Prices of New Zealand dairy land recovered sharply, but amid
low volumes, as farmers "cautiously" assessed the impact of volatility in values
of many agricultural commodities.
Prices of New Zealand farmland overall rose 0.9% in the
April-to-June quarter, compared with the average of March-to-May period, selling
for an average of NZ$26,612 ($23,130) per hectare, the Real Estate Institute of
New Zealand (Reinz) said.
The performance represented a recovery from the 0.5% fall recorded in the March-to-May period, and reflected in particular a rebound in
the dairy sector, an increasingly important segment of agriculture for New
Zealand, the world's top dairy exporter.
Dairy farms sold for NZ$33,543 ($29,150) per hectare, taking
a Reinz index for the sector, adjusting for farm size and location - up 5.2% in
the April-to-June quarter, compared with the March-to-May figure.
However, the increase comes amid a winter period which is
seasonally quieter, especially for dairy farms, of which 69 were sold, compared
with 95 in the March-to-May period.
There was a "significant drop in dairy farm sales for the
period," the institute said.
"As expected for the crossover period from one season to the
next, current activity is reported as being reasonably quiet," Reinz rural spokesman
Brian Peacocke said, referring to the New Zealand farmland market overall.
"Farmers and market observers alike are cautiously gauging the
potential impact on the forthcoming sales season as a result of clear signals
regarding a possible reduction in incomes from the mix of lower product prices,
rising interest rates and the very strong New Zealand dollar."
Milk price falls
Auckland-based Fonterra, the world's biggest dairy exporter,
in May prepared farmers for a sharp drop in milk prices for 2014-15 – to NZ$7.00
per kilogramme of milk solids, from NZ$8.40 per kilogramme of milk solids last
season – thanks to the weaker market conditions.
And prices at GlobalDairyTrade, the Fonterra-run auction,
have continued to decline since, hitting a 21-month low last week.
Indeed, there is now talk of prices falling to NZ$6-6.25 per
kilogramme of milk solids, although the course of the global dairy commodity
market will depend largely on China, the top importer, over whose demand for
foreign supplies there is considerable uncertainty.
Some observers, such as INTL FCStone and Rabobank, have flagged
a sharp slowdown in Chinese orders, but Fonterra and the US Department of Agriculture paint a more robust picture.
Rates and currency
Meanwhile, borrowing costs are rising, with New Zealand's
central bank expected on Thursday to raise benchmark interest rates for a fourth
time, to 3.5%.
This in turn as strengthened the currency, up some 6%
against the US dollar so far in 2014, so depressing the competitiveness of New