Dairy prices up another 14.8%, on top of +10.4% 2 weeks ago. WMP prices very strong. Even bigger gain in NZ$ terms. Volumes lower

Dairy prices up another 14.8%, on top of +10.4% 2 weeks ago. WMP prices very strong. Even bigger gain in NZ$ terms. Volumes lower

The latest globaldairytrade auction has resulted in sharply higher prices.

However, volumes sold are at seasonal lows.

The auction results saw wholemilk powder prices up 21.2% from the previous auction two weeks ago.

Overall prices are up 25% in US$ terms and up over 30% in NZ$ terms.

This is the seventh consecutive gain and prices are up in US$ terms by 77% over their mid-May 2012 lows.

15,994 tonnes of product was sold, seasonally down from 21,922 at the previous auction, and well below the highest acution event volumes sold in the last year of 59,307 tonnes in early October 2012.

Meanwhile, Westpac has projected out the impact of the drought on NZ milk production over the balance of the season. While the falls from here will be steep, the heart of the season is behind us. The rapid fall-off from here is expected to result in total 2012-2013 output bcoming in only 1% below the previous record year. (See chart below.)

Summary of Results

Number of Qualified Bidders 785
Number of Participating Bidders 185
Number of Winning Bidders 82
Number of Bidding Rounds 17
Duration of Trading Event (hours:mins) 3:23
Minimum Supply (Total MT) 14,920
Maximum Supply (Total MT) 16,320
Quantity Sold (Winning MT) 15,994
Average Winning Price (USD/MT, FAS) $4,683
Change in GDT-TWI™ Price Index from Previous Event 14.8%

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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David, good to see you note the very low volume (56% of the volume at the equivalent auction last year).
I would describe that as price manipulation rather than as a seasonal low. 
Having only 10% of your customer base (20% a year ago) winning product at any auction may not be very smart, and certainly not long term.

they do, but they don't worry about it (resistence to low quality that is) - see below..

And sometimes it encoruages them to look elsewhere, and find good quality at lower, and sometimes much lower, prices. Latest USDA international dairy prices (15/03/13):
SKIM MILK POWDER (1.25% BUTTERFAT)                
WESTERN EUROPE           3375   -  3700                       
                                             (N.C.) -  (N.C.)                     
OCEANIA                  3700   -  4200                       
                                  (300)  -  (400)
Todays auction had contract 2 SMP prices (USD) :-
Fonterra:         4,485
Arla:                3,555
DairyAmerica: 3,660

9 out of 10 ppl would say volume manipulation or price manipulation.
But???? Evidence???
Bidders will definitely demand some transparency on how Fonterra setups auction volumes.

The first link is to the globaldairytrade page and link to the sales data. The second link is direct to the spreadsheet:

The data link is down somehow. Thanks for the info.
But it is just facts not evidence to prove any kinda manipulation.

As you say, facts. From which people can draw their own conclusions.

Volume not been this low since March to May period 2011 (basis the fortnightly sales).
and then there are the indexes......
Explanatory Notes
All information published on this page may be reproduced provided the user acknowledges GlobalDairyTrade as the source.

Quantity Sold is the total quantity sold in a trading event across all products, contract periods and sellers. It is intended that the quantity sold will be between the Minimum Supply and Maximum Supply for each product. The Quantity sold may be less than the Minimum Supply if the quantity bid on a product during the trading event was less than the Minimum Supply, i.e. a product was under-subscribed. The product sold may slightly exceed the Maximum Supply by a small quantity to avoid prolonging the event unnecessarily. For example, if Maximum Supply is 10,000 MT and the quantity bid is 10,005 MT, the trading event may close rather than having to conduct one or more further rounds.

 Minimum Supply and Maximum Supply  are the lower and upper bounds on the quantities the seller wishes to sell in the trading event. The Maximum Supply is also sometimes referred to as the seller’s offer quantity.

Number of Participating Bidders is the number of bidders who entered a bid in the first round of the trading event.

Average Winning Price is the quantity-weighted average of winning prices at the trading event.

The product-specific price indices (refer "Price Changes from Previous Event" table) are chain-linked Fisher indices using winning quantities at the trading event.

GDT-TWI™ and All Products TWI are chain-linked, trade-weighted Fisher indices using total international trade flows. The indices use GlobalDairyTrade prices where available and USDA Dairy Market News prices elsewhere. USDA Western Europe average price for Butter Oil is used for AMF prior to December 2009, USDA Oceania average price for SMP is used prior to April 2010, and USDA Oceania average price for WMP is used prior to August 2008. From 16 August 2011 the indices includes movements in Cheese prices.

Real GDT-TWI™ is the GDT-TWI deflated by the U.S. Consumer Price Index – All Urban Consumers, USDL Bureau of Labor Statistics.


Glossary:Fisher price index
The Fisher price index is an index formula used in price statistics for measuring the price development of goods and services, on the basis of the baskets from both the base and the current period. It is defined as the geometric average of the Laspeyres price index (which only uses the base period basket) and the Paasche price index (which only uses the current period basket). For this reason, the Fisher price index (named after American economist Irving Fisher) is also known as the "ideal" price index.
The choice of a price index formula (Laspeyres, Paasche or Fisher) in a particular case is partly determined by the data available. The Fisher price index requires more data than both others and as a result may often be impracticable.

Further information

Related methods


GDTTM trading events are conducted as ascending-price clock auctions run over several bidding rounds. In each auction a specified maximum quantity of each product is offered for sale at a pre- announced starting price.
Bidders bid the quantity of each product that they wish to purchase at the announced price. If the price of a product increases between rounds, to ensure their desired quantity a bidder must bid their desired quantity at the new, higher price.
Generally, as the price of a product increases, the quantity of bids received for that product decreases. The trading event runs over several rounds with the prices increasing round to round until the quantity of bids received for each product on offer matches the quantity on offer for the product. Each trading event typically last approximately two hours.

While GDT™ is owned by Fonterra it is operated at arm’s length, and is open to other suppliers. GDT™ is operated by Charles River Associates. To date DairyAmerica, Murray Goulburn and Arla Foods have also sold product on GDT™. Updated contractual arrangements to reflect this evolution to a multi-seller platform are in the final stages of negotiation with Charles River Associates.
Chatting to some folk the other day, they thought the GDT was just like any other "sale" of stuff. Its not just a buyers/sellers market...... Its all about volume. You change your Volume as the price is called out..

Henry, I think you will find Charles River Associates is, or at least was, part of Goldman Sachs.
The other thing I think you will find is that what you can bid for is very dependent on past bidding/purchases.

Predicting a $10/kg MS payout next season

lol!  How much of that are you expecting to be dividend, Donker? ;-)

And maybe give us a hint of at what average USD exchange rate over the season?

and as volume of milk collected falls off, the volume of value add product should decline at a faster rate... refer CO below..
What we think interesting, is given this years all farm production is almost same as last year (- 1%), how any difference in payout and dividend between the years is explained....
We posted the coles/mainland link, cause, thats not good news from August last year (so will be in this years results) and say Coles are 4 out of 10 of all Ozz supermarkets (we have not heard of any countering scale "wins" for the brands business), and from our posts you can tell we are still sore from the supermarkets taking $800m odd ANZ brands earnings 2 years ago when the supermarket fighting really started.
And we are no pleased to see F combine all Asian brands business together, we thought ANZ need be kept separate, very much beacuse of the OZ supermarkets are too big to hide from..

Drought in the states being the main factor, how much corn do they have to feed the cows? not a lot me thinks.....a good time to cull medium producers and carry breeding stock only.....
Will see the effects of this in 6 months time, when it really starts to bite. By the way milk is incredibly cheap in the supermarket, how dare people compare it to coca cola. its worth 3-4 times as much as sugary water
It cracks me up people complain about paying $5 for a 2 litre milk, but they are more than happy to take out a $500,000 dollar mortgage on a house! perspectives here people!!

We see this as the supermarkets having wrecked the market for milk, they have changed peoples perception by using milk as a loss leader (get in the store and buy all their other rubbsh).
People advertised into feeling there is more "value" in sugar water, than in milk.... Hence all the T2 folk coming on now...
There was method behind the no milk in supermarkets rules...

This time last year production on farms was way higher than expected so there was a need to put more product on GdT in order to sell it.  CEO has said at meetings that too much product was sold via the auction last year and he wants to see it come down to 20% or lower.  This year there is a drought and production at factories is falling fast.  Very fast. So perhaps what we are seeing is the inverse of last year where there may be a shortage of milk to honour existing contracts, therefore less available to auction? I spoke to a NZ based buyer and he said that they can't get cheese slices from Fonterra - they don't have any and the buyer is being forced to buy from a Fonterra competitor.  He commented on the irony of the competitors cheese being made from Fonterra's milk, but Fonterra is missing out on the value add of it.


In anticipation of lower production volumes, Fonterra has reduced the amount of product offered in next week’s Global Dairy Trade auction. This will likely support prices at the auction. Dairy Market News noted a 10% increase in butter and skim milk powder (SMP) prices in Oceania from two weeks ago. Whole milk powder 

(WMP) prices were up 14% to the highest level since May 2011, and Cheddar was slightly higher. Prices were steady to 3.8% higher in Europe, according to Dairy Market News. There too, WMP showed the strongest gains. Chinese demand for WMP is voracious, and New Zealand has supplied nearly all of Chinese WMP imports. With New Zealand production waning, other producers will likely shift more production to WMP, leaving the United 

States with increased opportunities to export SMP and nonfat dry milk (NDM) powder



Yeah at some stage the consumer is going to pay for the high value land cost.....not so much land being produced anymore but more demand.......either that or price stays where it at and people go without luxuries such as milk and butter, cheese.......man coffee and cheese scones just wont be the same!

Our heart is with you,
But we expect as international price is seen to rise, other countires production will be diverted to the export product markets F currently sells to.
Plus we have the Irish coming off quota soon, and the Ozzies talking up dairy export (and Our Sir Ralph telling them so too).
Product markets are fickle. And even giving people choice to buy is tuff.
Have a look at this:
Here you have customers telling coles it is/they are
Absolutely appalling,
PLEASE review your policy on this product.,
This is crazy,,
I am one unhappy customer.,
Wat your doing is absolutely shocking u are replacing good quality brands with your Coles brand… Which in no way even comes close to the standard of the replaced brand. I refuse to shop at Coles anymore,
Rather this move may actually hurt Australian dairy farmers. Mainland supposedly supported and sourced from local farmers. We’re being lied to but I’m unsure as to whom is telling lies..

“…commitment to buy Australian-made wherever possible”. Rubbish! It’s all to do with price and profit. It’s highly likely Coles wasn’t able to screw down Mainland’s unit price and therefore has dumped them.
Totally agree, I’m all for Australian made, but have tried both the coles & Great Ocean road brands and neither stack up. They are rubbery and just not right…..Bring back Mainland especially the special reserve, if I wanted rubber cheese I’d buy coon!

and yet the supermarket says:
We appreciate how disappointing it can be to find your favourite product is no longer available, so we thought we would expand on this reasoning further.....
Hi Melissa, we’re disappointed to hear this, but we appreciate the feedback.

But we expect as international price is seen to rise, other countires production will be diverted to the export product markets F currently sells to.  Colin Armer mentioned similar sentiments in the Dairy Exporter a couple of months ago.  Have heard the magic number for the US to enter the market is $3500US/t. 

....not so much land being produced anymore but more demand......
A dilemma for land and milk consumers. Another thing that isn't being produced anymore is phosphate to put on the land so as to produce the milk.

land there is, common sense is variable:
Ukraine is naturally endowed with 42 million hectares of agricultural land, 25 percent of the world’s richest black-earth soil, favorable and predictable climate conditions, and warm sea ports as well as other transportation links relatively close to export markets.
Yet, for example, the nation’s annual grain yields remain below the Soviet era, while former republics Russia and Kazakhstan now exceed those levels, according to the International Finance Corporation, the for-profit arm of the World Bank.

Canadian dairy is a cartelised industry in that it is comprised of enterprises which restrict competition — through both import tariffs and output quotas — to fix the price of their products. OECD figures indicate that the amount that Canadian consumers over-pay for dairy products hovers around $3 billion (CAD) annually; we pay twice the world average.
If I were to wake up tomorrow and decide that I want to buy my own cow and charge my friends a buck for every litre of milk, someone would most certainly show up at my door and inform me that what I’m doing is illegal because I haven’t been issued a government quota.
Lacking the $30,000 necessary to purchase such a quota, I would be forced to sideline my entrepreneurial ambitions. As for buying milk for my personal consumption, I’m not willing to take my chances of buying cheaper milk in Vermont only to have a 300% tax slapped on at the border.
Argentina’s romantic image of gauchos roaming the plains herding the cattle destined to become sizzling steak endures, but beef production is 25 per cent lower than it was three years ago and Argentina has failed to meet its Hilton Quota of high-quality beef to the European Union.
And we all know about CAP.......

Henry - you willing to comment on how you see the accounts looking on 27 March? I can't see anything looking great in terms of payout changes (unless down) but then I don't have a great understanding of the finer intracacies of corporate accounts.

I wonder if inventory may be valued higher than it would have been without the last two auctions.

ANZ Supermarket sales channel Out Of Control: Or what our major supermarket customers really think of us........
Well we will be interested to hear the reaction to this:
Exclusive | Woolworths is considering buying milk directly from farmers, bypassing processors for the first time, and using it in a new brand to help counter perceptions it exploits dairy producers.
or can they let the Oz market (supers and suppliers go....)
Woolworth executives believe going around milk processors could improve dairy farmers' returns.
"We have always believed that the drop to $1 a litre ($AUD) is not sustainable for the dairy industry and not good for dairy farmers said Woolwoths' director of corporate and public affairs, Andrew Hall".
Febderal Queensland MP Scott Buchholz, of the Liberal National Party said farmers in his electorate viewed big retailers as the enemy and he supported any measures that could deliver better returns to farmers...
We are not happy, for as the supermarket would buy milk from the farmer, and run, or toll it throu the processor, the next step would be to contract manufacture the MAKING OF CHEESE and YOGHURTS etc and even milk powder .... Looks like the thin edge of the wedge...
Can we see Fonterra now having to be extra nice to suppliers, be extra mean on supply chain and manufacturing costs, and still be locked out/lnocked off the supermarket shelf...?
Can we see a milk processor out smarting the supermarket guys?
We can not see any evidence that suggests that the supermarkets will and want will be stopped.
Not to be confused with the Infant powder supply channel to China Out Of Control (see previous posts).

CO, went to F prospectus page 99.
The financial performance of the ANZ business is expected to stabilise in FY2013 in a difficult and challenging trading environment. While consumer and out-of-home foodservices volume is forecast to grow by 3% in FY2013, revenue is forecast to decline by 1%.

The New Zealand consumer and out-of-home foodservices businesses are expected to achieve revenue growth of 9% as a result of capacity expansion to support export growth and new product development. In Australia, revenue is forecast to reduce by 7%, primarily reflecting reduced sales of private label products by the business. Gross profit is expected to improve 1%.
In addition to the factors noted above, a key driver of an 11% forecast increase in FY2013 normalised EBIT over that for FY2012 is the restructuring of Australia and New Zealand overhead costs, which is forecast to deliver cost savings of $16 million in FY2013 (or $20 million on an annualised basis).
A provision for restructuring costs was incurred in FY2012.
The FY2013 EBIT forecast reflects a recovery on that for FY2012. However, it should be noted (as outlined in the sensitivity analysis on page 106) that there is significant risk associated with this recovery in view of continuing competitive pressure and its impact on margins and ranging of product by major retail customers.
Here is the effect they are expecting, but we,ve not found the repair actions, other than concentrate on out-of-home-food-serves and a move to Nelson (to live in Hope).

Thanks Henry - appreciate your comments. :-)

By the time results hit the finacial accounts, its too late to alter commercial activities, we see the TAF was a major distraction for Fonterra management and in fact (see above) the Australian market is moving away from them.
Problems in OZ, will need be supported from the mother ship (NZ supplier returns). We think this shows how Fonterra's plan for local milk pools (NZ, OZ, South America, China etc) can be effectively undermined by a smart supermarket group.
We have a similar view payout, more opportunity for down rather than up, but probably more or less steady.

Farmers split on Woolies milk plan  - ex afr.com
The National Farmers Federation has backed Woolworths’s plans to buy milk directly from farmers, bypassing processors, and use it for a new brand designed to counter perceptions the supermarket exploits dairy producers.
But some dairy farmers fear Woolworths will impose extra connditions that could drive up costs as occurred with similar arrangements in the UK.
... Last December Woolwoths registered the Brand "Farmers Own" for dairy products including milk, yoghurt, butter, cheese, cream, dairy puddings and desserts (except ice cream and frozen yoghurt)......
Dairy farmers say they are struggling to survive as major supermarkets wage a milk war offering prices as low as $1 a litre.
With the industry gripped by crisis, 500 dairy farmers and local business people flocked to a meeting in Tongala, in northern Victoria, on Wednesday to try and work out a way to challenge the huge chains.
A report sourced from Rabobank will show that retail milk discounting and price pressures on dairy suppliers is a worldwide phenomenon and not just confined to Australia.
Rabobank senior analyst Michael Harvey told the Australian Broadcasting Corporation’s rural news service today that milk wars are already a major feature of supermarket food trading in the US, the UK and Europe.
He suggested that the problem might be worse for farmers in Australia because there is a more complex supply chain in the Australian dairy industry.
In other parts of the world, he said, supermarkets are dealing directly with farmers. “Generally, I think the farmers are a whole lot more comfortable with the process; they can actually negotiate a price directly with their major customer to market,” he told ABC rural news.
Daily farmers say they are struggling to survive, with supermarkets offering consumers milk from as low as $1 a litre.
Coles – owned by Wesfarmers Limited (ASX: WES) and Woolworths Limited (ASX: WOW) have been waging a price war for some time now. Coles is aggressively trying to win back customers from Woolworths that it lost through years of neglect under its former management. As part of that strategy, the company introduced $1 milk two years ago and then $2 bread, with Woolies and independent IGA stores, supplied by Metcash Limited (ASX: MTS), forced to follow suit.
The ABC reports that 500 dairy farmers and local business people have met in Tongala, in northern Victoria, to try and work out a way to challenge the two dominant supermarkets. Businessman Dick Smith, famous for promoting Australian businesses, and politicians Barnaby Joyce and Bob Katter were amongst the speakers.
Dairy farmer Nigel Hicks has told the ABC that he receives 25 or 26 cents a litre, but his cost of production is around 43 cents a litre. He has increased his bank borrowings in an attempt to stay afloat, but can’t survive at current milk prices.
Q: and F is addressing these forces directed at its brands business in ANZ by.....

Q: and F is addressing these forces directed at its brands business in ANZ by.....
We should certainly expect to see some impairment of the brands business' $billion dollars of goodwill shown in Fonterra's accounts. No?

And locally we have supermarket warring over cheese:
..... While competition is the main factor driving the current cut-rate cheese deals, retail prices on the product have been dropping steadily for the past couple of years.
The monthly weighted average price for a 1kg block of mild cheddar dropped 22 per cent between February 2011 and the same month this year, from $10.78 a kg to $8.38, according to Statistics New Zealand.......
What we are thinking through is Fonterra's "milk pools" strategy.
1. We are wondering, why all the investment in farms and fresh supply up to the door of the supermarkets, when at any time, and following the Western World markets, the supermarkets can turn and drop the retail price of fresh and branded produce by 20% to 50%?
2. Is Fonterra moving the wrong way across the supply chain? What is the future (price/ financial margin) for production that is either fresh or goes as product to customer via the supermarket?
3. How is the Ingredients business to fair if looking through this view? We see the ingredients business has the majority % of its product that is then used as inputs for manufactured product that is in turn put to customers via the supermarkets...
Q: are we missing something here?
Looking back at the above we are wondering how the milk pools strategy feeds in and drives/underpins the brands business... and again aske ourslves what is the F plan in dealing with the supermarkets?
Supplementary Q: We understand the new bottle is amazing
"This is absolutely without a doubt Fonterra's biggest innovation yet." (sad we think if true)
Taste and freshness were the biggest drivers of consumers' milk choice and research showed many used the "sniff test" to check milk was still fresh before the expiry date.
Research showed about 7 per cent of all fresh milk was thrown out "because people think it smells off", said Fonterra group marketing manager of brands Craig Irwin.
How is F going to earn any more money from this. When clearly $1 Litre (in OZ example) is the real driver of fresh volume sales?
What difference does it make if milk in that bottle is not on shelf for customers to buy, or supermarket specify that bottle without charging more (Nice to know: has the researched of customers concluded that they are prepared to pay a higher price for milk in that bottle) ?.

Oh, we have stumbled on a part answer - not what we were looking for....
Consumer reaction has been similarly mixed. Many people pointed out that the opaque plastic would lead to the harrowing situation of unwittingly running out of milk mid-coffee.
Others suggested a truly ground-breaking innovation would have been a return to glass bottles, perceived to be more sustainable.
Fonterra's innovation manager for beverages Olaf van Daalen explained that light damaged vitamin B2, for example, which went on to react with proteins and fats and change the taste.
He said his finely tuned tastebuds could detect a difference in the space of minutes of sunlight exposure, or a couple of hours of artificial light.
Van Daalen said Anchor would not change its recommended retail price for its newly packaged milk, and it was up to supermarkets to set final pricing.
grrr, has anyone really thought anything through.....
we are just off to howl at the moon

Now hang on a minute mist42nz...heaps of energy particles stream right through your fridge and your milk all the time including at night....

Simon Bromell, Managing Director, Fonterra Ingredients Australia
Gardiner Foundation Melbourne, February 6, 2012
The Future for Dairy from a Global Perspective
I’ve been asked today to give a perspective on the future for dairy.
Fonterra is the world's leading dairy exporter and Australia plays an integral role in
Fonterra’s operations. As a truly global dairy company, Fonterra is uniquely qualified
to understand where the future of the dairy industry may be heading.
We say the future for world dairy is strong.
Simon has spent the past 20+ years working across the national food supply chain.

He currently leads Fonterra Australia's Ingredients business. The team of around 1,400 employees engages 1500 farmer suppliers, collects some 50,000 tanker loads of milk each year, operates 10 manufacturing sites in Victoria and Tasmania, and is responsible for Fonterra's local dairy ingredient sales and exports.

Simon's corporate experience prior to Fonterra included sales and marketing (6 years), supply chain, logistics and procurement (8 years), corporate affairs and communications (3 years), and finance (2 years).

Well Simon would say:
So the second success factor in the future we believe will be access to high quality
milk pools
High quality milk helps ensure our products stay fresh and deliver their benefits for
customers as long as possible, but securing this milk supply is a challenge in a
competitive and constantly changing environment.
It’s very clear that to source the best milk, consistently, we have to incentivise the
right types of production and quality control, retain our best suppliers, and still attract
new high-quality milk while decreasing the portion of milk attracting a quality penalty.
Fonterra is proud of our efforts in this regard, investing heavily in an effort to assist
improve their quality by offering a variety of benefits and services.
The improvements in quality control are putting millions of dollars in Fonterra
farmers’ pockets
each year, and contributing to growing customer confidence in our
supply chain.
short hand, winners are grinners and we pay you more than you are worth already...
download the pdf, it has some gems.

investing heavily in an effort to assist improve their quality
They invest in effort, making you/us invest the dollars in the effluent systems
Their thinking is, well the money the farmers use is really just money from us (our money), they forget that the money is usually "borrowing capacity" not retained profits etc......

A contact in the restaurant/cafe trade was telling me about this new innovation a week or so ago - they are really excited about these bottles.  I have sometimes wondered about milk quality when I see milk sitting out on a bench for some time at cafes etc.
Will be interesting to see how supermarkets price it.
Hope they bring out their Dairy Dale brand in it too. :-)

I see Synlait Farms is to start trading on the unlisted market from tomorrow.  Will be interesting to see if there is investor interest in a pure dairy farming play.  12,900 cows on almost 4,000 hectares with annual production at a $6 payout worth $32.5m.
Net asset value of $1.45/share according to presentation to Unlisted.  Dairy farming entities in the past who have bee listed have always traded at discounts to there NAV of 20-25% + . The last two GDT Auctions certainly help the sentiment I would have thought.  Maybe the first trade will be somewhere between $1.10 - $1.25 ?  

Window dressing aside (and refer to the Unlisted market rules)
Well lets say the assets are worth $204m * 80% $163m (could be $153m at 75%), take off the debt $143m (all liabilities $128m + 6m + 9m) . So left with $10m to $20m
across $41m shares.
is 0.24 to 0.49.
Thats 24 cents to 49 cents per share from your calculation. Then there would be the spread for someone to cross.
The point you make about the listed assets values is this:
1. Comparative Sales: Land agents will say the market is driven by comparable sales - this is easy for smaller owner operator units.
2. Productive or cash return values: This being the property is worth what I can earn off it.
So in this case take 2013 cash income (not cashflow) with debt at segregation from dairy factor) and decide what multiple you will pay.
Proviso. Ask your self when can I expect a dividend to be paid to me.... (refer lvr)