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Vol 19 No 3, January 27, 2020
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Land values slide Gerald Piddock gerald.piddock@globalhq.co.nz
D
AIRY land values will slide over the next five years as farming is put under increased economic and environmental pressure, Rabobank says. Tighter credit, reduced foreign capital and pending environmental change will all lead to softer dairy land prices in the short to medium term, Rabobank’s Afloat But Drifting Backwards – A Look at Dairy Land Values Over the Next Five Years report says. And an erosion of farmgate milk prices could put more stress on dairy land prices, author and dairy analyst Emma Higgins said. The bank forecasts an average farmgate milk price of $6.25/ kg milksolids for the five years – above the 10-year average but below recent prices. Fonterra’s last forecast in December has a mid-range milk price of $7.30/kg MS. Operational and compliance
costs are expected to rise and production slow down as genetic improvements and management are offset by reduced stocking rates and fertiliser use in some regions, she said. “Based on this view, cash returns to dairy assets will fall and the price ratio of land relative to its revenue potential will rise – both of which will put downward pressure on the value of the asset itself.” The decline in values means investors needed to do longer and costlier due diligence before buying dairy land. That slows the land-buying process and removes some of the drivers of market tension that have previously inflated land prices. Reduced capital has been the key factor restricting land value growth over the last decade, she said. But the big unknown variable is the Government’s freshwater proposals. “The impacts have the potential to reverberate across the entire dairy land buying/selling process.” The report comes days after
MORE:
Full story in next week’s Farmers Weekly. BRIGHT FUTURE: Pure Oil company men Nick Murney, left, and Keith Gundry, centre, check on the sunflower crop with farmer Stu Pankhurst. Photo: Annette Scott
Blooming heck, what a crop CROPPING farmers in Canterbury are growing sunflowers as an alternative break crop to help meet growing demand for Pure Oil NZ’s latest product – high oleic sunflower oil. Sunflowers in full bloom on Stu Pankhurst’s Aylesbury farm
are a first for him and he’s pretty happy with how they’re shaping up. With a short crop rotation of just 120 days the flowers fit his system well and so long as the wind and birds stay at bay he hopes three to four tonnes a hectare at harvest in March,
Farmers Weekly columnist Keith Woodford pointed to changes in the lending policies by the banks, looming environmental regulations and the Government’s tightening of the rules for overseas investor buying dairy farms as
reasons why dairy farm values had declined. In March last year the Dairy Farmer magazine also pointed to a change in attitude with young farmers basing offers on a farm’s earning potential and rather than overpaying like
Getting about $900 a tonne will also sit well in his farm budget. Pure Oil managing director Nick Murney said after a couple of trial seasons the Rolleston company has 300ha under contract this year but more growers will be needed to meet the consumer demand.
previous generations who banked on capital gains. “The crunch will really come if dairy prices should ever decline below $6/kg MS,” Woodford said.
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