Bumper Fonterra pay-out boosts farm values at auctions
Fonterra’s bumper payout for dairy milk solids has underpinned the multi-million dollar sale of two large scale dairy conversion farms in Northern Hawke’s Bay.
The two farms sold for a combined value of more than $12.5million after some hectic bidding in the auction room of Bayleys Napier last week – with multiple parties bidding on each of the properties. Some 58 farmers, stock managers, accountants and rural banking specialists from across the Hawke’s Bay were in the auction room to watch proceedings.
Bidding on the 351 hectare Ben Alpin farm opened at $3.9million. After 16 bids from four potential buyers, the property sold under the hammer for $5.020million.
Next up for auction was the nearby 468 hectare Trig Downs dairy farm. Bidding opened at $6million and rose in initial $100,000 increments from three bidders before finally selling for $7.5million.
Bayleys’ East Coast general manager Gary Brooks said both farms drew strong interest from farmers looking to upsize their dairy production – particularly in light of Fonterra’s latest $8.30 per kilogramme of milk solids payout…. and the prospect that could rise to even higher levels around the $8.80 mark.
“The underlying consensus among those in the auction room, both potentially buying and from an analytical perspective, was that dairy production is about to head into another upward pricing cycle,” Mr Brooks said.
“That has obvious ramifications for dairying land.
“The big difference we have seen now from previous such cycles is that potential buyers are basing their purchase price more on return on investment rather than capital gain expectations. That is a fundamental shift from an historical psyche to a more business-focused buying approach.”
Mr Brooks said the Trig Road property was
converted to diary production in 2009
and this season was on target to milk 1000 cows – producing 356,340 kilogrammes of milk solids. Meanwhile, Ben Alpin was milking 650 cows and was targeting to produce 218,000 kilogrammes of milk solids in the current season.
Both farms were bought by Hawk’s Bay farmers with existing rural properties. The farms were jointly marketed by Glyn Rees-Jones and Hadley Brown from Bayleys Hawke’s Bay. Mr Brooks congratulated the duo for using their extensive regional networks to market the farms, as well as showcasing the properties to Bayleys’ nationwide rural databases.