NZ dairy farm prices eroded by 'hint of caution'

The price of New Zealand dairy farms eased amid concerns over the return of some dryness, real estate professionals said, as US officials cautioned over the potential for a drop in milk prices too.

The price of New Zealand dairy farms was 2.9% lower in the three months to January than in the October-to-December period, the Real Estate Institute of New Zealand (Reinz) said.

Prices were still up 7.8% year on year. However, this represented an underperformance compared with average New Zealand farm prices, up nearly 10%.

The decline was attributed in part to ideas of profit-taking, most notably by investors in the Canterbury area on the north east of South Island.

"The dairy farm market in Canterbury has reached a plateau," the institute said, highlighting that "some syndicates are taking the opportunity of capitalising on their extensive development work".

'Hint of caution'

However, the institute also highlighted some concerns over fresh dryness in Waikato, in the north of North Island, where a "hint of caution is emerging as dry conditions impact on" central areas.

Separately, the US Department of Agriculture bureau in Wellington highlighted that rainfall had proven below average in both Waikato and Canterbury this year, touching a raw nerve after drought early in 2013 sent overall New Zealand milk production falling.

And the bureau highlighted the potential for a retreat in milk prices next season from the record levels that many processors are planning to pay out for 2013-14, which ends in May, boosted by bumper Chinese imports.

"Commentators are warning that the milk solids price for 2014-15 is very unlikely to be as high as this year," the bureau said, adding that such expectations meant that "most farmers will be fairly careful when it comes to purchasing feed".

 Nonetheless, the bureau raised by 628,000 tonnes, to a record 21.20m tonnes, its forecast for New Zealand's milk production in calendar 2014, an increase of 5.7%,

'Positive mood'

Reinz added that volumes of sales of farms overall in New Zealand had increased in the November-to-January period to 1,794, the highest in nearly five years.

"The increase in sales volumes for the three months to the end of January is an indication of the positive mood prevailing throughout the rural sector", said Brian Peacocke, the institute's rural spokesman.

"Most regions are seeing solid demand" for livestock enterprises.

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