The buzz surrounding dairy processor Warrnambool Cheese and Butter has not translated to a boom in dairy farm sales.
While unable to be specific, managing valuer Chris Ryan, of Optean Properties in Victoria, says there is an oversupply of dairy farms on the market and prices are likely to stay low for the next year or so.
He says the 4 per cent rise a year in rural property values in Victoria over the last two decades would have cut off in 2008 for dairy farms.
«From 2000 to 2008, dairy farm prices improved significantly, but subsequent to 2008, when there was a big correction in milk price, there was also a big correction in dairy farm properties.»
He says dairy farm properties are not selling fast.
«There’s an oversupply in the south-west of Victoria, and probably in Gippsland too, and very little interest.»
Mr Ryan says banks have been supportive so far, but there have been several distressed sales in recent times, which have added to the devaluation, as banks have been keen to realise their assets.
The milk price increase of around 24 per cent has lifted optimism, but Mr Ryan says until all the distressed sales are over, farm prices won’t rise significantly.
NSW processing optimism
Meanwhile, Chinese companies are eyeing off opportunities to invest in dairy processing in NSW to produce milk powder.
Mike Logan, of Dairy Connect, is working with six interested parties, both state owned and private companies, to invest up to $150 million over three factories in the Mid North Coast or Hunter region, the Central West and the Southern Highlands, towards Nowra.
«The limiting factor is not the foreign investment as accessing the milk in the state. The farmers are not yet ready to commit.
«They have existing contracts with processors (like Parmalat, Murray Goulburn and Lion) that are reasonably exclusive, and as they expire, we can then start to take up commitments from farmers, probably only part of their production when there’s a surplus of milk in spring and summer.»
He agrees that the interest in dairy processing is not translating to price increases for dairy farms.
Where the price for dairy products on the global market has gone up by 80 per cent in the past few years, farm returns have risen only 15 per cent.
«The farm gate price in NSW is not reflecting the international price, and is limited by the supermarket price, and the only way to break out of that is give these farmers access to the international price,» Mr Logan said.
Source: ABC