Farm prices still rising despite milk price slump

REINZ's Dairy Farm Price Index rose by 6.9 per cent in the three months to April compared to the three months to March.

Farm prices have continued to rise, despite the near halving of milk prices over the last year, according to Real Estate Institute of New Zealand (REINZ) data.

The institute's Dairy Farm Price Index rose by 6.9 per cent in the three months to April compared to the three months to March. Compared with March last year, dairy farm prices were up by 15.5 per cent, REINZ said.

This was despite Fonterra dropping its farmgate milk price forecast to $4.50 per kg of milksolids for this season, down from last season's record high of $8.40, because of sharp declines in the international traded price of wholemilk powder.

Farm prices in general were also higher - the REINZ All Farm Price Index rising by 1.9 per cent in the three months to April compared to the three months to March. Compared to April 2014 the REINZ All Farm Price Index rose by 0.8 per cent.

"In contrast to the very topical discussions relating to the reduction in the dairy payout, beef prices remain strong, good properties continue to sell at values deemed fully firm, and large areas around the country are experiencing excellent autumn growing conditions," REINZ Rural Spokesman Brian Peacocke said.

"Unfortunately for those in parts of Canterbury and further north, drought conditions still prevail," he said.

REINZ said 1798 farms were sold in the year to April, 2.8 per cent fewer than were sold in the year to April 2014.

The median price per hectare for all farms sold in the three months to April was $28,668, up 16.7 per cent from $24,574 recorded for the same period last year.

REINZ said there was strong sales activity in the greater Waikato region for dairy and grazing properties where values for the better farms were holding well.

There was a big lift in horticultural sales in the Bay of Plenty where investors and existing operators are competing strongly, with an emphasis on top quality production blocks rather than those with good homes, REINZ said.

Prices for such blocks currently are equal to or above pre-PSA levels - $500,000 per canopy hectare for gold kiwifruit and up to $375,000 per canopy hectare for green, it said.

Grazing properties accounted for the largest number of sales with 39.6 per cent share of all sales over the three months to April 2015.

Dairy properties accounted for 20 per cent, finishing properties accounted for 15.9 per cent with horticulture properties accounting for 15.1 per cent.