Land sales en­quiries af­ter com­mod­ity rise

South Waikato News - - RURAL DELIVERY -

Ex­port com­mod­ity prices are sparkling but the out­look for the ru­ral econ­omy this year is ‘‘mud­dly’’, with banks keep­ing a stran­gle­hold on farm lend­ing and cash­flows still tight, say sec­tor spe­cial­ists.

Global food prices rose by 25 per cent last year and in Fon­terra’s first global on­line auc­tion for the new year av­er­age dairy prices jumped 7 per cent. But it would be 2012 be­fore there was a re­bal­anc­ing of over­heated pre-re­ces­sion land as­set val­ues and in­come, they said.

ANZ Na­tional Bank chief econ­o­mist Cameron Ba­grie said farm bal­ance sheets looked ‘‘a bit shoddy’’ de­spite high com­mod­ity prices which gen­er­ated stronger in­comes.

‘‘Things will come to­gether in 2012 but 2011 is go­ing to be a bit of a mud­dly year,’’ Mr Ba­grie said.

Farm­ers would con­tinue to con­cen­trate on re­duc­ing debt. The out­look for 2011 was bet­ter than for last year but the sec­tor was ‘‘in a half­way house’’, Mr Ba­grie said. Next year farm­ers would have re­paired their bal­ance sheets and com­mod­ity prices were ex­pected to still be strong, he said.

Mar­ket ex­perts ex­pected only a slight im­prove­ment in farm sale ac­tiv­ity.

PGG Wright­son, the coun­try’s biggest ru­ral real es­tate com­pany, pre­dicted more en­ergy in the $10mil­lion-plus farm mar­ket with farm­ers and other in­vestors with cash team­ing up to buy farms that would be op­er­ated like cor­po­rates, with share­hold­ers and con­tracted man­age­ment. The com­pany’s real es­tate man­ager Stu­art Cooper said in­quiry at the mar­ket’s top end in­creased last month.

Na­tion­ally there were only five big farm sales last year com­pared with 60 in 2008.

Bank of New Zealand chief econ­o­mist Tony Alexan­der said an in­di­ca­tion of new eco­nomic life in the sec­tor was a strong in­crease in trac­tor reg­is­tra­tions last month.

He be­lieved more peo­ple, in­clud­ing syn­di­cates, with cap­i­tal and only some debt would en­ter the mar­ket this year.

But Waikato ac­coun­tant Nigel McWil­liam, a dairy spe­cial­ist with Diprose Miller, said banks were re­spon­si­ble for the real es­tate mar­ket squeeze.

‘‘Bank cri­te­ria for lend­ing are mak­ing it so dif­fi­cult to get deals across the line. We have farm­ers look­ing to bor­row and a num­ber [of clients] look­ing to sell, and the banks are very in­volved with sale and pur­chase agree­ments, walk­ing the prop­erty with the pur­chaser and then pour­ing cold wa­ter on the deal,’’ he said. This was a far step from pre-re­ces­sion days when banks lent freely, in­clud­ing against land value ap­pre­ci­a­tion, Mr McWil­liam said.

ASB ru­ral econ­o­mist James Shor­tall said dairy and meat re­turns were gen­er­ally strong but farm­ers’ cost struc­tures were still high be­cause of in­creases in in­puts like fer­tiliser. Im­por­tant farm­ing re­gions were strug­gling with drought and farm­ers were very cau­tious about spend­ing af­ter ‘‘a real shakeup’’ over cash­flow deficits.

Stuff.co.nz

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