Property matters: Farms prices tipped to hold steady

The dry weather is expected to have an impact on the cash flow of farmers. Photo / Supplied

Drought will hit farmers' general spending harder than the property market, says rural market expert.

New data out shortly could show if the severe drought is having an effect on farm sales but one expert believes farmers' general spending will be hit harder than volumes or prices of property deals.

Brian Peacocke, REINZ rural market spokesman and a farm sales specialist of licensed agents Pastoral Realty with offices in Te Awamutu and Cambridge, said he was keen to get the new figures, due out in the next few days, which he said might be particularly telling.

"The drought hasn't affected the South Island areas the same as the North Island," Peacocke said.

"We're about to get the next set of figures for March and I think they will show the volume of sales has been okay and prices are steady," he said.

"But the drought will inevitably have a major impact on the North Island and it will show itself in cash flow. Farmers will be spending less."

Many Waikato dairy farmers were drying off their herds early to cope with lack of feed but Peacocke said he had seen no evidence that farmers were considering selling due to the drought.

"The effect of the drought will be on cash flow rather than sales. There are no more farms [than normal] going on the market, we're not going to see that," Peacocke said.

In fact, farmers had been particularly encouraged by some rain lately, he said.

"The rain has been variable in a number of areas, in-so-far-as where we are midway between Hamilton and Cambridge.

"It's not sufficient to turn the drought around because temperatures have remained very high," said Peacocke who is the founding shareholder, managing director and principal of the business.

North Island feed supplies were extremely limited and farmers were buying hay, straw and wrapped silage, Peacocke said.

"There's no record where it's coming from but if they're buying it from the South Island, it means supplies in the North Island are limited," he said. "Farmers will buy it as locally as they can but as the feed supply tightens, they're forced to go further out."

The most recent farm sale data released in March showed the REINZ All Farm Price Index falling by 3.3 per cent in the three months to February compared to the three months to January. The index was down 9 per cent compared to February last year.

Seven regions recorded increases in sales volume for the three months to February compared to the same three months to February last year.

Auckland recorded the largest increase in sales compared to last year, with a rise of 17 deals, followed by Nelson (up 16 sales) and Waikato (up 11 sales).

Seven regions recorded decreases in sales volume with Canterbury recording the largest fall (down 16 sales), followed by Manawatu/Wanganui (down five sales) and Southland (down three sales).

"In spite of climatic conditions affecting the greater part of the North Island, there has been good demand for dairy units throughout the country, particularly for well irrigated properties in Canterbury," Peacocke said.

The figures, released on March 19, showed grazing properties accounted for the largest number of sales, accounting for 44.6 per cent of all deals, in the three months to February.

Dairy properties accounted for 20.3 per cent, finishing properties 18.7 per cent and horticulture properties 7.9 per cent of all sales, REINZ data showed. Together, these four property types accounted for 91.6 per cent of all sales during the three months ended February, REINZ said.

Farm prices

•All farms: $21,951/ha.

•Dairy farms: $33,254/ha.

•Grazing farms: $12,900/ha.

•Horticulture farms: $118,371/ha.

[Source: REINZ median sale prices for the three months to February]