Signs rural market is starting to recover
After two challenging years with low returns and an uncertain international market outlook, dairy farmers at last have some reasons for optimism.
With the Global Dairy Trade auction gaining steadily over the past two months and Fonterra’s payout projections increasing accordingly, our economy’s most important sector appears to have emerged from its trough.
Farmer confidence is heading in a positive direction, with one of the banksponsored rural surveys showing that, over the past three months, the percentage of farmers expecting prospects to improve has increased significantly and, among dairy farmers, optimism now sits at a nine-year high.
Although that sentiment is evident in the rural property market, it still has some caution attached.
Farmers are preparing to act to enhance their businesses, with some right on the point of doing so.
Fonterra’s rising payout will give confidence to both sell and purchase land.
Those considering offering property to the market can be more certain that they will receive a good price, while those looking to buy can expect a better return on their investment.
Those farmers who cut back on inputs during the market downturn are now likely to benefit from their resistance to adversity.
Entering a more positive phase, however, those planning to transact dairy property need to be realistic and put themselves into the minds of potential purchasers, who will be scrupulous in their assessment of a particular farm’s business case, ensuring that they can operate profitably before committing to purchase.
Locally, prospective purchasers are asking for good support blocks, with farms suitable to grow maize and run replacement stock in particular demand.
Those farmers who are looking are well-resourced and ready to buy so a number of transactions of such properties are likely through the spring.
One or two sales of good properties over the next few weeks should set the tone for the rural property market for the rest of 2016.
Richard Leach, based in Putaruru, sells rural property for PGG Wrightson Real Estate, from Matamata through the Central Plateau to Taupo.