Judge Peter Boshier said this was "unreasonable" - and that the ministry knew the school expected to keep the farm.
Records show the ministry threatened locals who tried to set up a trust to take over ownership of the farm when the college closed in 2004.
Boshier said because the school could not later prove it owned the farm, the ministry disposed of it, even though it had three chances between 2005 and 2014 to arrange for the school to keep it.
"Proper consideration of the Area School's interests could not and did not occur," Boshier said in the 12-page opinion.
Taihape Area School still has access to the farm but cannot get it back as it has now been shifted into the Treaty settlements landbank.
Boshier dismissed the ministry's contention that it did not realise the school was still using the farm, saying it did not ask.
"I have not seen any evidence to suggest the ministry made enquiries.
"I consider that it was unreasonable that the ministry did not make enquiries."
It had earlier given "clear and unequivocal" assurances the school would keep ownership.
Instead, the school, with leaky classrooms and facing a major rebuild, has lost a million-dollar asset.
The ministry says its "error was in failing to be aware of the commitments made" when it disposed of the farm in 2014.
Rangitīkei National MP Ian McKelvie said he did not buy that reason.
"It's extraordinary to me that the Ministry of Education couldn't find a way of managing this at the time it was discovered.
"It displays the ministry's attitude to this right from the start."
Multiple attempts to intervene by McKelvie, board of trustees, and then minister of education Trevor Mallard got nowhere.
The Ombudsman investigated after the board of trustees last year lodged a complaint to cap a 17-year fight with bureaucrats.
The new principal, Craig Dredge, stressed children could still learn at the farm. He said he would work to see the findings were published locally.
The board of trustees got the ministry's apology on Monday this week.
"We ... have not yet had an opportunity to discuss the board's view on what they have said," board chair Shari Chase said a statement.
"It was important to the school board that we sought an independent review of this matter and thank the Ombudsman for his findings."
The Ombudsman told the ministry to commit to supporting the school's agricultural programmes.
McKelvie said there was no guarantee access to the 13ha farm would endure as its future rested on an unfinished Treaty claims process, so the ministry should pay reparations to ensure on-farm lessons continue.
"I'm not sure whether that's cash or whether that's kind."
The ministry has not made a comment about any form of compensation.
Three ex-principals and ex-board chair Andy Law earlier said they see the saga as a case of bureaucrats riding roughshod, and engaging in doublespeak.
They described getting hindrance, not help, from high-level officials, in trying to negotiate the unfamiliar process of securing ownership of the farm.
Boshier told the ministry to change its practices so this does not happen again.
"I would have expected the ministry to enter into a formal arrangement with the board to ensure, and protect, the Area School's ongoing use of the farm," he said.
The ministry undertook an internal review which RNZ has requested to see.
It told Boshier that it had "robust processes and record-keeping practices" but would review these.
"Should a situation of this kind arise again in the future we would handle this differently and ensure that more thorough checks and balances were in place," it said.
The ownership of school property is usually vested in the ministry.
However, in this case, the college owned the farmland, and when it closed the land went into the ministry's ownership.
Ministry papers from 2005 indicated the farm was not to be disposed of, Boshier said.
But instead of reassigning the farm to the new Area School for education use, the ministry declared it surplus and disposed of it to Land Information New Zealand, which in 2015-16 land banked it.
Subsequent attempts to "un-landbank" it have hit a brick wall, with the government ruling that out earlier this year.
