Dairy farm values steady, future growth expected despite challenges

Peter Newbold, General Manager Livestock & Real Estate for PGG Wrightson.

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Dairy farm values have grown since 2014, but perhaps not at the impressive rate expected.

The median price for dairy farms in 2014 was $36,700 per hectare, and last year it was $38,700.

The Country’s Jamie Mackay asked PGG Wrightson’s General Manager, Livestock & Real Estate, Peter Newbold, if a $2000 capital gain wasn’t enough.

Newbold said the numbers “told a story,” but he remained positive about the future.

“I do think this coming year we’ll see a little bit of movement up,” he said.

“How much, I’m not sure, but there is definitely demand out there.”

There were $4 billion in rural sales in 2014, and $1.5 billion of that was from dairy.

Newbold said 2019 painted a different picture.

“Everything dropped off a cliff to where we’re about $2.6 billion.”

Things were looking up, though.

“Interesting in this last year that’s gone, we’re back up around $2.9 [billion] and nearly $1 billion in dairy.

“So, there’s definitely a trend there heading up, and I actually think over the next 12 months, we’ll see a move beyond $3 billion and head up, maybe, to where it was.

“There’s plenty of movement out there, and I think it’s good for the industry.”

Newbold said farmers bought land for yield rather than capital gain anyway.

“I think if you’re coming into a farm today, really you’ve got to look at the return and not what it may be worth in five or six years’ time.”

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He said there was genuine interest in dairy farm sales, but it was not without its challenges.

“Will there be enough to meet the demand out there?

“But [interest in sales] has definitely started earlier, which is good.”

Mackay asked about dairy conversions and whether they were affecting sales.

Newbold said there was speculation about this, but he reckoned the situation wasn’t that simple.

“I think the numbers at the moment, as I see it, are at single digits.

“Will it gain momentum? Yes - but to what number?”

Newbold said some would go through the process and end up not converting anyway.

“[They could] use it as a feature to sell their property in the future.”

Despite some mixed trends over the past decade, the outlook for dairy farm values remains positive, with activity building and confidence returning to the market.

Explore rural listings, insights, and market commentary at pggwre.co.nz, and connect with a team that understands the realities and opportunities in New Zealand’s farming sector.

Also in today’s interview: Newbold talked about activity in the horticulture sector and the IHC Calf and Rural Scheme.