As at March 2025
Stabilisation in farm values on the back of improved payout, but high input costs eroding higher payout.
The dairy industry has been in a holding pattern in recent times but noting the 2016 – 2022 season payouts have seen some stabilisation in farm values in recent times following a period of softening in farm values throughout the 2018 – 2020. This is on the back of the Reserve Bank’s commentary on the dairy sector at the time that urged the highly indebted wider agricultural sector to keep repairing its balance sheet because risk looms.
The 2023/24 season saw a final payout of $7.83/kgms, the 2022/23 season $8.22/kgms, with 2021/22 season $9.30/kg milk solids. This compared to $7.54/kgms in 2020/21 and $7.14/kgms in 2019/20. The most recent Global Dairy Auctions have shown an increase after falls over the previous six months in whole milk powder in particular which has the greatest bearing on Fonterra’s “Farmgate Milk Price”. The 2024/25 season forecast is around $10.00/kgms.
Whilst the payout levels for both the current and the coming season for dairying is very encouraging, the significant increase in on-farm costs sees almost the minimum levels of $8.00/kgms to provide confidence in the sector.
Value levels have been surprisingly stable over the last 18 months or so, after a slight reduction in values during the 2022/23 period. We see the most recent sales indicating values at around $40 - $45/kgms. Further analysis indicates land without buildings and Title allowance at $30,000 - $35,000/ha or $35/kgms.
The latest REINZ data indicate an uptake in farm sales over the last 12 months which is reflected in a slight rise in the REINZ All Farm Price Index. The lift in sales reflects a renewed confidence in the rural market.
The size, standard of improvements, location and soil types are key factors in determining saleability and value. The subdivision potential and house site allowances provide additional value over and above the productive base and also reflect a degree of liquidity of security.
Previous strong demand for horticultural land has propped up the value of a number of farms in the Bay of Plenty region, but the more recent reduction in orchard values has seen the demand for bare land soften.
Kiwifruit Market
As At March 2025
It is well documented that the kiwifruit industry had strongly rebounded following the discovery of the disease Psa in 2011. Value levels strongly increased on the back of profitability in the Green (Hayward) variety, supported by the success of the new Gold (G3) variety which has also shown good tolerance to Psa. The value levels climbed to an all-time high, in approximately May/June 2022.
There was a period during 2023/24 where the kiwifruit orchard market was very depressed and the market effectively stopped trading. This was a reflection of both climatic and marketing factors which saw a drop in payout levels and associated drop in overall confidence in the sector.
There have been a number of sales over the last six months or so and confidence has returned, albeit at value levels significantly off the peak of mid 2022.
Kiwifruit orchards are analysed into productive assets per canopy hectare (land, vines, structure, shelter irrigation, crop and licence) from various sales. They exclude buildings and house site/title allowance and other surplus land.
Our current assessed value of top quality orchards in the Bay of Plenty is around $1,450,000 per canopy hectare excluding crop – range $1,300,000 - $1,500,000 per canopy hectare, with the latter level for much smaller orchards on properties with a relatively high level of housing and related development. Overall, these levels represent around a 20% reduction from the market peak.
Sales of Green orchards over the last six months in the wider Bay of Plenty indicate a relatively wide range from $350,000 ‑ $450,000 per canopy hectare (land, vines, structures, shelter, irrigation and crop). The value is being held up somewhat by the value associated with cutover to the more desirable Gold variety. These levels are around 40% lower than the market peak around three years ago.
