NZ: Dairy Land Values Remain Robust Amidst Growth Cap
Source: The DairyNews
The imposition of a cap on the expansion of New Zealand's dairy herd, coupled with a focus on quality farms, continues to bolster land values, despite challenges such as lower farm returns and escalating costs.
Bayleys' recent dairy market insight report underscores how the plateauing of the nation's dairy milking platform is sustaining confidence in land values, despite a notable increase in interest rates and operational expenses this season.
Nick Hawken, Bayleys' national rural director, noted, "For almost a decade now, New Zealand has faced increasingly tighter limitations on the ability to convert land to dairy. The national dairy platform is now at a maximum, and we aren't 'making' any more dairy farms. This scarcity is continuing to underpin values in key dairy regions."
Investors are acknowledging the regional constraints on total dairy land supply and are willing to invest in high-quality farm operations, particularly in key dairy regions such as Waikato and Canterbury.
The mid-range value per hectare for Waikato's 2023 land values remains relatively stable compared to 2022, with Canterbury and Southland also reporting similar values, particularly at the upper end of the mid-range value per hectare. These regions collectively accounted for nearly 60% of all dairy land sales in 2023.
Despite the challenges faced by the dairy sector in recent years, Hawken emphasized investors' long-term confidence in the industry, driven by its strong prospects aligning with broader business strategies.
Looking ahead, Hawken anticipates a continued flight to quality dairy areas as buyers seek reliability in processors, infrastructure, and climate to support farm performance and mitigate risks.
Bayleys also highlights the importance of environmental standards in farm transactions, with buyers and lenders prioritizing detailed environmental information to ensure sustainable production.
Moreover, the sector's response to environmental pressures, led by robust processor initiatives and collaboration across the supply chain, instills confidence in investors regarding the industry's future sustainability.
As consolidation and decommissioning of smaller dairy farms persist in traditional regions like Taranaki and Waikato, the industry's transition to larger units gains momentum, offering options for both expansion and exit strategies for farmers.
The upward trend in the sector's predicted payout midpoint to $7.80 per kg milk solid further bolsters investor confidence, signaling a positive outlook for the industry.
Despite challenges posed by higher interest rates, Hawken emphasizes that buyers with access to capital recognize the long-term value of dairy investments, underscoring the sector's resilience and potential for growth.
Nick Hawken, Bayleys' national rural director, noted, "For almost a decade now, New Zealand has faced increasingly tighter limitations on the ability to convert land to dairy. The national dairy platform is now at a maximum, and we aren't 'making' any more dairy farms. This scarcity is continuing to underpin values in key dairy regions."
Investors are acknowledging the regional constraints on total dairy land supply and are willing to invest in high-quality farm operations, particularly in key dairy regions such as Waikato and Canterbury.
The mid-range value per hectare for Waikato's 2023 land values remains relatively stable compared to 2022, with Canterbury and Southland also reporting similar values, particularly at the upper end of the mid-range value per hectare. These regions collectively accounted for nearly 60% of all dairy land sales in 2023.
Despite the challenges faced by the dairy sector in recent years, Hawken emphasized investors' long-term confidence in the industry, driven by its strong prospects aligning with broader business strategies.
Looking ahead, Hawken anticipates a continued flight to quality dairy areas as buyers seek reliability in processors, infrastructure, and climate to support farm performance and mitigate risks.
Bayleys also highlights the importance of environmental standards in farm transactions, with buyers and lenders prioritizing detailed environmental information to ensure sustainable production.
Moreover, the sector's response to environmental pressures, led by robust processor initiatives and collaboration across the supply chain, instills confidence in investors regarding the industry's future sustainability.
As consolidation and decommissioning of smaller dairy farms persist in traditional regions like Taranaki and Waikato, the industry's transition to larger units gains momentum, offering options for both expansion and exit strategies for farmers.
The upward trend in the sector's predicted payout midpoint to $7.80 per kg milk solid further bolsters investor confidence, signaling a positive outlook for the industry.
Despite challenges posed by higher interest rates, Hawken emphasizes that buyers with access to capital recognize the long-term value of dairy investments, underscoring the sector's resilience and potential for growth.
