager Finance, Peter Engel, said the financial product, based on farmers leasing rather than owning their herd, will give farmers greater flexibility in the use of their capital.

The lease plan offers farmers the opportunity to expand or release capital through the leasing of dairy cows from the company, Engel explained.

This may involve the company working with the client to source lease stock, or farmers may sell their own stock to PGG Wrightson and lease back, he said.

Leasing is currently rare in New Zealand agriculture, but Engel promised this is about to change.

Engel said the company believes that the leasing option will be of value to farming clients, and in particular to those expanding dairy operations with strong cashflows.

New Zealand's herd of dairy cows is estimated to be worth US$7.83 billion, an increase of 63 per cent over the last 12 months.

In 2005/06 the national dairy herd was US$3.83 million strong. For the 2006/07 season it had grown to US$3.92 million. At the same time the average value of a single dairy cow rose from US$1,250 to US$2,000, making the capital value of an average dairy herd worth between US$650,000 and US$700,000.

Peter Engel says the PGG Wrightson Livestock Lease Plan is designed as an operating lease, enabling the full cost to be tax deductible. For many farmers this offers tax advantages.