Farm sales continue to remain subdued with 235 farms of all types selling throughout the country over the three months to the end of April, according to the latest rural sales figures from the Real Estate Institute of New Zealand.
That's down 7.8% compared to the same period of last year and down 49% compared to the same period of 2022. The graph below shows the national trend, with sales following a regular seasonal pattern, but with a steady decline.
In the 12 months to April this year, 920 farms were sold throughout NZ, down 26% compared to the previous 12 months.
Farm prices were also softer, with the REINZ All Farm Price Index, which adjusts for differences in the mix of farms sold by size, type and location, declining 13.1% in the three months to April this year compared to the same period of last year.
The REINZ Dairy Farm Price Index, which adjusts for differences in the mix of dairy farms sold by size and location, was down 10.8% over the three months to April year-on-year.
"The elevated interest rates and unfavourable farm product prices have led to a general decline in farming sales across multiple sectors," REINZ rural spokesman Shane O"Brien said
"This is not dissimilar to what happened in the three months ending April 2023.
"The decline in sales is particularly notable in the forestry sector (-34.1% compared to the three months ending April 2023), and in dairy support sales (-25.0% compared to the three months ending April 2023)," he said.
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20 Comments
If interest rates don't fall by Christmas, unlikely, and sheep meat prices don't rise significantly by Christmas it will get very, very ugly on hill country. I don't think many realise how bad it is out there for sheep heavy farms.
Sadly I’d have to agree with that - cyclones blew out the cash buffers (and dug a giant hole) for sheep heavy east coast of the NI- and drought just smoked what was left of reserves for the east coast of the SI. Banks won’t want to offer extra borrowing against farms that have lost a third of their value in 18 months thanks to demand from carbon farming disappearing in a puff of political smoke. So once again - we’ll get to see what we’re made of I guess.
The fundamentals are actually still fine in the medium/long term - but a collision of Australian oversupply/restocked pork in China, stratospheric inflation and corresponding interest rates are making a hell of a mess in the mean time.
but a collision of Australian oversupply/restocked pork in China
China has a supply glut of pork. And Russian pork production in the Far East is huge. Guess where it's going.
https://www.cnbc.com/2023/12/13/china-is-on-the-verge-of-deflation-fall…
In the next few years this is going to be true of a lot more than just pork. China is determined only to buy from friendly countries going forward and is willing to invest in those countries to get their farm productivity up to where they need to be.
And there lies the crux of the matter CV. NZ does not produce any thing in abundance that can't be produced elsewhere. One thing we can possibly produce in reasonable quantities is soft wood , which according to FAO is going to be in short supply in the near future.
What is the definition of medium and long term Outlook? I've heard/seen that used for decades and no one has ever defined the time frame of medium let alone long term.
I maybe cynical but when any industry group says that in my experience it means no one has any idea what will happen. I'm not picking on farming as the same applies to all industries.
Land values are a red herring really, unless your heavily indebted, as at the moment the cashflow dosnt work at any land price on a lot of farms. From my analysis to make hill country landuse work you need to be virtually debt free to be able to maintain the business, bank and invest away in good years, survive drought and storms, have a chance to retire off in a reasonable state and pass on with no debt while paying out other children.
Medium outlook considers things like protein consumption relative to demographic shifts etc in global tends and who can/can not compete for whatever reason. Excepting the oversupply glut (we ignored some flashing lights) and our over-reliance on China - the global demand has been as expected (prices are strong in EU etc)
Land value is relevant because many farmers did what households did when their home doubled in value - they felt richer and spent money they probably shouldn’t have spent. Now that spending isn’t available when they need it.
Fair enough but the medium definition and future from that is a bit scary if you look at those factors to be honest.
Overspending, well that's no one's fault but the ones who overspent, farm or urban.
Unfortunately the years of low interest rates and rising land prices, urban and rural (in fact urban is worse than rural) caused risk to be forgotten about by many, and now risk is well back on the radar and needs to be understood by everyone.
The market can be a cruel master with no feelings.
Free market enterprises are a game of attrition- outlive the others and you’ll do okay (evolution started that game) no matter what industry you’re in. If you can’t innovate faster or slash deeper then someone else (or something else) will own your business at the end of it. It’s ruthless - but that’s the legacy of deregulation. The young and keen will find some gems in the rubble.
Agree and hope it improves for all on the land and all power to those that learn from the experience - hopefully they prosper and take their industries forward.
Its unfortunate that a few will loose their lively hoods but I always wonder are these well established farms in the same ownership for years and years and have paid off their farm or are theses newly (last five years or so) purchased farms which were bought with the minimum of deposit, probably overpaid and are now suffering the consequences. I understand that many farms are bought with capital gains in mind and not for a reasonable economic return on what they can produce.
There will be buyers of those farms but not at the price the owners expect.
There will be buyers of those farms but not at the price the owners expect.
Chyna?
Possibly but overseas buyer hoop has to be jumped and Winnie will put his oar in if National try to ease restrictions.
New lending is where the pain will be. Young farmers or those in succession tangles.
nigelh, I suspect most will be long held farms. Many young farmers have other income streams. As far as I can construe not many have entered into the AG business recently without a good work ethic and sound financial sense.
Unlike many farms which are run along the lines off " this is what we have always done". Unfortunately for them things have changed.
Off course there are many long term exemptions to that as there are some that change and do alright and will do into the future.
As far as capital gains go, as a farmer I couldn't care less, but some will be thinking on those lines. That way of thinking when buying hill country has not worked out so well in the past if one is relying on other farmers buying from the existing farmer. What I have seen over the past 45yrs is the only bright spots for farmers to sell has been to forestry and the manuka honey rush, which is all gone now.
I suspect it is a case off "back to the future" with farm sales. There are the exemptions as in being in a desirable area or subdivision for lifestyle blocks. but for a lot of real outback hill country the future could be pretty average, and we are one of those.
Thanks for a run down
A local dairy farm I've commented about before. Has been for sale 2-3 years, then in receivership, next auction, then tender . I'm not sure what the banks plan is now. Not a terribly bad farm, multi generational, it's just not working. Can't imagine how sheep n beef are remotely surviving.
It's certainly not about compliance issues.
Personally a lower dollar would be great but only because my gross income considerably exceeds imported expenses, I'm not sure that's true for all.
I agree with a previous comment that the cyclones cleaned out a lot of our 'rainy day' savings and for us the bank account is running on a much thinner edge than it has been for a few years.
However at $8.00 or better there is a good income in dairy farming. We will never win farmer of the year, we are not tech savvy nor paperwork flash but we are travelling okay, making a reasonable return on our efforts and equity. Good enough that we are fully supportive of any of our kids who want to create their own path in farming.
I also agree with Jack Lumber's query/sarcasm about what constitutes medium and long term. It is a phrase repeatedly churned out by management looking to retain their highly paid employment. Just over the horizon lies the rainbow so the saying implies. Even Fonterra's Hurrell (who I support) has started using the phrase when announcing bad news.
Good on ya Wilco, I always take my hat off to real hard working dairy farmers.
Weak domestic demand: "China is sending record quantities of soybean meal abroad, as a shrinking number of pigs and weak demand force processors to export their surplus animal feed."
https://www.bloomberg.com/news/articles/2024-05-30/china-turns-to-expor…
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