New form of investment: beef syndicates

Press, Volume CXI, Issue 32639, 22 June 1971, Page 25

New form of investment: beef syndicates

A company with the ai mof atracting outside equity capital in the farming sector through the popular syndication concept has recently been established in the South Island.

The Grazing and Export Meat Company, Ltd, intends to play a big role in the rational development of beef production. Apart from attracting equity capital, the syndication of beef production may help farmers who are unable to switch because of the high capital cost of cattle. Production will be integrated through a chain of syndicates stretching from the back-country breeding herd through to final marketing ofthebeet

The idea began' as a cooperative diversification venture by a small group of West Otago fanners, but it has grown to a company with the aim of providing the management for syndicate investment in cattle breeding. The company is confident that investors in beef syndicates it sponsors will get a better return on their capital than they would get from say, real estate syndicate schemes.

The company itself dot not own cattle or land; it manages cattle owned by syndicates, through grazing contracts with farmers. The cattle are moved round the properties of the contract fanners depending on the seasons, to obtain maximum growth. The grazing contracts are incentive contracts, with the grazing fee linked to the cattle’s gains in weight. The company keeps a close eye on the condition of the beasts; it provides all services, including veterinary services, and has mobile weighing stations to check the cattle’s progress. The contract grazier’s only responsibility is to see that the cattle are fenced and fed on the basis agreed upon with the company. The low labour requirement could be attractive to some farmers, as they need no capital—only the right kind of land and feed at the right time. Trouble is minimised by the regular calls of the company’s field staff. If drought or other conditions make weight gains impossible, the system allows the termination of the contract and the transfer of the cattle.

There are basically two types of syndicates: finishing

syndicates and breeding syndicates. The finishing syndicates will initially be confined to fanner participants.

City investors are offered participation in the breeding syndicates, where returns are steadier and more easily calculated. The minimum investment is $5OO, and in further multiples of $lOO. Syndicates are, of course, limited to 25 members, and the syndicate deed allows for a five-year period, with the option of continuing the investment.

i Figures supplied by Mr G. i Thompson, the Canterbury area field manager for the i company, suggest that there : are indeed prospects of a ’ fairly high return on invest- ; ment In addition there are considerable initial tax savI ings. i The Interests of the I syndicate members are safei guarded in various ways. ’ Cash profits are returned to s investors annually, together : with an audited statement of i the syndicate accounts. A second article bn this > interesting form of invest- : ment will be printed tomorI row. It will examine the way r in which the system works s and analyse the costs and : benefits and potential return to investors.

Return of capital The Supreme Court has sanctioned the reduction in capital of Woolcraft-Keipper Holdings, Ltd. Shareholders passed a resolution at the annual general meeting on April 21. Cheques for the reduction payment of 50c a share have been sent out.