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Farm sales plummet in July; Dairy farm sales down 78% from 2008
Farm sales have ground to a virtual halt as the slide in the all-important dairy payout has forced both banks and farm buyers onto the sideline.
Nationwide farm sales slumped to 52 in July from 80 in June and 154 in July 2008, while dairy farm sales crashed 78% in July to 5 from 23 in July of both 2007 and 2008.
Total July farm sales were 70% below the average July month for the previous four years. This compared to June sales being 60% below the previous four years' average and March sales being 62% below their average.
The average drop in nationwide farm sales between the June and July months for the previous 6 years was 10.8%, but it was 37.5% this year.
The Real Estate Institute of New Zealand (REINZ) releases farm sales figures for three month periods. Their figures show 229 farms sold in the three months to July from 285 in the three months to June and 601 in the July period a year ago. At interest.co.nz we also separate sales out for each individual month.
There were 40 dairy farms sold in the REINZ's July period at a median price of NZ$3,419,104. This was up by NZ$400,000 from the June period when there were 55 sales, but down from NZ$4,200,000 a year ago when there were 89 sales.
REINZ rural spokesman Peter McDonald said with the 40 dairy farms changing hands in the period, the national average price of NZ$41 per kilogram of milk solids and more than NZ$35,000 per hectare was a good result.
McDonald said the average size of dairy farms sold in the period was 147 hectares with production on average of 904 kilograms of milk solids per hectare.
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"It's good to see the season finish on a consistent note," McDonald said. "Despite all the gloomy predictions, the average figures we're seeing are good news, especially combined with encouraging news such as the 25 percent increase in powder sales reported by Fonterra," he said.
The REINZ median farm price for the three months to July was up slightly from June at NZ$1,200,000. It was down from NZ$1,800,000 in the July 2008 period.
I wonder if this is
I wonder if this is partially a sign of over-capacity....we now have too many farms making milk, so the price will collapse....it will stay that way until excess capacity leaves the market, or the market picks up....either way this seems to suggest a tough number of years for farmers....
Good old Ambrose talks about factory over-capacity....
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/603530...
However for me ppl still need to eat and global population is a staggering 6 billion...I really dont understand why food demand collapses so far. To me if you need food you have to get it, or you starve, so its an essential, a colour TV isnt....42inch colour TVs at $500 I can see....50cents a litre of milk? surely not.
regards
regards
Yes, was talking to a
Yes, was talking to a west Coast diary farmer over the weekend - he's not figgering that any tax payments will be needed for a year or three. So Gummint tax receipts will not look great, either.
Could be that "we" just
Could be that "we" just need to get back to eating sufficient, not excess, Steven.
"U.S. Food Consumption Up 16 Percent Since 1970. The total amount of food available for each person to eat increased 16 percent from 1,675 pounds in 1970 to 1,950 pounds in 2003"
http://www.ers.usda.gov/AmberWaves/November05/Findings/USFoodConsumption...
...speculation on food prices drives
...speculation on food prices drives the price up. Thus the "crash" is not due to collapsing demand of the good, just the investment.
On the other hand, as people become richer they demand more food.
Dairy products were never a
Dairy products were never a staple of the Asian diet. The dairy 'boom'was predicated on all those Asians consumers dumping their traditional breakfasts of sticky rice etc for milk, yoghurts etc. Guess what - in a recession they can and will go back to the basics.
All this talk about 'food being an essential', 'people will always need food'etc is just mindless babble unless you consider WHAT TYPE OF FOOD. Here in NZ we have largely switched to the production of 'luxury' dairy products (produced with a lot of energy input etc). It will not prove to be a great decision.
Your food 'essentials' if you want to call them that, are the grains and root crops (the starchy, carbohydrate rich basics), and to some extent vegetables. High end dairy products such as butter and cheese are NOT essentials.
We talked about this 12 months ago on this very blog, so it most certainly is not a case of hoocooodanode.......
where does this leave meat.An
where does this leave meat.An essential luxury?
marcf : Do we now
marcf : Do we now include domestic cats and dogs in our collective herd of meat product animals ? ......... Budgies count as poultry ?
Markf - where does this
Markf - where does this leave meat.An essential luxury? - No a Meat is byproduct of the Milk.
Sorry what I meant is
Sorry what I meant is would a rapid change from milk to beef cause more problems or be a good solution .I mean using the cows milk to nourish a calf to then become a steer sounds logical , and kinda natural lol
Pet dog is certainly way
Pet dog is certainly way cheaper than eye fillet! Rack of chihuahua anyone?
I've got an old spaniel
I've got an old spaniel if anyone feeling peckish
Households everywhere are waging a
Households everywhere are waging a war on waste and now prefer to source locally grown produce in favour of exotic imported products. People are spending less at restaurants - which typically have much waste (and why they go out of business so quickly). Menus are also changing to include smaller portions of protein from cheaper cuts (even in USA). It's not that people are starving they are just reverting back to basics (which is probably healthier for them and the planet). You'd assume that dairy and meat would become cheaper on the local market while excess capacity is removed???
Except the supermarkets margin get
Except the supermarkets margin get better
Marcf - that is a
Marcf - that is a problem that is peculiar to NZ - food prices have dropped in the UK. Is it those Aussies again?
"a rapid change from milk
"a rapid change from milk to beef ".....would be the dairy farmer sending his cows to the meatworks.
@ 10% increase in the NZ dairy cow kill = 400,000 extra cattle processed = lots of cheap burgers, and lots of poorer farmers. This will lead to lots of spare grass which will cheapen the price of land which is what is happening.
Also humanity generaly doesn't eat carnivores (like dogs), mostly just herbivores (like cows) and some omnivores (like pigs) that don't get fed much meat anyway. This is why most of the population are, what I call, "indirect vegitarians" i.e. people that only eat vegitarian animals.
lovely
Andy, I agree in part
Andy,
I agree in part but "Asia" covers a lot of countries and its possible that the demand response from the Indian Subcontinent may be very different from NE Asia.
In the short term there could be problems but over the medium term if I were to wager a bet it would be that a rising middle class in China will demand meats and fish and that value added dairy products could do well in places like India.
This article is more evidence
This article is more evidence that the banking sector has shut up shop in the lending department - alot more than they are admitting.
Milk: It was dubbed white
Milk: It was dubbed white gold in 2007 when dairy farmers started to see record returns from their cows.
Less than 2 years later, a slump in commodity prices has hit dairy farmers in the pocket.
Once thought to provide insulation to the New Zealand economy from the global financial crisis there are now fears parts of the sector may be going bust.
What's in store for farmers and what will be the knock-on effect for the rest of the economy?
Economics Correspondent, Nigel Stirling explores the prospects for the dairy industry and what it might look like in the post credit-crunch world.
http://www.radionz.co.nz/audio/national/inst/2009/08/insight,_sunday_16_...
Speaking of dairy farm financial
Speaking of dairy farm financial sustainability, check this out.
1. The obvious "“ at least 20% of NZ's dairy farm production can not, and will not ever, meet their debt servicing commitments even under the most promising payout and interest rate scenarios.
2. Reduced stability of the NZ financial system. Banks are continuing to lend taxpayer guaranteed funds to farms with no prospects of ever repaying the debt. That would appear to be high risk and reckless in terms of the financial stability of the banking system. That risk exposure is flowing through into higher bank charges and interest margins as banks struggle to retain profitability and/or viability.
http://www.agprodecon.org/node/90
Jamesey - that was scarey.
Jamesey - that was scarey.
The $41 average per KG
The $41 average per KG milksolids is, I suspect, the reason the sales volumes are so low. $41/KG is about where the average price was a couple of years ago before the 18 month boom in dairy prices and with all the bad news coming from the dairy farming sector I am suprised dairy farm prices are still this high.
You got it Jamesey, the
You got it Jamesey, the banks will shift the losses onto the backs of their residential mortgage holders. All good sport for John's old mates and it should guarantee those fat party donations keep coming. I wonder how many of Clark's supporters have woken up to the fact that when they pay the bank its big fat wad of interest on the massive mortgage on the bog standard house that now costs twice what it did at the start of Clark's era, a chunk of the wad is bound to find its way into the National Party election war chest! Well done Helen.
Wally, enough with the 'Gnat's
Wally, enough with the 'Gnat's mates' riff.
/rant on
The previous lot spent the best economic years we will ever see, paying off their constituency with OPM. Lobbying is a fact of life, whatever the party in power, and to suggest that somehow the ground has shifted is simply risible. It's just BAU.
Face it: in our current situation, as in foreign policy, there are only really bad options, and even worse ones. There aren't any good ones.
Stick to commodities speculation and hope that IRD (motto: "by their IP shall ye know them") haven't noticed...
/Rant off
What can I say 'YOU
What can I say
'YOU AINT SEEN NOTHING YET'
$41/milk solid. Gag. These are
$41/milk solid. Gag. These are farm purchases that are reliant on oil staying at current prices for the next 30 years (life of mortgage). Duh. Exactly what is going to happen when it becomes too expensive for the tanker to do a daily or two daily pickup. When Nitrogen again hits the highs of over $1400. Superphosphate hitting the stratosphere over $700 per tonne. We saw these prices 12 months ago, as dairy started to tumble. Banks are taking punters money to slowly lever their way out of the crap they have got themselves and farmers into. Wake up farm buyers. I go with AndrewJ, we aint seen nothing yet.