Landcorp won't renew sharemilking contract with Shanghai Pengxin in 2017

Landcorp, the state-owned farming company, will end its five-year relationship with Shanghai Pengxin next year, saying it wants to focus on other areas of growth and won't renew its sharemilking contract.

Chief executive Steve Carden said that as part of its new strategy, the company is focusing on areas of growth such as its Pamu brands farm products, its investment in a sheep milk joint venture and wool supply to Danish shoe manufacturer Gleryps.

"Landcorp has worked hard with Shanghai Pengxin and is proud of what the partnership has achieved, turning around 16 poorly performing farms," Carden said. "The Landcorp team on the ground have done a terrific job."

Pengxin entered the New Zealand dairy market with the controversial purchase of the Crafar farms in 2012 and has since added a 74%  stake in Synlait Farm Holdings, which has 3942 hectares of prime dairy farms in central Canterbury, and signed a supply and purchase agreement with Miraka for ultra-heat treated milk for the Chinese market.

But its expansion plans for New Zealand have faltered after the company was knocked back in its application to acquire the Lochinver Station in the central North Island. Another Pengxin unit, Dakang New Zealand Farm Group, withdrew an application to buy seven dairy and three support farms in Northland from Pinny Farms, the region's largest milk supplier, last October. In January, former Fonterra executive Gary Romano resigned from Pengxin.

Mr Carden had been keen on an expanded relationship with Pengxin as recently as 2014 when he described the partnership as "a very positive one" and said he would be keen to discuss a management role for Lochinver if that deal was approved.

The sharemilking contract expires in May 2017. Landcorp would continue to manage the Pengxin farms over the next 18 months "and is committed to ensuring a smooth transition of the properties including stock and staff at the end of May 2017," he said.

The two companies said they wouldn't rule out teaming up again in future.

(BusinessDesk)