'Drought-breaking rains' revive NZ farmland market
By - Published 19/05/2014

"Drought-breaking rains" fostered a sharp recovery in the price of farms in New Zealand, even as the country's important dairy sector has seen some fall-off in milk prices.

Prices of New Zealand farms rose 14.7% in the year to the end of April, a sharp acceleration from the 9.2% recorded in the year to March, data from the Real Estate Institute of New Zealand showed.

The increase reflected "confidence" in the sector instilled by an end to drought conditions which hit the country for a second successive year early in 2014, albeit proving not nearly as severe as those in early 2013.

"Rural morale has rebounded following drought-breaking rainfall in the northern regions," said Brian Peacocke, the institute's rural spokesman.

In South Island, the "surplus of rain has been great for the pastoral sector", although he cautioned that the storms had "impacted heavily on some in the arable sector".

'Relief from dry conditions'

In the dairy sector, farm prices in New Zealand, the top milk exporting country, were up by a more modest 6.1% year on year, although this reflected in particular recent growth.

Prices in the February-to-April quarter were 5.7% higher than in the January-to-March period.

The recovery comes despite a fall in prices, with product values at GlobalDairyTrade, the auction run by Auckland-based dairy giant Fonterra, falling 19.7% so far this year, reflecting improved milk production, including in New Zealand itself, so underpinning farm revenue hopes despite lower values.

Fonterra's milk collections were 16% higher last month on South Island and soared 51% on North Island, compared with the drought-affected levels a year before.

The co-operative said that "rain from ex-Tropical Cyclone Ita brought relief from the dry conditions that had been impacting volumes in the North Island".

Fonterra volumes for the first 11 months of 2013-14, which ends this month, were 7.7% higher than a year before.

Regional differences

In the dairy sector, Reinz said that there was a "good, steady market" for farms in Northland, in the north of the country, with "stronger prices" for good farms in neighbouring Waikato.

However, the institute noted a "quieter market" in south eastern North Island, and, on South Island, some signs of "resistance to higher prices" in the popular Canterbury region.

North Island's Bay of Plenty was singled out for a "strong upturn in prices", although this reflected the market for "good quality, well situated kiwifruit orchards".

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