Spring brings farm op­ti­mism

South Waikato News - - Community Cookbook - PAUL O'SUL­LI­VAN

Spring is tra­di­tion­ally ru­ral prop­erty’s busy time. This year will be no ex­cep­tion.

Good Au­gust weather, af­ter a wet July, sug­gests pas­ture will come away well in Septem­ber.

Mean­while, with un­ex­pect­edly pos­i­tive re­cent move­ment in the Global Dairy Trade, lo­cal dairy farm­ers have rea­son for op­ti­mism.

On the morn­ing af­ter Fon­terra’s lat­est overnight auc­tion, my phone started ring­ing straight away, with farm­ers con­sid­er­ing sell­ing prop­erty. My col­leagues re­ported the same.

Many farm­ers have waited for months as dairy re­turns stayed low. Now, with ex­port mar­kets back on an up­ward tra­jec­tory, the prop­erty mar­ket has more pos­i­tive sig­nals to re­act to.

While it is too soon to call this ‘con­fi­dence,’ at least it is pos­i­tive sen­ti­ment. That means two things.

First, those think­ing about sell­ing will now be en­cour­aged to act, know­ing they should re­ceive bet­ter prices than they would have over the past two years.

Sec­ond, buy­ers and sell­ers should come closer in their per­cep­tions around farm val­ues, mak­ing sales quicker and eas­ier to ne­go­ti­ate.

Those farm­ers who have held back, wait­ing for the dairy sec­tor to turn around, should see the next few months as an ideal time to test the prop­erty mar­ket.

Some re­cent list­ings are food for thought in that re­spect.

These in­clude a 343 hectare Kin­loch prop­erty, with a fur­ther 205 hectares of lease­hold, run­ning 850 cows, then drop­ping to 500 cows for win­ter milk­ing, which pro­duced over 500,000 kilo­grams of milk­solids in 2015/16.

Noth­ing of that scale has sold re­cently, so how the mar­ket re­sponds will be in­trigu­ing.

Other list­ings in­clude a 71 hectare South Waikato farm and a 289 hectare Man­gakino farm, pro­duc­ing av­er­ages of 83,000 and 180,000 kilo­grams of milk­solids, re­spec­tively over the past five years.

Buyer in­ter­est for these prop­er­ties is al­ready ev­i­dent.

As the­se­pro­ceed to sales, they should re­mo­ti­vate the ru­ral prop­erty mar­ket.

With the sup­ply of farm list­ings set to in­crease through the com­ing months,we can look for­ward to a dy­namic and vig­or­ous spring ru­ral prop­erty mar­ket.

* O’sul­li­van is Bay of Plenty and Cen­tral Plateau Real Es­tate Man­ager for PGG Wright­son Real Es­tate Ltd.

Farm­ers need not take out an ex­pen­sive bank over­draft when faced with a pro­vi­sional tax pay­ment says a tax ad­viser.

Tax Man­age­ment NZ chief ex­ec­u­tive Chris Cun­niffe said his com­pany had pi­o­neered the tax pool­ing sys­tem in part­ner­ship with In­land Rev­enue as a way of ‘‘re­mov­ing the fric­tion’’ from the tax sys­tem.

The pool­ing sys­tem has been in ex­is­tence since 2003 and is sanc­tioned by In­land Rev­enue, which re­ceives tax on a busi­ness’s be­half.

Cun­niffe said the sys­tem charged a much more favourable in­ter­est rate of 4.68 per cent com­pared to the IRD’S penalty in­ter­est of 8.3 per cent. How does it work? A farmer pays a tax pool­ing in­ter­me­di­ary a one-off, taxd­e­ductible in­ter­est cost, which is based on the amount fi­nanced and pe­riod of ma­tu­rity, and the in­ter­me­di­ary pays pro­vi­sional tax on his be­half.

This pro­vi­sional tax pay­ment is placed at the IRD in an ac­count that is ad­min­is­tered by an in­de­pen­dent trustee.

That in­de­pen­dent trustee will in­struct the IRD to trans­fer the tax into the farmer’s IRD ac­count when he pays the prin­ci­pal bal­ance at the agreed upon time.

‘‘We can look for­ward to a dy­namic and vig­or­ous spring ru­ral prop­erty mar­ket.’’

Spring is the per­fect time for farm­ers to test the prop­erty mar­ket.

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