Dairy Market Update

In this sector market update, we focus on the dairy sector with insight on market conditions from Bayleys Canterbury Director and country salesperson, Ben Turner.

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There has been renewed strength in the dairy market throughout the country over the last 12 months, particularly in the key dairying hubs of Waikato, Canterbury and Southland.

The outlook for on-farm returns remain very positive, with Fonterra revising the farm gate milk price upwards in December to sit between $8.40 and $9.00 per kilogram of milksolids, and it’s incredible to think there is a strong possibility the final pay-out for the 2021/2022 season could start with a magic “9”.

Spring activity in the dairy real estate market has again been positive, and the market has continued to experience further growth with some of the highest sales values seen in the last five years.

The spring campaigns throughout the country have attracted interest from buyers all over New Zealand – not just the local buyer network – as dairy investors search for the right opportunity with the right yield, nationwide.

There has also been a notable increase in buyer enquiry and demand from investors outside the dairy sector, particularly from sheep and beef farmers looking to utilise their balance sheet to add additional cashflow to their overall operations.

According to the Real Estate Institute of New Zealand, the amount of dairy land sold has almost tripled with 19,500 more hectares marketed and sold in the 12 months to 30 September 2021, compared to the previous period.

There also continues to be growing demand for dairy support land, with 26-percent more hectares sold as farmers proactively look to future-proof their current operations from increasing regulatory compliance requirements.

The Waikato has seen a number of smaller or former dairy farms purchased for either dairy grazing or maize, with a significant increase in competition for support land from those pastoral farmers searching for fattening land to complement existing operations.

Overall, there has been an increase in the average sale price per hectare of dairying land of around $2,600 across the nation in the last 12 months.

This is clearly evidenced by a lift in Canterbury values, particularly in those tier 1 farms, now sitting between $50,000-$55,000 per hectare, with the next tier down ranging between early-to-late $40,000 per hectare – depending on location, environmental factors and the standard of infrastructure.

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