Dairy soars on positive prospects

Solid markets for New Zealand milk solids, shifts in land use regulation and optimistic operators keen to invest back into their industry means the land market for dairy units is enjoying positive prospects for the coming season.

After two years of solid demand for dairy units, Bayleys country sales manager Ben Turner and his team in Canterbury are enjoying a further lift in interest that looks likely to reflect the sector’s upbeat prospects.

The Canterbury region is likely to see another 25,000 cows milking by 2028 with at least 20 conversions either underway now or scheduled to kick off in the new dairy year.

Following the expiry of the national dairy moratorium and the withdrawal of intensified agricultural regulations, land use change is easier, but still subject to some regulatory hurdles.

“The majority of the demand for dairy land is from family operators both within the South Island and from up north,” says Ben.

That includes what he describes as “family corporates”, larger family-owned agribusinesses doubling down on further dairying investment.

In the Waikato where average farm size tends to be smaller, Bayleys general manager Mark Dawe says the volume of dairy farm sales for Bayleys has more than doubled to 58 in the past year compared to the year before, that's a significant amount given Bayleys enjoys the largest share of the market.

Alongside this, Bayleys sales of dairy support and cropping units have enjoyed a 50% growth in volume of sales.

“Smaller dairy units are tending to sell for between $3 million and $6 million, depending on location, size and condition.”

While Otorohanga was hit by some unusual flood events earlier this year, he said the Waikato’s reputation as a generally reliable, safe dairy region remains a solid draw card for existing families expanding dairy operations, and first-time farm buyers.

“Compared to Canterbury where irrigated properties have had a lift in value, we have not seen such a move on price, but certainly on the volume sold.”

He anticipates the sales volume will stay high for the foreseeable future.

“We have seen the more pro-active, aggressive operators already invest their Fonterra payout late last year before it was made. But now the more conservative farmers who tended to wait until they saw the money are considering their potential next farm purchase.

Ben Turner says the domino effect of the dairy land use change is also starting to play out into dairy support land. As more of it and arable country is converted to dairy platforms, interest turns to new areas for grazing/support properties.

“There appears to be more interest in heading into South Canterbury for this, and parts of coastal North Canterbury which catches more reliable rainfall and is well contoured for dairy support.”

He cites potential dairy support blocks ranging from $50,000/ha to $60,000/ha while good dairy units in central Canterbury are selling around $70,000/ha.

“And scale is attracting a premium from a conversion perspective, with land capable of carrying 1,200-1,400 cows particularly appealing.”

Arable farmers who have endured some tough years are also looking at dairy options for their properties without necessarily exiting arable farming altogether.

“They appreciate the capital cost to get into it but also see a good cashflow relatively quickly from it.

“If you have the ability to convert part of the farm to dairy, it can also help manage issues like succession, alongside cashflow.”