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NZ dairy farm prices recover as sales volumes improve overall, REINZ says

Thursday 15th December 2016

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New Zealand farm sales rose 7.4 percent in the three months ended Nov. 30 and there is room for cautious optimism in the rural market, according to Real Estate Institute data.

There were 447 farm sales in the latest three months, a 7.4 percent increase on the same period a year ago. Annual sales rose 1.9 percent to 1,803, although 21 percent fewer dairy farms and 6 percent fewer grazing farms sold over the same period.

The median price per hectare for all farms sold in the three months to November was $26,348, down 8.1 percent on the same quarter in 2015. However, the All Farm Price Index, which adjusts for differences in farm size, location and farming type, rose 4.9 percent in November from a year earlier.

Dairy farm prices recovered somewhat in November, with dairy prices picking up over the quarter. Milk processors have raised their milk price forecasts this month following a 74 percent increase in the price for whole milk powder on the GlobalDairyTrade platform since early July. Production has declined in key exporting nations like New Zealand, Australia and the European Union, and demand from major markets like China is picking up.

The REINZ Dairy Farm Index gained 1.7 percent in the three months to November compared to the three months to October and improved 4.1 percent compared to November 2015.

REINZ rural spokesman Brian Peacocke said the increased sales reflected improving conditions in the rural market, "but the predominant comment in the marketplace is that a mood of caution prevails."

"This is evidenced by detailed pre-purchase due diligence investigations, and a level of concern amongst purchasers regarding volatility of income," Peacocke said. "Whilst the increase in the milk pay out is great news and has extended the lifeline for some, it is clear financial institutions are maintaining expenditure restrictions on their client base, and as would be expected, are insisting on fiscal prudence. The above factors are contributing to a lack of confidence in some areas."

For the three months ending November, the median sale price per hectare for dairy farms was $47,385 with 45 properties sold, compared to $40,716 for the three months ending October.

Ten regions recorded increased sales volumes in the November quarter compared to the previous year, with Otago the highest, followed by Northland and Canterbury. In Otago and Canterbury, dairy volumes were light but the finishing, grazing and arable sectors did better.

Grazing properties accounted for the largest number of sales at 36 percent in the three months to November, while finishing properties accounted for 24 percent, horticulture properties 16 percent and dairy properties 10 percent. The four property types accounted for 85 percent of sales in the quarter.

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