In recent years there has been an increase in the number of investments being made in dairy farms within New Zealand. Could this be a by-product of some form of fashionable trend among local investors? Hardly; these types of investments have become such an attractive option through a combination of potential growth, sustainability, and the wealth of experienced equity managers within the industry. When combined, these factors create a compelling case for investing in the dairy industry.
Perceived Potential – Breaking the Glass Ceiling
Many dairy farms are being run well below their optimal level of efficiency. That is not to say they are not profitable or productive, just that there is often an enormous potential for growth. Tapping into this potential through capital development is what drives investments in dairy farms. By streamlining performance through a combination of tightening up existing practices and expanding upon output, investors have the opportunity to see greater returns.
Unlocking this potential could be a matter of investing in new equipment, increasing livestock numbers, refining the supply chain process, or a combination of all of the above. What exactly it is that this particular dairy farm needs will vary on a case by case basis, with the constant factor being the room for improvement. Of course there will be some that are operating at close to their maximum capacity, but with so many that could use that extra push the opportunities for prudent investment are plentiful.
Sustainability – Feeding the Need
Another central reason why this sort of investment has proven so popular is the inherent sustainability of the industry. At its core, every industry operates on the simple premise of supply and demand; where demand facilitates supply, opportunities for investment will arise. Dairy farming has been around for centuries, and unless human beings start making dramatically different choices in their diet it will continue to be a necessary part of our existence.
Looking at things from the investor’s point of view, knowing you are putting capital into an industry that will not suddenly lose its relevance is half the battle. In this sense, dairy farms make for safe investments; since overall demand is unlikely to fall away, success is entirely in how you choose to operate your farm.
Experience Counts for Everything
Since dairy farming is such a developed industry within New Zealand, there is no shortage of experienced equity managers who can help get the most out of your investment. With an intimate knowledge of how the industry operates, these managers will be better able to determine what areas of practice are most in need of investment. Having this sort of helping hand can be invaluable in ensuring you milk greater returns from the process.