With Christmas just around the corner and the start of summer, we have just seen the single largest change in the dairy industry since the formation of Fonterra, and that is the launch of Trading Amongst Farmers.
With its large demand we have seen great interest and uptake of the economical units and a lot of discussion on the benefits of the ability to trade these rights, whether many farmers will take up the opportunity, and what effect an increase in the share price will have on land values.
This year, people looking to purchase a farm in Taranaki have had a greater selection in all areas and size with several 300-cows or bigger operations on the market, which have been scarce in the last couple of years. With the increased numbers of properties to purchase, buyers have had more options and time to make decisions which have led to a low number of sales completed to date. But, as the season progresses, several of these farms are now selling after further negotiations.
Enquiry for dairy farms has been very strong with the most positive aspect being the number of first-farm buyers (up on the previous season) creating the demand up the chain. Sales this far have been in line with the previous season, while the cash flow on all operations is behind last year making day-to-day operation tight. However, the fundamentals of borrowing and the forecast and outlook on the commodity prices remain firmly positive.
Several dairy support properties have been offered for sale this season, but the traditional buyers - share milkers and farmers - have been reluctant to commit as the cost of grazing has generally been competitive. This has left an opening for graziers presently to find some very good buying to expand their business with quality property available for purchase.
On the sheep and beef side, we are still experiencing strong demand for economical units in excess of 3000 stock units, but the supply side has been limited by the properties offered for sale, either lacking in size or quality. Looking forward, it is positive to see young buyers prepared to purchase with many requiring little support from families as the banks seem to be very active in lending again.
In a nutshell, it's a good time to be buying a dairy farm as the selection offered can satisfy most budgets and the opportunities are there. Looking forward to the New Year, the number of farms for sale looks to remain steady and with the changes to share supplied, it could make it a lot harder to become a fully paid-up supplier to Fonterra in the future with dividends rights as other overseas examples have shown.
Merry Christmas and a happy New Year.
Matthew is from Matthew & Co Real Estate Ltd