The dairy boom appears at an end.
Dairy farm prices have eased 10 to 15 per cent in recent weeks on the back of tumbling international product prices and concerns Fonterra may further lower this season's payout.
Some real estate companies have gone 10 weeks without completing a
dairy farm sale, as vendors and purchasers stand off waiting for the market to find a new level.
Southern Wide Real Estate director Dallas Lucas said sales of dairy farms had now resumed, and he expected to complete some transactions in the next few days, with five offers under consideration for Southland dairy farms.
However, farms that in August were selling for $40 or more for every kilogram of milksolids produced were now fetching between $35 and $38 per kilogram.
Lucas said the market was likely to settle at that level.
Fallout from the global credit crunch, and then Fonterra late last month dropping its forecast payout for this season from $6.60 per kilogram of milk solids (kg/ms) to $6, had made buyers and vendors nervous.
Lucas said there were also more dairy farms for sale than there had been in the last few years.
In August 2007 he had eight dairy farms on his books. In the same month this year he had up to 30 - some exceptional properties, he said.
While Fonterra had forecast a $6 kg/ms payout, Westland Milk Products had talked about an end-of-season payout of $5.20 to $5.60 kg/ms.
Even though the industry had been waiting for a correction, it was quicker and larger than expected.
"It's not a disaster, it's just that we've been used to something better in the last couple of years."
Since July whole and skim milk powder prices had almost halved.
While there were buyers looking for properties, Lucas said their profile had changed, with fewer inquiries from business people looking to invest in the industry.
- OTAGO DAILY TIMES
