Since our last update on the dairy market in Canterbury, we have observed more sales activity with vendors achieving strong prices for well managed properties with good natural attributes in many areas on the South Island.
After consecutive years of negative sentiment in the dairy industry, optimism appears to have returned and this is being reflected in the market for dairy farming land.
The market’s momentum is driven by the resilience of the New Zealand Dairy Industry during a global pandemic and a strong farm gate milk price restoring confidence in those already invested and capturing the attention of new investors.
Historically, financial pressure coupled with the uncertainty around environmental policy and regulation, biosecurity issues and Covid-19 and the associated lockdowns were all weighing heavily on the minds of farmers and potential investors.
Global demand remains firm and milk production is at below average levels and this dynamic drives the high milk prices we have been experiencing this season.
The GDT index is sitting at 1,564, just below the peak of 1,572 in April 2013.
Fonterra last update raised the range of the payout to $9.30- $9.90 per kgMS. Synlait also upgraded their forecast to $9.60 in line with Fonterra. This is a significant increase on the starting forecast for the season of $7.25-$8.75.
Last month, drought has been declared in Southland, Clutha and Lakes District in Otago, affecting dairy operations in these areas.
Previous dairy research:
At the end of February, the Government made a decision to allow just 300 more international dairy farm workers into New Zealand in 2022 in an attempt to solve the sector’s significant staff shortages. The number was disappointing to most in the sector, as many farmers will still struggle to staff their operations. The industry had put a request in front of the Government for 1,500 exemption visas back in November 2021. Some estimates put the labour shortage in the sector at 4,000 workers.
He Waka Eke Noa - Primary Sector Climate Action Partnership will put its proposed alternative to the Emissions Trading Scheme (ETS) to the Government by May 31, after taking farmer feedback into account.
Environmental compliance is still creating greater complexity in dairy farming businesses. As policy changes continue to roll out and become clearer, we expect the market to become more sophisticated around factoring them into the value being offered for land.