Dairying Market and Valuation Comment
(March 2011)
Values
slightly lower than those 12 months ago at around
$37-$38/kg milk solids
The dairying industry is in a holding pattern although recent record payout of $8.00 per kg ms payout for the 2010/2011 season, and solid forecast of around $7.00 per kg ms for coming season is instilling confidence.
This is after a period of strong downward correction from the highs of 2007/2008.
Sale prices are around $37,000–$42,000 per hectare (land and buildings and dairy company shares) or around $37–$38 per kg ms.
The strength of the New Zealand dollar continues to restrict stronger payout levels, but despite this international prices for dairy products are exceptionally high.
Location and soil types are key factors in determining saleability and value. The subdivision potential and house site allowances are particularly relevant to coastal properties as factors impacting beyond the productive dairying value.
Kiwifruit Market
(mid–2011)
Leading up to mid–November 2010, Zespri Green Orchard values were strengthening on the basis of slight increases in projected payout levels ($4.10+ per tray). Value levels were predominantly between $160,000–$230,000 per canopy hectare (land, vines, structures, irrigation, shelter and crop).
Likewise, Zespri Gold Orchard sales were showing a steady increase in value levels. Our sales analysis indicated levels of around $340,000–$440,000 per canopy hectare for mature vines (including crop) on the basis of projected payout per tray of $8.70.
However, since the discovery of the bacterial disease known as Psa (pseudomonas syringae actinidiae), orchard values have dropped substantially.
The industry has reacted positively in terms of the establishment of an organisation known as Kiwifruit Vine Health (KVH) to control the spread of the disease.
However, its spread has been relatively significant geographically, and it will not be until the Spring period to see how successful the various control measures have been.
There are two strains of the disease, Psa V (Italian) and Psa LV (Asian) with Psa V of much more concern, given its virulent nature.
The fact is, the industry is being affected as a whole now, regardless of whether an orchard actually has the strain. Until there is a scientific breakthrough in the control of the disease, and/or the creation of a disease resistant variety, considerable uncertainty will remain.
In summary, orchard values have potentially decreased by up to 40%-50% over the last six months as a result of the Psa issues.
At this time the industry is very much in a holding pattern, and specifically participants are waiting until the end of the upcoming Spring where it will become more obvious whether the control measures undertaken by KVH and general protocol have been adequate to mitigate the major spread of the disease.
It is likely that over the next 6–12 months there will be a very wide range in value levels, reflective of a number of issues, such as whether the orchard or neighbouring orchards have the disease, general locality, buffer zone to other orchards, proximity to any other known orchards with either strain of Psa, and so forth.
In the short term, it is likely that there will be some orchardists that are prepared to sell, effectively at any value level, to exit the industry. Under the worst case scenario, this would be the value of the land and shelter.
Analysis of
most recent 'green' sales (to March 2011) have reduced by around 40%-50% from
last season to levels to
around $120,000-$140,000 per canopy hectare (Zespri Green) exclusive of house
site allowance or buildings.