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MARKETBEAT: Taranaki Rural Report 2015

Tags: Marketbeat Research Rural Taranaki

Rural land prices in the Taranaki region have reached a post Global Financial Crisis (GFC) high according to latest results reported by the Real Estate Institute of New Zealand (REINZ).

The REINZ sales data for the three months ending May 2015 shows the median sales price of rural land to have reached $42,617 per hectare. While the September quarter of 2012 generated a higher median the figure was based on only four sales and was skewed by the sale of a small arable unit and can therefore be disregarded. While the median sales value can be volatile due to the relatively limited number of sales and the wide variety of different farm types, the latest figure continues the trend of increases in value prevalent since mid 2011, when land values reached their post GFC more.

Dairy Sector Faces Cash Crunch

Following a record dairy payout in the 2013/2014 season, dairy farmers have seen forecasts for the current season regularly reduced in line with retreating commodity prices. The current forecast sits at $4.50 per KgMS. A final payout at this level would result in a reduction of approximately $7 billion in dairy farm income compared with last season.

Combined with a previously announced estimated dividend range of 20-30c a share, the forecast amounted to a cash payout of $4.70 to $4.80 for the current season - below DairyNZ’s estimate of break-even for most farmers of $5.40 a kg.

Given the above it is clear therefore that many dairy farmers will have to continue to exercise caution with on-farm budgets, particularly for those 10% of dairy farmers that hold 30% of the total debt within the more.

Taranaki Farmers Amongst Nation’s Most Efficient

A number of key indicators from the most recent NZ Dairy Economic Survey for the 2013/14 year from Dairy NZ show Taranaki dairy farmers to be amongst the most efficient in the Country. Compared to other major dairy producing regions Taranaki farmers generate some of the highest operating profit margins and overall more.

Better Year for Sheep and Beef Sectors

While the commodity price index has declined sharply over the last year this has been primarily driven by the performance of the dairy sector.

The meat, skins and wool component index however has been far less volatile. Although down on the peak levels reached in September of 2014 it has remained at elevated levels since early more.

View the full MARKETBEAT report here.

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