The retreat in milk prices, combined with rising interest
rates, has softened the New Zealand farmland market, which has slowed rapidly
in price terms amid a pick-up in volumes.
Farmland prices were 0.1% lower in the March-to-May period
than in the three months to April, the Real Estate Institute of New Zealand
The decline, while small, contrasted with a 6.4% rise revealed
in the previous report, and with a year-on-year increase of 13.7%.
And, indeed, with land changing hands at an average of NZ$25,018
per hectare - and with the number of farms sold hitting 1,881 in the year to
May, up 26% year on year – the institute said that the market remained "strong"
and illustrated "the healthy state of the rural sector".
'Hint of caution'
However, Brian Peacocke, the Reinz rural spokesman also
highlighted a "hint of caution" in the market, reflecting "an easing in the
dairy payout [and] increasing interest rates", besides enhanced environmental
Fonterra - the group responsible for processing the vast
majority of milk in New Zealand, the top dairy exporting country – last month
cut its forecast farmgate milk price for 2013-14 by NZ$0.25 per kilogramme of
milk solids to NZ$8.40 per kilogramme of milk solids.
The move had been much anticipated, after a tumble of some
25% in dairy prices in four months at Fonterra's benchmark GlobalDairyTrade auctions.
The co-operative has forecast a drop in prices in the newly
started 2014-15 season to NZ$7.00 per kilogramme of milk solids.
Dairy farm prices indeed fell 0.5% in the March-to-May
period from those in the three months to April.
And, at 5.1%, dairy farms recorded a below-average annual
rate of appreciation for the year to May.
Reinz again underlined "very strong activity" in the
kiwifruit sector in North Island's Bay of Plenty.