The number of farms being bought and sold has recovered in April and May 2011. Sellers may be being more realistic.
An analysis done for interest.co.nz of 29 farms sold in May 2011 in the Canterbury, Otago and Southland regions shows that capital gains have all but evaporated, despite a strong recovery in the number of properties sold.
These 29 transactions represent two thirds of all sales in these three regions. And this sample of five dairy farms and 24 grazing properties turned over for a combined more than $94 million.
Included in this review were four properties that had previously turned over in the last three or so years. Combined, these four sold in May 2011 for $9.8 million, whereas the last time they came to market they were valued at $12.3 million.
There were five dairy farms that sold in this sample, fetching a total of $22 million. or an average of $4.4 million each, representing $35 per kilogram of milk solid. All tare in the Southland and South Otago areas.
The 24 grazing properties in this review sold for an average of $1,028 per stock unit – and all up more than 70,000 stock units were traded in these farms. A Canterbury dairy-conversion farm at Moranan was sold for $2,280/su. At the other end of the scale, an 1,154ha sheep/beef/deer unit at Monowai sold for $6.425 million for 12,400 stock units, or only $518/su.
In 2008 a 605ha / 6,000su Southland unit at Dipton was up for sale for $8 million. It finally sold in May 2011 for just $5.25 million
More detail on the current state of farms sold can be seen here.
The REINZ says 130 farms were sold nationally in May, the highest volume in three years. Rural confidence is rising due to high commodity prices, they say.
Farm sales
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11 Comments
A lot of the sales have been forced or pressured sales by banks and the banks have the final say on what offer is accepted in most cases. In the Tararua region there has been sales of $182-$250 su and others pending to go into forestry all up 30,000 su lost to trees. 45% of 2008 gv One school has 5 pupils and another school 3. Lamb kill same as 1961 this year with Ovation closing in Waipukurau.Ironic in a year of high returns for meat and wool.
You have the wrong stick anon, I was simply stating that a lot of the sales are bank induced, I wasn't talking about entitlement of farmers just merely stating how the sales figures are being manipulated to say that or give the impression that there is confidence in the rural market. Banks have new regulations to abide by from the Reserve Bank. I was simply reflecting on how rural NZ is shrinking and changing and that is reflecting in the declining sheep numbers and potential export earnings for the country, let alone the human cost.
In my view anon, the realisation is that now cap gain is no longer there and not an entitlement anymore. Although its a bitter pil to swallow for some. Very few bank sales out there, the only one i am aware of sold at market price anyway. More a case of farmers just being willing to meet the market now that they understand where it is.
It looks like the market is finding some sort of level, given that there have been such low sales volumes recently its been no more than guesswork as to where the market was actually at .Those predicting the doomsday senario have once again been proven overly pessimistic.
Sentiment down south here is as high as I can recall with increaseing evidence that the lift in prices looks set to be continueing through next season and quite probably beyond. Im not suggesting this will result in significant captital gains but I do think it puts the market on a fully firm footing.
.......was the idea that the market is always right and that the “invisible hand” of market forces will allocate recourses through price signals. I have always been comfortable with this image of capitalism and the free market. However, as I have progressed through life have discovered that it does not apply in all situations, sometimes the government must intervene to avoid the possibility of a market “correction” that may reduce the stability of institutions that our government has chosen to value highly (i.e. the Banks). There are many examples of this and they are becoming more and more common as the government attempts to stabilize an increasingly unstable economic environment.
Examples of this include Landcorp purchasing farms in order to underpin the rural property price;
“Plenty of interest seen as Landcorp buys land” (Wanganui Chronicle, 16th May 2011)
http://www.wanganuichronicle.co.nz/rural/news/plenty-of-interest-seen-as-landcorp-buys-land/3952003/
Or taking over failing farming enterprises (owned by Meat and Wool NZ chairman Mike Petersen) )))))_ ;
“Landcorp grabs Horizon jobs” (NZ Farmers Weekly, 25th October 2010)
http://www.farmersweekly.co.nz/article/8066.html
The government also underpins horticultural land in Hawkes Bay. This can be seen by its purchase of Scales Corp., which owns Mr. Apple. This sale was completed with investment from ACC and the NZ Superannuation Fund;
“SCF’s Scales stake sold off” (stuff.co.nz, 3rd May 2011).
http://www.stuff.co.nz/business/money/4956412/SCFs-Scales-stake-sold-off
The government also underpins the housing market by offering home loans to people that would otherwise be unable to obtain such finance. This is via the “Welcome home loans” scheme, where you don't need a deposit for loans of $200,000 or less.
Carbon emissions is another example of the government manipulating market forces to ensure an acceptable outcome for those whom create this negative externality. Farmers are the largest producers of greenhouse gasses in this country. A tax has been imposed on all other areas of the economy that produce greenhouse gases in order to mitigate the effects. However, as the effect of making farmers accountable for their emissions would impact negatively on their economic situation, the government has decided to “postpone” their inclusion into the emission trading scheme, effectively subsidizing them, while the rest of the economy pays.
The government plays the entire spectrum; from managed economy to laissez faire, at its whim. Providing government guarantees to banks and finance companies that it considers too large to fail (such as South Canterbury Finance) under the guise of a socialist left. While also allowing the invisible hand pummel the savings of pensioners and retirees, as Brigecorp, Hanover, Bluechip and the like fail, in true libertarian style. The government picks and chooses who is bailed out, and who is left to sink, with the tax payer picking up the tab.
And farmers wonder why they are becoming more isolated in our society...
Federated Farmers National Vice President vandalising DoC Car Park
Well said Stevel
By the way interesting comments last week out of the States about Fonterras Auction system.
PRICES ARE MIXED IN FONTERRA’S LATEST AUCTION: (By J. Kaczor) A statement in one of the introductory sections on the GlobalDairyTrade website, What is GDT?, asserts it has become “the leading price reference indicator for the products traded.” That may have been so before New Zealand’s Securities Exchange, NZX, started offering futures contracts for some of GDT’s products, using the average of the Spot month prices as the basis for cash-settlement for their futures contracts. The Spot month is the first contract in each auction – the first full month after the auction month (e.g., August, for June’s auctions). Recently, something came amiss. For whatever the reason, the winning prices bid for skim milk powder in May and June rose to levels that were not supported by comparable prices reported at ports in Western Europe and the U.S., or by any known market comments about significant or unusual supply shortages or demand increases. For example, the winning price for skim milk powder in the June 1st auction for deliveries in August was $2.06 per lb, whereas the winning price for whole milk powder was $.36 per lb lower. At the same time, Dairy Market News reported the high end of the price range then available for skim milk powder in Western Europe was $1.65 per lb and the current prices for nonfat dry milk reported to NASS was $1.64 per lb and the California plant averageprice was $1.63 per lb. The sharp price inversion between the two major internationally traded dairy products apparently did not get much attention from Fonterra or NZX, but the combination of a spot market with relatively small volumes used to settle futures contracts creates opportunities for price manipulation that traders should be concerned about. The maximum volume of skim milk powder GDT reported as available for 1st contract bidding was 1.1 million lbs for each of the most recent six auctions
He goes on to say "......... the information provided in the current Summary of Results becomes close to meaningless. The SOR reports the minimum and maximum combined volumes for all products offered, the total volume sold, and a single weighted average price for all sales. The SOR is already no more meaningful or enlightening than would be a similarly constructed summary for, say, a combination of marsh mellows, marbles, and fish food [or “shoes and ships and sealing wax, and cabbages and kings” – Lewis Carroll.]" "
http://www.milkproducerscouncil.org/updates/061711.pdf
USDA reports there were 13,000 more dairy cows in May than in April (81,000 more than a year ago), and production per cow edged upward....... .......
Nothing like manipulated data to send the herd building message......this time its going to go higher for longer, this time itsgoing to be different....... yeah right.
Malarky, Im interested in your reasons for being pessimistic? This is not about "happy thoughts" its the actual reality of whats dropping into bank accounts and the probability of another pending good year at the very least. Recent reports from the likes of Oxfam and the UN back up trends often highlighted by the likes of Fonterra, Beef and Lamb NZ, MAF etc when predicting a positive macro enviroment for our farm products. Of course you know better.....
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