NZ dairy farm sales plummet, prices weaken, despite firm outlook

The number of dairy farm sales have plummeted in the last two years. Photo / Bay of Plenty Times

The number of dairy farm sales has plummeted over the last two years, despite firm farmgate milk prices, REINZ said.

REINZ also said the median price per hectare for dairy farms has fallen by 22.1 per cent over the past 12 months.

The institute's rural spokesman Brian Peacocke said sales data for the three months ending in November confirmed a slight increase in farm volumes compared to the recent October period, but there was a significant reduction in volumes for the same period in 2018 - (down 16 per cent) and in 2017 (down 11 per cent).

The standout was the dairy category, which was down 55 per cent on the equivalent period in 2018, and down 83 per cent on the 2017 figures.

This was despite an improved farmgate milk price forecast, a favourable winter and a good spring in most dairy regions.

Fonterra this month lifted its farmgate milk price to $7.30 a kg, which would be the fourth-highest price in its history.

The forecast range has shifted up to $7.00 to $7.60 per kg, up from a previous forecast range of $6.55 to $7.55 per kg, and lifting the mid-point by 25c to $7.30/kg.

Peacocke said the decline in dairy farm sales appeared to be driven by "inexorable advances" in compliance regulations and costs.

Secondly, the "Achilles heel" for the dairy industry – the availability and quality of labour.

"Thirdly, and most significantly, the tightening of credit in the banking sector and the apparently acknowledged directive from within the Australian-owned banks to dramatically reduce their exposure to the dairy industry," he said.

Peacocke said it appeared greater returns for the banks could be generated from increased investment in the residential and commercial sectors, hence the downward pressure on the availability of funds for the agriculture sector, and made worse by the Reserve Bank's requirement to increase capital reserves.

"In the meantime, record prices continue to be generated for output from the beef, lamb, mutton, venison and horticulture sectors which have also benefited from a great spring," he said.

Accordingly, demand for such properties remained strong, he said.

"Contrary to such logic, it is only the cautious dairy sector that is currently struggling in terms of sales, land values and demand, with a bare eight sales of dairy farms throughout New Zealand for the month of November 2019, compared to 30 in November 2018 and 36 in November 2017," Peacocke said.

The REINZ All Farm Price Index rose 1.3 per cent in the three months to November 2019 compared to the three months to October 2019.

Compared to the three months ending November 2018 the REINZ All Farm Price Index fell by 1.4 per cent.

The REINZ All Farm Price Index adjusts for differences in farm size, location and farming type.

For the three months ended November 2019, the median sales price per hectare for dairy
farms was $39,678, compared to $41,204 (11 properties) for the three months ended October 2019, and $50,964 (36 properties) for the three months ended
November 2018.

The median price per hectare for dairy farms has decreased 22.1 per cent over the past 12 months. The median dairy farm size for the three months ended November 2019
was 104 hectares.

The REINZ Dairy Farm Price Index fell 0.6 per cent in the three months to November 2019 compared to the three months to October 2019.