It is ironic that on the day Fonterra announced a downgrade of next years projected payout, a Mid Canterbury cropping farm has believed to have been sold for a record figure.
Cropping farms in this area have had years of average returns and ever increasing costs so it is understandable they are looking at alternative land uses to improve profitability.
The challenge is however, that costs in the dairy industry are also increasing and more and more farmers are reliant on a higher and higher payout to survive.
Too much debt in dairying caused problems for many only two years ago, so will the rising cost of land see a return to these issues once again?
Are these new land prices reflective of better productivity and profits in agriculture, or are we seeing the start of a new wave of inflated land prices? Your views?
The sale of a Mid Canterbury crop and grazing property to dairy farmers for more than $12 million shows increasing confidence in farm ownershipreports The Ashburton Guardian. Armadale Farm at Dorie, at 301 hectares, is believed to have been bought at more than $42,000 per hectare, heralded as the highest price in the area for about four years.
Mid Canterbury Federated Farmers dairy section chairman Hamish Davidson said he would not be able to confirm the price one way or the other, but if rumours were true that it was "north of $40,000 per hectare" it was certainly high. Previously, non-dairy farms in that area were selling for $36,000 to $38,000 per hectare.
Mr Davidson said if the goal of the new owners was to convert it, as one would expect it would be, then they would be paying another $5000 to $6000 per hectare on top of the sale price for conversion costs, and then another $6000 to $7000 per hectare for Fonterra shares. So overall it would be costing them up to $55,000 per hectare, or in the range of $16 million.
Mr Davidson said the high sale price underpinned confidence in the equity position of farms in Mid Canterbury. It would be heartening for banks which had lent a lot of farmers money over the years, as well as the farmers themselves, that there was some value in the land they owned.He said there was growing confidence in farming overall, not just dairying. Sheep and beef prices were high and the overall cost of credit was quite low.
"New Zealand is a really attractive place to buy land, there's a lot of overseas people looking at buying land," Mr Davidson said.
While Armadale had sold to a New Zealander, two recent sales in the district, one at Winchmore and one just out of Ashburton, had both sold to ex-pat Kiwis.
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