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Dairy farm prices have slipped back and the global financial crisis is making investors more cautious but agriculture is still a long-term play, say economists.
The Real Estate Institute of New Zealand said the median price for dairy farms for the three months to September was $4.5 million,
down from $4.65 million in the period ending August, but more than double the $2.06 million in September 2006.
The institute said dairy farm sales and prices were relatively firm in September despite a drop in milk payouts to dairy farmers, with 55 farms changing hands in the period, down from 67 to August.
The total number of farm sales of all types was 516, compared with 430 to August, with a median price of $1.67 million, down from $1.74 million in August.
Institute rural spokesman Peter McDonald said it was traditionally a slow time for sales.
"There's a little bit of a wait and see attitude out there," McDonald said. "Despite the lower milk solids payout announced by Fonterra, there is still confidence in the sector and it needs to be remembered the reduced payout announced is still considerably higher than it was a couple of years ago."
Fonterra last month cut its forecast payout to farmers for the current season from $7 to $6.60 a kg of milksolids, compared with $7.90 and $4.46 for the previous two seasons.
Westpac economist Doug Steel said the extreme global volatility meant projections had a wider degree of forecast error, including fertiliser costs, commodity prices and the dollar exchange rate.
"Even if the numbers work the confidence around those numbers working is a little bit lower," Steel said.
Farms being converted to dairying would continue although probably not at the same rate as when the payout was higher.
"Really high volatility is just not good for business investment, whether it be new plant machinery, farm investments or commercial property," Steel said.
National Bank rural economist Kevin Wilson said agriculture was a long-term investment where people generally rode the waves.
"You can buy a farm this year and sell it next year but you can buy shares today and sell them tomorrow," Wilson said.
"It [financial volatility] might make people think a little harder but the dairy returns in particular are an average 12-month selling season and the amount of milk sold in the last fortnight relative to total production is relatively small."