Dairy mood high despite worrying start

There has been an increase of 36 per cent on dairy land prices in the past two years.

Confidence remains high in the dairy farm market despite an unsettled start to the year for the industry.

Real Estate Institute of NZ figures show there has been an increase of 36 per cent on dairy land prices in the past two years, with prices rising by $4000 a hectare this month alone.

The national median selling price for dairy farms in the three months ended February was $45,105 a hectare compared with $40,742 in January, $34,499 in February last year and $33,254 in February 2013 -- an increase of 36 per cent.

The dairy industry has had a tough start to the year with a lower milk price payout announced, the 1080 milk powder scare, and drought hitting parts of the country.

However, Bayleys country sales manager Simon Anderson says the market remains strong with record prices still being paid for land.

He believes this is because long-term prospects are still looking positive.

Interest rates are at good levels and farms have become more efficient over the past few years, with farmers in tune with the cost management of their businesses.

"People are looking at the long term," Anderson says.

"They are running long-term businesses.

"This is not fair-weather farming."

Included in sales for the month of February were 33 dairy farms at a median sale value of $51,418 a hectare.

The median farm size was 100ha with a range of 29ha in Taranaki to 531ha in Canterbury.

Anderson says demand continued to outstrip supply and while that was happening there wouldn't be any changes in value.

"There is only so much land to go around. The long-term future for farming is still positive."

The REINZ dairy farm price index rose by 4.5 per cent in the three months to February compared with the three months to January, from 1971.0 to 2060.2. Compared with February 2014, the index rose 15.1 per cent.

Overall, there were 70 fewer farm sales for the three months ended February this year than for the three months ended February 2014, with 1809 farms sold in the year to February this year. This was 1.0 per cent fewer than were sold in the year to February last year.

The median price a hectare for all farms sold in the three months to February this year was $28,009 compared with $22,644 for the three months ended February last year and the median price a hectare rose less than 1 per cent compared with January.

"While the current three-month period reflects a reduction in sales volumes, the tone of the market throughout the country is solid, albeit underpinned by a hint of cautious optimism,", says REINZ rural spokesman Brian Peacocke. "Demand in most regions remains strong, with prices experiencing upward pressure as a result of a shortage of listings."

"The spin-off to the shortage has been a renewed focus on second-tier properties and those which for whatever reason have been on the market for some time, with sales being concluded for a number of these properties."