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NZ dairy farm values follow milk prices into retreat

NZ dairy farm values follow milk prices into retreat

A recovery in New Zealand dairy farm prices has followed the revival in milk prices and foundered, amid concerns over sector returns, besides over the strength of the country’s currency.

Values of dairy farms in New Zealand dropped by 2.0% in the January-to-March quarter, compared with the average price in the December-to-February period, according to data from the Real Estate Institute of New Zealand.

The reversal of gains shown in the previous report echoed the performance of dairy markets themselves, which having soared 27% in the first two months of the year at benchmark GlobalDairyTrade auctions, which are based in New Zealand, lost all those gains in March.

Prices were undermined by the easing of drought in the country, the world’s top milk-exporting nation.

‘Reduced dairy payout’

“The reduced payout” that New Zealand farmers look like getting from processors for milk 2014-15 is “being carefully assessed by prudent [farmland] purchasers, said Brian Peacocke, the Reinz rural spokesman.

Auckland-based Fonterra, which processes the vast majority of the country’s milk, is expecting to pay producers NZ$4.70 per kilogramme of milk solids this season, the lowest price in eight years.

Mr Peacocke added that the drought too has had a “negative impact” on the land market in South Island, where the dearth of rainfall was particularly acute, and indeed remains an issue, Fonterra said last week.

Currency factor

He also highlighted that strength in the New Zealand dollar was being closely watched by investors, after a rally of some 7% from a March 11 low.

A firm currency cuts the competitiveness of New Zealand exports, besides giving inward investors less for their money.

The Kiwi dollar – which came close this month to parity with the Australian dollar for the first time since the currencies were in the early 1980s floated freely on international markets – has been underpinned by a promising economic performance and relatively high interest rates.

The New Zealand benchmark cash rate is 3.5%.

The volume of dairy farm sales also dropped in the January-to-March period, to 86, from 102 deals a year before.

(Source – http://www.agrimoney.com/news/nz-dairy-farm-values-follow-milk-prices-into-retreat–8229.html)

NZ dairy farm values follow milk prices into retreat Reviewed by on . A recovery in New Zealand dairy farm prices has followed the revival in milk prices and foundered, amid concerns over sector returns, besides over the strength A recovery in New Zealand dairy farm prices has followed the revival in milk prices and foundered, amid concerns over sector returns, besides over the strength Rating: 0
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