Dairy prices down as are costs
Dairy prices are easing but cost inflation is down across the board, providing some relief to farmers.
The head of agribusiness for Westpac, Mark Steed, says his staff have seen a lot more dairy farms come up for sale, marking a turnaround from the past few years of low payouts. The prospect of a $6.75 payout this season has dairy farmers relieved and buoyed up about the future.
Steed says the only uncertainty that hangs over the sector is what will happen on the political front – the composition of the new government.
The other imponderable is the weather and what effect this may have on production for the season. Many regions are reporting production is down, and Steed says what happens with the weather over the next three months will be important.
Meanwhile the Real Estate Institute’s spokesperson on rural issues, Brian Peacock, says quite a number of farms are coming on the market, especially in Waikato.
“There is mix of reasons for this including a combination of [farmers’] age and stage, coupled with the climatic conditions and labour issues. Also, people tend to move up and down in size and scale when they deem that the market is pointing upwards as it is now and this is probably seen as quite a good time to be selling,” he says.
Peacock says this season’s $6.75 payout has lifted confidence in the dairy sector, influencing the decisions people make. While the trend is for dairy farms to be larger there is a still a market for smaller farms.
“These small farms are picked up by the first farm purchasers and others who want to step back from a larger unit,” he says.
Smaller farms tend to be in traditional dairy areas in the North Island such as Taranaki, Waikato and Northland whereas the larger ones are in the South Island and are often conversions from sheep and beef to dairying.
