Dairy Boom Pushes Up Farm Prices
Posted on: Friday, 9 May 2008, 15:00 CDT
By REICH, Josh
Increasing milk payouts and Nelson's sunny weather are helping the region cash in on a nationwide boom in dairy farm prices.
Since last October, dairy farm prices have hit record levels. In Southland a farm sold for $29.3 million, while others have sold in mid-Canterbury for $19.2 million, Hawke's Bay $14.5 million, and Taranaki $9.45 million.
The median price for a dairy farm is more than $4 million, $550,000 higher than late last year.
Sales are also at a record high.
Bank of New Zealand chief economist Tony Alexander said a record 272 farms were sold in February, up 77 percent on the same period last year.
He described the sector as "booming".
In the Nelson region, 23 farms sold during February. This is seven fewer than February 2007, but the average sale price jumped from $745,000 to $1,585,000 in the same period.
Dick Bennison, a rural property valuer with Duke and Cooke, said since Fonterra increased its payout to dairy farmers last year, land in the Nelson region had been in hot demand.
"There is strong demand for dairy land and there has been two or three sales recently of good dairy units," Mr Bennison said.
He said the demand for dairy land was a reflection of what was happening in the dairy industry. Earlier this month Fonterra increased its forecast payout to farmers to a record $7.30 a kilogram of milk solids.
"We're seeing it not only with dairy farms themselves but also with land that is suitable for what we call dairy support grazing - land that is suitable for raising heifers or dry cows or the production of supplementary feed that can be used for dairying - so any land that is of a reasonable contour and is readily accessible has become very popular," he said.
He was reluctant to give the price properties had recently sold for, but said dairy farms that may have been valued at between $19 and $24 per litre of milk solids produced last year would now attract a higher value of between $35 and $40 a litre.
Lifestyle was another attraction for people looking to buy farming land in the region.
"People who have sold dairy farms and are looking to a different location, a lot of them cite climate, particularly those coming out of Southland or the West Coast looking for somewhere with a slightly better lifestyle where they can semi-retire or get out of whatever they were doing and do something a little bit different."
Peter Evans, rural property consultant with PGG Wrightson in Richmond, agreed with many of Mr Bennison's sentiments.
He said there had been a significant amount of rural sales recently, largely driven by the dairy sector.
A property near Tapawera had recently sold for more than $4.5 million, and another secondary farm had sold in excess of $3.5 million.
He said dairy farmers looking for extra pasture to graze replacement stock were keen buyers, as were those from outside the region looking to "relocate to the warmer climes of Nelson".
However, life down on the farm is not so easy for sheep and beef farmers, according to Nelson Federated Farmers president Edwin Newport.
He said a number of sheep and beef farmers in the region had been selling their properties as they had had enough of low prices and were "cashing up their assets".
But Mr Bennison said despite the low returns, there was still interest in land suitable for sheep and beef farming. "Pretty much any substantial farming property that comes on the market at the moment has strong demand for it."
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(c) 2008 Nelson Mail, The. Provided by ProQuest Information and Learning. All rights Reserved.
Source: Nelson Mail, The
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