The retreat in milk prices, combined with rising interest rates, has softened the New Zealand farmland market, which has slowed rapidly in price terms amid a pick-up in volumes.
Farmland prices were 0.1% lower in the March-to-May period than in the three months to April, the Real Estate Institute of New Zealand said.
The decline, while small, contrasted with a 6.4% rise revealed in the previous report, and with a year-on-year increase of 13.7%.
And, indeed, with land changing hands at an average of NZ$25,018 per hectare – and with the number of farms sold hitting 1,881 in the year to May, up 26% year on year – the institute said that the market remained «strong» and illustrated «the healthy state of the rural sector».
‘Hint of caution’
However, Brian Peacocke, the Reinz rural spokesman also highlighted a «hint of caution» in the market, reflecting «an easing in the dairy payout [and] increasing interest rates», besides enhanced environmental concerns.
Fonterra – the group responsible for processing the vast majority of milk in New Zealand, the top dairy exporting country – last month cut its forecast farmgate milk price for 2013-14 by NZ$0.25 per kilogramme of milk solids to NZ$8.40 per kilogramme of milk solids.
The move had been much anticipated, after a tumble of some 25% in dairy prices in four months at Fonterra’s benchmark GlobalDairyTrade auctions.
The co-operative has forecast a drop in prices in the newly started 2014-15 season to NZ$7.00 per kilogramme of milk solids.
Dairy underperforms
Dairy farm prices indeed fell 0.5% in the March-to-May period from those in the three months to April.
And, at 5.1%, dairy farms recorded a below-average annual rate of appreciation for the year to May.
Reinz again underlined «very strong activity» in the kiwifruit sector in North Island’s Bay of Plenty.
Source: Agrimoney