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Dairy Property Market Research Series: Canterbury

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2021_12 Cant dairy

2021_12 Canterbury Dairy trends

Dairy farm sales activity in the second half of 2021 indicates renewed confidence in the Canterbury dairy market. Good quality dairy farms with sound nutrient outlook and quality, and efficient infrastructure have received strong interest and provide for a sound banking proposition.

The realisation of a record high farm gate milk price (current Fonterra milk price forecast sits between $8.40 and $9.00), together with a favourable outlook in the medium term has given the market renewed impetus.  Although interest rates are now starting to climb, they remain low by historic levels and the positive outlook is now being reflected in a noticeable uptick in prices.

This is a change from 2020 when we considered the buyer pool and demand for dairy farms to be low. Factors contributing to this were a lack of liquidity through an absence of overseas buyers, a reduction in bank appetite for lending, and uncertainty around how environmental rules and regulations could impact farming systems resulting in lower farmer confidence.

Previous dairy research:
Canterbury Dairy support and arable land market  | September 2021
Southland Dairy Property Market Update | August 2021
North Canterbury Sheep and Beef Property Sales Map  |  May 2021
Canterbury Dairy Property Market Update | April 2021
Southland Dairy Property Market Update |  March 2021
Dairy Property Market Update | September 2020

However, recently we have observed interest in Canterbury dairy farms from non-traditional sources of capital including syndicates, sale and leaseback arrangements and international entities taking a minority interest in proven large scale dairy farming businesses.

Interest in dairy farms is also coming from the sheep and beef sector with established, larger scale operators looking to diversify their farming interests into dairying, and further deepening the buyer pool.

Alongside interest from the sheep and beef sector, demand and prices paid for dairy farms appears to be strong when the dairy farm offered for sale has strategic appeal to neighbouring or nearby farmers. Demand for support land to lease or buy appears strong as larger scale Canterbury dairy farming businesses look to take control of their grazing and feed requirements.

Another development of importance is the recent Fonterra farmer vote in favour of capital structure changes. This is another step in the evolution of Fonterra and we will watch with interest how interested parties will factor the capital structure changes into their negotiations when buying and selling dairy farms.

Furthermore, the National Policy Statement for Freshwater Management 2020 (Freshwater NPS 2020) may have more impact on regions outside of Canterbury where environmental rules and regulations are already generally well understood by participants in the dairy market.

An emerging potential issue is Greenhouse Gas Emissions and possible additional costs to farming businesses.

With more buyers in the market and lenders more willing to support those dairy farming businesses that have been able to reduce borrowings, transactions are being finalised. Farmers who have confidence that their production systems are sustainable are buying dairy farms.

Real estate agents are reporting vendors who previously may have wanted to list and sell their dairy property are now withdrawing from the market due to improved returns and a lack of competing alternative investments, limiting the supply.

We consider that dairy farm values have risen in response to a potentially deeper buyer pool and fewer farms being offered to the market for sale.

More research from other industries:
Central Otago Viticulture Property Market Update | November 2021
New Zealand Forestry Market Update| August 2021
Kiwifruit market update | May 2021


2021_12 Canterbury Dairy map visuals2

Dairy Property Market Research Series: Canterbury

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Related Experts

Greg Petersen

Director | Rural Valuation

Christchurch (Rural Valuation)

Greg is an experienced registered valuer and leads our Canterbury rural valuation and property consultancy team in Christchurch.

Greg specialises in the valuation of rural property throughout Canterbury and the South Island. His work for the firm has included financial reporting valuations of large scale rural portfolio’s, compensation assessments for major infrastructure projects and one off individual farm valuations for lending, estate and development purposes.

Greg offers our clients excellent technical skills and he has a highly developed understanding of the public sector and relevant legislation. He plays a lead role in our corporate dairy farm valuation work, high country, infrastructure compensation and in other valuation practice areas.

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Tim Banks

Associate Director | Rural Valuation

Christchurch (Rural Valuation)

Prior to joining Colliers, Tim had 25 years agribusiness banking experience in the North and South Island in relationship management, business development and senior leadership roles.

He completed and peer reviewed rural valuations throughout his banking career.  His banking skills include agribusiness finance, credit analysis and rural valuation.

With his wife he owns an irrigated, intensive stock and cropping property in North Canterbury.

The family property was leased prior to farming meaning Tim understands the lease market, has experience dealing with lessor and lessees and negotiating lease agreements.

Tim brings to the Colliers Rural Valuation and Advisory team agribusiness banking and practical farming experience, an understanding of irrigation and environmental compliance as well as a strong network of farmers and their advisors.

His focuses are all types of rural land valuation throughout the South Island and advisory work in the rural sector.

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Luke van den Broek

Associate Director | Rural Valuation

Christchurch (Rural Valuation)

With over 13 years’ experience in providing valuation and advisory services throughout New Zealand, his expertise covers rural land valuation and advisory matters throughout Canterbury and the South Island with emphasis on valuations for bank lending, financial reporting and insurance.

With broad property knowledge, excellent technical skills, a personable nature and industry understanding, he is well positioned to provide valuations and advice, specialising in dairy, arable, pastoral and intensive farming operations.

His specialist knowledge coupled with attention to detail and his drive for excellence, and continuous professional development, mean he is a valuable and trusted advisor to his clients.

Luke van den Broek,  MBA | BBS (VPM & Agribusiness)
Registered Valuer

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