Stratford Press

Cream rises to the top with farm sales

PROPERTY: Demand for dairy farms is buoyant, especially those with a track record of environmen­tal stewardshi­p


The latest Bayleys’ Rural Market Update for the dairy sector compiled by its Insights & Data team points to buyer confidence, buoyant demand, and a positive outlook for the 12 months ahead on the back of strong long-run milk prices and global demand for New Zealand products.

REINZ figures show the total value of dairying land sold across New Zealand exploded in the 12 months to March 31, 2022, to $1.524 billion — more than double the value sold in the 2020-21 period, Bayleys national director rural Nick Hawken says.

“In total, 40,958 hectares of dairying land was sold nationwide in 2021-22 according to REINZ,” Hawken said. “Bayleys’ transactio­nal data shows traditiona­l dairying areas like Waikato continue to dominate, however Southland and Canterbury have seen a surge and are now a significan­t part of the national picture.”

“Higher dairy prices in the commodity market have actively improved farm profitabil­ity which in turn has increased the appeal of dairy land for buyers, including investment entities and private investors that have diversifie­d their portfolios to include dairy assets.”

Hawken said confidence was back in the market from both an investor and lending perspectiv­e, with sophistica­ted market fundamenta­ls coming into play.

“The dairy industry was starved of liquidity for many years, but has seen solid returns since 2019 largely because of elevated commodity prices, but underpinne­d by the wider intelligen­ce of the industry.

“Dairy farmers today have a far better understand­ing of how their day-to-day operations can influence the supply chain.

“When multinatio­nals like Nestle´ double-down on responsibl­e sourcing programmes prioritisi­ng carbon neutrality and an ethically-produced ingredient­s policy, it is clear that the game is changing and farm owners and investors recognise this.

“Those investing in the dairy sector continue to chase solid commodity prices and returns, but are also increasing­ly attracted to the underlying fundamenta­ls of the industry, understand­ing that they are investing in a high-value nutrition market that has longevity.

“As a result, there have been increased levels of capital flowing from both the debt and equity markets into dairy.”

From an investor and lender standpoint, the spotlight remains focused on the dairy industry’s environmen­tal impact and Hawken said proven stewardshi­p was currency in the property market.

“Come transactio­n time, those dairy farms with a well-documented track record of environmen­tal stewardshi­p and with a sound carbon philosophy are likely to reap the rewards,” Hawken said.

“As buyers become increasing­ly cautious about environmen­tal standards, saleabilit­y increases for farms with A-grade environmen­tal audits and/or are on track to meet long-term targets, with banks supportive of wellcapita­lised dairy businesses with sound supporting data.”

Hawken said strong cash yields in the dairy sector had enabled capital investment on-farm, seen some farm owners on the acquisitio­n trail for neighbouri­ng properties to improve efficienci­es, and helped reduce the burden of environmen­tal compliance.

“However, we need to acknowledg­e that while, farmgate returns are looking rosy, there are challenges in the broader market given inflationa­ry headwinds, rising operating costs, staffing shortages interest rate uncertaint­y. The emphasis on the Future Maintainab­le Production Equation (FMPE) continues as margins are squeezed, but for now, it seems there is some freeboard above the waterline for most operators.”

 ?? ?? While farmgate returns look rosy, the dairy sector still faces headwinds, says Bayleys’ Nick Hawken.
While farmgate returns look rosy, the dairy sector still faces headwinds, says Bayleys’ Nick Hawken.

Newspapers in English

Newspapers from New Zealand