Farm prices up but mood remains cautious - REINZ

Rural News

The REINZ Dairy Farm Price Index is up 4.1% compared to 12 months ago but purchasers and banks remain cautious

15th Dec 16, 3:48pm by Greg Ninness

Dairy farm prices are steadily improving as international milk prices rise, with the REINZ Dairy Farm Price Index up 4.1% for the three months to November compared to the same period last year.

The Dairy Farm Price Index adjusts for differences in farm size and location but other measures of dairy farm sales were also up, with the median farm price per kilogramme of milk solids at $41.05 in the three months to November, up 17.9% compared to the same period last year.

The median price per hectare for dairy farms was $47,385 over the three months to November, which was up by a third compared to a year ago.

Prices of other farms were also up, with the REINZ All Farm Price Index up 4.9% for the three months to November compared to the same period last year.

Sales numbers were also up, with 447 farms of all types selling in the three months to November compared to 416 for the same period last year.

However Real Estate Institute of New Zealand rural spokesman Brian Peacocke said farm buyers remained cautious.

"An increase in volumes of farm sales in the three months ending November reflects improving conditions in the rural market, but the predominant comment in the marketplace is that a mood of caution prevails," he said.

"This is evidenced by detailed pre-purchase due diligence investigations and a level of concern amongst purchasers regarding volatility of income.

"Whilst the increase in the milk payout 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," he said.

Farm sales

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Source: REINZ

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10 Comments

by Andrewj | 16th Dec 16, 2:54pm 1481853269

All I can say is , my bank manager is very blue, profits are illusory. Multiple farm listings around here, many more farms for sale than buyers.
The top has passed and it looks all downhill from here.

by Casual Observer | 16th Dec 16, 7:21pm 1481869283

I'm hearing similar things too Aj. No one seems to know where prices really are. Plenty of farms for sale, and the ones that are selling seem to be the ones that don't have a lot of choice and are on the margins for productivity. Banks appear to be discouraging anyone who doesn't have to sell from listing.

by Belle | 16th Dec 16, 7:21pm 1481869293

Saw a Rabo guy a few days ago. Very positive dude. All sweet in rural heaven. Doubt it. Never seen so much land for sale around here. I think we are at your tipping point for beef at long last Aj. The bull schedule is starting to look very shaky. You would never know it though, apparently weaner bulls going from eyewateringly expensive to something akin to gold.

by Casual Observer | 16th Dec 16, 7:40pm 1481870420

Belle, how many of the farm for sale listings are there due to Regional Council Plans do you think? Once the Environment Southland Water and Land Plan came out the number of farms listed has gone up significantly. I'm hearing many farmers say they want to get out due to the impacts the proposed plan will have on their business and more so the significant amount of increased paperwork that will be needed on an ongoing basis. SOme younger farmers are also turning away because of the latter reason.

by Belle | 16th Dec 16, 8:41pm 1481874109

I have no idea Cas Ob. But all here would be in the priority one category which isnt pretty. Thinking mebe the Landcorp one would be a cut n run jobby. Them being so socially responsible. Achk! That was me clearing my throat. Its pretty crazy stuff. But I am not slashing my wrists yet. But looking at prices asked....why would you? Better to head to an area with no restriction. We have been looking at extending ourselves so one of our kids can get into farming. Um u turn. Cant really be bothered now. Why throw my son under the bus. He lives a good life in town. The thing is I farm to look after the environment already. Little n, no cropping, plenty of trees, I dont nick water for irrigation. Use rpr...when its available (Grr). Yet after those new rules come in my farm gona be hard to make a quid off unless I spend a fortune on this plan thingy and fence all the waterways which the stock dont go into anyway cos I have a lot of troughs and very small mob numbers. For farms like this its needless. But hey lets not look at the real culprits, they are too indebted so lets just ignore them.

by Andrewj | 16th Dec 16, 11:01pm 1481882508

high inflation in farm costs often at over %8 compounding have left most farmers with very few options. Unless we can find a new way to compete in the world market I don't have a lot of optimism. Glencore can supply feed in Europe cheaper than we can convert it to protein here.

http://www.world-grain.com/articles/news_home/World_Grain_News/2016/11/…

Then new Technology in feed starts to have effect

http://www.world-grain.com/articles/news_home/World_Grain_News/2016/11/…

Puts things in perspective when you realise that beef (full cycle rather than just buy and finish) takes about 15-16 kgDM/ kg carcass weight; cows about 14 kgDM per kg MS; pigs about 6 kg/kg CW and chooks about 4-5 kg feed/kg carcass.
But feed quality and energy values vary between the feeds used.

So when people start talking costs I will start listening and thinking things may change, otherwise it's a big world out there and we already blew tomorrows lunch running up asset values far beyond economic worth. In a globalised world we have too much competition for our cost structures to allow us to compete and the USA beef news is still interesting.
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It’s been so long since fund activity in the cattle market was positive rather than negative, most traders can’t recall. Complicating matters is the fact that the cattle industry is in a long-term expansion phase and cattle supplies in the second half of 2017 will exceed the large supply increase seen in 2016. Therefore, fundamental optimism long term is not part of the general outlook.

by Doris | 17th Dec 16, 7:49am 1481914168

Have you made a submission, Belle? I think this plan is still very much up in the air. We were in, now we're out cos of the iwi, whole things a dog's breakfast.

by Belle | 18th Dec 16, 12:28pm 1482017339

I think I will do Doris. At this point I am trying to learn a bit more about all the issues.

by Doris | 19th Dec 16, 11:47am 1482101246

I think just an estimate of how it would impact your farm business and ability to keep farming would be worth submitting.

by tim12 | 18th Dec 16, 12:21pm 1482016901

I think there is a big disconnect between town and country,most town friends i talk to believe our farms are all worth 20 million and that we are the super rich. And that farm businesses don't have to be profitable because foreign billionaires will buy them and run them for a hobby. I see the root of all evil has been zirp. It has caused property to become speculative investment with little relation to income. But the times they are a changing. Higher interest rates need to happen. Once the shit hits the fan no one will want to buy a farm. And the passing of these regional council rules contributing to a massive collapse in farm values putting pressure on the banks?