18 Oct 2017

Wet weather, worker shortage pushes farmers to sell

5:13 pm on 18 October 2017

The Real Estate Institute says it is expecting a surge of dairy farms to hit the market in Waikato and Southland because of problems with succession plans and workers.

FOR WATER TAX story - Generic cow

Photo: RNZ / Rebekah Parsons-King

The institute's latest figures for the three months to September show that the number of farms sold dropped by 30.2 percent compared to the same period last year.

Rural spokesperson Brian Peacocke said this was being driven by the persistent wet weather and high rainfall in many regions making people reluctant to put farms on the market, or go and view them.

Mr Peacocke said the weather now seems to be improving and a large number of dairy farms were being put up for sale, particularly in Waikato and Southland.

"We've got a bigger number of properties in the Waikato that are coming onto the market than has been the case for the past several years."

Historically, good properties sell very well, but in the last two years there have not been too many of the class that are referred to as 'second or third tier dairy farms', Mr Peacocke said.

"Whereas this year there appears to be some of those properties coming to the fore."

And this meant there might not be enough buyers in the market for the lower level farms.

"The market is a little bit untested for that level of property, and the question then arises - are there going to be purchasers for those properties or are there going to be other factors they have to change?

"For instance, if it's a third tier farm and there is no demand from a dairy perspective does it have to then change in its land use to maybe a heifer grazing or beef finishing type property... these are some of the questions hanging in the air at the moment."

Mr Peacocke said there's a mix of reasons behind the surge.

"The things that do stand out is that there is an awareness that age is an increasing factor, therefore succession planning has been an issue, and the wet weather has been a driving factor for some.

"Underpinning that, labour is an increasing issue so a lot of properties are having some difficulty with labour, and when you are getting miserable conditions that's pretty tough for the labour."

Mr Peacocke said it was creating frustration in the sector and could be the tipping edge for farmers trying to decide whether to sell up.

Strong commodity prices encourage farm sales

The Feilding sale yards can have up to 40,000 sheep at the biggest sales.

The Feilding sale yards can have up to 40,000 sheep at the biggest sales. Photo: RNZ / Jemma Brackebush

Federated Farmers Dairy chair Chris Lewis said another factor behind the amount of farms being put on the market was the strength in the sector

"We've seen the commodity prices from sheep, beef, and especially dairy stabilise in the past couple of months ... so there's an opportunity for a few sellers to think it's a good time to sell their farm.

"In the past couple of years there haven't been as many dairy farm sales, partly because of the lower payout and the confidence of sellers to get a good price hasn't been there."

Mr Lewis said there were plenty of open days coming up and property owners would be hoping that buyers were feeling as confident.

"In the next month it'll be really interesting to see what the average farm is worth."

The latest figures from the Real Estate Institute show that the median price per hectare for all farms sold in the three months to September 2017 rose 2 percent to $27,363 compared to the same three months last year.

However, when compared to the three months ending August 2017, the median price per hectare has dropped by 2 percent.

He said succession planning has always been a problem for the farming sector.

"It's just something we have to deal with - make sure farming is attractive for the generation coming in, and make sure there is a good career path so they can build equity to buy a farm."

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