‘Record number’ of NZ dairy farms expected to hit market

Aging farmers, difficult climatic conditions and an increase in compliance issues are among the factors that will nourish dealflow, research suggests.

While only five dairy farms were sold in October throughout New Zealand, the country’s Real Estate Institute expects a significant uptick in the number of farms coming to market in the main dairying areas of Waikato and Southland.

“The drivers for such a movement appear to be a mix of succession planning/increasing age of farmers, frustration for some resulting from the climatic conditions and difficulties with labor […] and the awareness it is probably better to sell when the dairy payout is at a reasonably healthy level,” said Brian Peacocke, rural spokesman at REINZ.

In July, Fonterra Co-operative Group, the largest dairy exporter in the world, increased the farmgate milk price to NZ$6.75 ($4.67; €3.93) per kilogram of milk solids for the 2018 season, 12.5 percent more than the amount the co-operative had forecast in March and a 73 percent jump on the NZ$3.90 kg/MS New Zealand farmers were receiving during the 2015-16 season.

The membership organization did not specify when this increase in sales activity is expected to occur. A spokesperson was not immediately available for comment.According to REINZ, the median sales price per hectare for dairy farms in the three months ended October 2017 was NZ$40,012, 1.7 percent lower than the NZ$40,716 for the three months ended October 2016. However, one farm in Waikato sold for close to NZ$70,000 per hectare last month.

Overall, rural market activity was slow in the last quarter, primarily due to weather conditions.

“Sales data for the three months ending October 2017 are reflective of the difficult winter/early spring period during which much of the country experienced record rainfall,” Peacocke commented.

According to REINZ, there were 92 fewer farm sales, a 26.1 percent drop, compared with the same period last year. However, the beef market remained strong, as did horticulture properties in the Bay of Plenty and particularly the Paengaroa district, where top prices for gold kiwifruit orchards exceeded NZ$1 million per canopy hectare. While other regions experienced reduced activity in the horticulture market, the median price per hectare for such properties has increased 92.1 percent year on year, reaching NZ$350,833 for the three-month period ending October 2017.