While very dry conditions exist on the east coast of the Upper South Island farmers have to-date received solid farm gate prices in each of the main sectors, including sheep and beef on the back of above average export prices.
The dry is top of mind for farmers, outweighing the current positive outlook for winter and spring product prices.
Despite the dry, recent demand for pastoral properties in the Upper South Island has been stronger than other parts of Canterbury. Typically, the weight of money for pastoral properties is lower meaning a deeper pool of buyers exists providing more liquidity in the market, less influenced by a lack of overseas buyers.
Farmers appear focused on cashflow and profitability, more so than the chance of any future capital gain. Environmental rules and regulations are being considered by those entering the rural market.
The Zero Carbon Act, passed in November 2019, include targets for agricultural methane emission reductions of 10 percent by 2030 and 24-47 percent by 2050. The Government has also announced that it will enter into a world first programme of action with the agriculture sector aimed at introducing farm gate emissions pricing by 2025.
Afforestation potential and demand also exists for pastoral properties from the forestry sector. Low finance costs, good intermediate returns from carbon, raising log price potential, the ability to convert unproductive land into forestry to receive income and the ability for overseas buyers to buy forest land all serve to make sheep and beef properties saleable for a pastoral or forestry land use or a combination of the two.
However, demand for blocks with afforestation potential has generally been higher in other parts of the country compared to the Upper South Island with dry conditions and steeper terrain considered to be limiting factors while established land-owners in the region appear to have actively planted less effective areas on farms, sometimes registering new plantations in the Emissions Trading Scheme providing a future income stream.