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Waikato farm values surge higher despite circumstances
Waikato farm values surge higher despite collapse in whole milk powder prices
The ongoing collapse of whole milk
powder prices on the GlobalDairyTrade auction has failed to
deter Waikato farm buyers from setting a new record pricing
level for a dairy farm in the province.
The latest
GlobalDairyTrade auction earlier this month saw the price of
whole milk powder drop another 7.1percent. The drop was
credited to China buying less
product, combined with
surging output in Europe, the USA and Australia.
Russia's ban on European cheese imports has also worsened the situation - with European milk instead dried into powder and dumped into markets New Zealand usually dominates.
ANZ chief economist Cameron Bagrie said the low prices being achieved for whole milk powder could even necessitate the Government looking to intervene by adjusting either the official cash rate or the New Zealand Dollar... or both.
“One year of sub-par dairy incomes are manageable. Two years becomes problematic and will necessitate the shock absorbers (OCR and NZD) adjusting,” Mr Bagrie said.
“We expect Fonterra to bite the bullet and cut the 2014/15 pay-out. It’s prospects for 2015/16 that remain key, and prices need to lift an awful long way to get a pay-out close to breakeven.”
However on virtually the same day the GlobalDairyTrade news was breaking, bidders at Bayleys’ latest rural auctions in the Waikato ploughed in ‘boots and all’ to three dairy farms up for sale – breaking the $100,000 per hectare price ceiling in the province for the first time.
The latest trio of sales included:
• A 69 hectare dairy farm near Morrinsville milking 220 cows and producing 84,000 kilogrammes of milk solids sold for $7.56 million to a neighbour who had an existing contract with the Tatua dairy company.
• An 87
hectare dairy farm on the Hauraki Plains with 94,000
Fonterra shares sold for $3.825 million to a first-time
buyer supported by wider family with an
existing farm in
the area.
• A 112 hectare dairy farm milking 280 cows which last year produced 108,000 kilogrammes of milk solids, and which was recently passed in at auction.
The property had an advertised asking price of $3.7 million (plus GST) but, as the sale was negotiated outside the auction room, the price is currently confidential until lodged with the Land Information Registry.
Bayleys Waikato rural
manager Mark Dawe said per hectare land values for dairy
farms in the province were still being calculated at milk
solid returns much akin to Fonterra’s record $8 pay-out
levels dating back to 2011.
“I don’t expect this trend to change in the immediate future,” he said.
“In fact, we understand that the Morrinsville property is the first Waikato unit to break the previous pricing ceiling of $100,000 a hectare.
“What we have noticed is that potential buyers are looking at how they can increase output on existing properties, which in many cases, would nullify any drop in pay-out levels and set them up to be ahead of the pack when pay-outs rise again... which they will.
“Additionally, we are seeing ‘old money’ buying these farms. That is to say well-established families from within the region who have strong balance sheets on existing operations, and are looking at growing their Waikato presence.
“As we saw at the auctions – that growth can either be through acquisition or by leveraging in family members to their own farms. Again, this is a trend which shows no sign of abating,” Mr Dawe said.
In addition to the three latest sales, Bayleys has sold another 21 Waikato dairy and dairy-support farms through the auction process since the beginning of October for a total of almost $80 million.
ends
Bayleys Real Estate
New Zealand
Bayleys is New Zealand's largest full-service real estate company. We offer expertise in the marketing and sale of a wide range of property, including residential real estate, farms and lifestyle blocks, and commercial and industrial property. This includes tourism and business sales such as hotels and motels. We also cover the real estate markets in Fiji and other Pacific Islands.
Bayleys also provides a complete property and facilities service including property management and valuations teams focused on achieving both Owner and Tenant satisfaction.
No other real estate company can match our breadth of coverage across all market sectors throughout New Zealand.
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