Farm prices levelling out: Institute

Farm prices are bottoming out after falling back to 2007 levels, according to the Real Estate Institute of New Zealand.

The median farm sale price for the three months to February was $1.26 million, down from $1.53 million in January and $1.75 million in February 2008.

Institute rural spokesman Murray Cleland said the price was on a par with the corresponding period in 2007, when the median was $1.3 million.

"While this is well down on the median price of $1.75 million the market saw in the three months to February 2008, this needs to be seen in the context of the massive dairy payout of that season," Cleland said.

"Fonterra's available payout to farmers was a record $7.90 per kg of milksolids last season, of which 24c was retained, with the prior season at $4.46 and this season's forecast at $5.10 per kg.

"There is no denying the reduced dairy payout and bleak economic outlook has had a dramatic impact on rural sales in recent months," Cleland said.

"We're hoping this month's figures are a true signal that stability is returning to the market."

Indicators such as Fonterra's latest product auction, in which prices rose, pointed to the likelihood that prices would settle at 2007 levels, Cleland said.

The median dairy farm price was $3.53 million, down from $4.14 million in February last year but higher than $2.94 million in February 2007.

Westpac economist Doug Steel said the moving three-month results could be volatile, with the composition of sales differing between periods and fewer sales increasing the volatility.