Prices of New Zealand dairy farms are lagging the average despite a marked revival in the profits outlook for milk producers, enjoying strong rises in both output levels and prices.
Prices for New Zealand farms overall jumped 10.5% in the July-to-September period, compared with the quarter before, to amongst their highest levels in five years, an index compiled by the Real Estate Institute of New Zealand showed.
However, values for dairy enterprises rose by just 2.5%, remaining well below record levels reached in early 2009, if remaining more expensive than the average farm.
The average sales price for dairy farms came in NZ$34,912 per hectare, compared with an all-farm average of $22,851 per hectare.
Milk output recovery
The relatively weak performance in the dairy sector defied a much-improved outlook for producers from that earlier in 2013, when output tumbled thanks to the worst drought in decades, which dried up pastures and prompted many farmers to accelerate slaughter rates.
However, the sector's prospects have improved thanks to a return of rains, which have boosted production, and a succession of price increases offered by processors, such as Fonterra and Westland Milk Products, for milk, in the face of strong world demand, especially from China.
New Zealand is the world's top dairy exporter.
Fonterra milk collections in the June-to-September period, the first four months of 2013-14, rose 5%.
Rabobank said of New Zealand's rebound in milk production: "A very favourable autumn and mild winter resulted in a rapid bounceback in cow condition and feed availability for calving in early spring.
"With mild conditions persisting into early spring, and good feed availability, it is difficult to see conditions arising that could derail a good spring flush and first half of the production season."
National Australia Bank said that New Zealand had enjoyed a "robust start" to its production season, with milk intakes reported "very strong" in August and September.
Indeed, volumes were so strong that some "needed to be freighted from North Island to South Island, where there is more processing capacity", NAB said.
On land prices, Reinz spokesman Brian Peacocke noted that the figures came for a period of relatively small volumes, with 342 sold, compared with an average of 410 ovcer the previous three quarters.
"The September quarter is the peak workload period for the majority of farmers, and as a result farm sales for the period have been moderate," he said.