Feds wary of expensive dairy as NZ farm prices, sales climb in December

Conor English

Lobby group Federated Farmers fears dairy farms have become too expensive as the latest figures show sale prices and volumes remained strong in December.

The median dairy farm sale price climbed 11 percent to $38,267 per hectare in the three months ended Dec. 31 from the same period a year earlier, with a median farm size at 112 hectares, according to the Real Estate Institute. That compared to a median price of $24,163 per hectare for all farms.

The volume of dairy farm sales almost doubled in the three month period to 121 from 63 properties a year earlier, bolstered by 62 farms changing hands in the month of December alone.

"Land prices associated with dairy have lifted hugely," Conor English, Federated Farmers chief executive, told BusinessDesk. "Internationally our dairy farm values are getting right up there, it's great if you're selling, but not if you're trying to buy."

New Zealand's dairy sector is seen as a lynchpin in the economy's momentum this year as surging international prices for milk products on strong demand from Asia has helped push up the nation's terms of trade to a four-decade high.

Last November the Reserve Bank warned of the risks associated with increased agricultural debt, which is largely concentrated in the dairy sector. The report cautioned farmers not to take on more debt on the assumption of consistently high commodity prices.

"Debt levels in the rural sector have ticked up," English said. "If people are increasing debt to increase production then that's okay, but debt that's from people trying to buy more land, that's a concern."

English said farms were continuing to expand with stock units growing while the number of actual farmers declined.

"Often its neighbours buying up neighbours land, that will often be the first port of call for any real estate agent. So farm size has gotten bigger over the last 20 years." English said.

Today's REINZ figures show a 20 percent lift in all farm sales to 554 in the three months ended Dec. 31, from a year earlier. The annual number of sales was also up by 20 percent to 1,756, the biggest turnover for a 12-month period since February 2009.

The REINZ All Farm Price Index rose 4.9 percent for the December period, compared to the same three month period 12 months earlier.

Grazing properties were the predominant type of land sold, accounting for 43 percent of all sales, while dairy made up 22 percent of sales.

Horticulture farms were the most expensive, with a median price of $141,134 per hectare, with the median farm size of five hectares sold.

Across the regions Otago saw the largest increase in sales, followed by Southland and Waikato. Nelson, West Coast, Auckland and Gisborne all saw a decrease in sales.

(BusinessDesk)

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