Jamie Gray is a business reporter for the NZ Herald

Depressed milk price brings farm values down

Dairy farms fell to $33,897 per hectare for the three months to March. Photo / Mark Mitchell
Dairy farms fell to $33,897 per hectare for the three months to March. Photo / Mark Mitchell

Low milk prices continued to weigh on dairy farm prices in the first three months of the year, according to data from the Real Estate Institute of NZ.

The institute said the median sales price per hectare for dairy farms fell to $33,897 for the three months to March, compared with $37,761 in the same period last year and $36,687 in the three months to February this year.

The median dairy farm size for the three months to March was 121ha.

Across all farms, the Real Estate Institute of NZ (REINZ) said, the median price per hectare in the three months to March was $27,202 compared with $27,957 in the same period last year.

ASB Bank rural economist Nathan Penny said the data showed prices responding to very low farmgate milk prices, but there were pockets of strength.

"Going on our own data, from our own networks, there are two tiers emerging.

"In the less dairy dominated regions where land is not the greatest for dairy farming - Northland for example - prices have come off, whereas in the more traditional areas of Waikato, Taranaki and Canterbury, prices have held up much better," Penny said. "Prices are holding up quite well, particularly considering the low milk price," he said.

ANZ agri-economist Con Williams said the fall in farm prices, against the background of record prices in 2014/5, looked orderly. He said it looked like the large scale, more marginal "class C" style properties were probably making up the majority of transactions.

The REINZ data follows the Reserve Bank's "stress test" last month which showed the banking system was robust enough to handle the current dairy sector downturn.

The bank said low global milk prices were generating significant financial pressure for dairy farmers, with around one half of the dairy sector experiencing a second consecutive season of operating losses.

The institute's rural spokesman Brian Peacocke said the data indicated an easing in sales volumes for most categories of rural property, with the exception of horticulture.

"While in general terms the dairy sector is subdued, isolated sales of good quality farms at very good price do reflect optimism in the longer term future of the industry," he said.

In the regions, Northland continued to receive buyer inquiry for dairy farms but limited supply and sales made pricing difficult.

There was evidence of banks requiring higher levels of equity from Northland farmers. There had been steady sales of grazing stocks and strong activity in lower-value properties suitable for planting manuka for the honey industry in Northland.

In Hawkes Bay there had been limited activity due to a shortage of property. There was conjecture around the proposed Ruataniwha dam and its likely impact on prices.

- NZ Herald

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