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If Dairy Farming is the Future Why are So Many Farms for Sale?

by Whaleoil on November 15, 2012

The tipline is running hot with stories of forced sales in the dairy sector, with the banks no longer able to sell off farms who can’t cover their mortgages over time. There are no local buyers out there, and the banks are starting to get very nervous about the prospects of recovering their loans.

Trademe has 390 Dairy farms over 100 ha listed for sale, and from what I am hearing from the rural estate agents, there is not much interest in buying dairy at the moment. Word is a lot more are going to come on the market in the next six months.

The socialists in the National Party, David Carter and Amy Adams, need to explain why they want to give an industry in trouble massive subsidies. They cant hide behind the economic growth argument if the arse is falling out of the industry anyway.

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  • http://www.facebook.com/kohibruce Bruce C Smith

    Intervention and subsidies are the last thing needed – the Oz Banks don’t need to be bailed out for reckless lending. Just let land find a value that allows for returns from production rather than from capital gain.

  • Jimmie

    Not that unusual WO. Dairy farming/payout has always been cyclical in nature.

    Currently the forecast Fonterra payout of 5.50 is the lowest since 2008-09 (The last three seasons were between 6.30-7.50)

    Historically (1990-2004) the dairy payout fluctuated between about $2.90-$4.30)

    This season is low with not a lot of short term growth projected so of course there will be less demand for dairy farms.

    Also with the new TAF system coming on line a number of investors may see this as an alternative to buying a farm.

    However when the payout goes up again demand for farms will increase – no different to urban house prices really.

    It will be good for dairying if some of the poorer operators are forced off their farms – will reduce land prices for others buying in.

  • StacyMcNaught

    Not doubting your comments above Whale, but there is a lot of people sitting on their hands because of Fonterras TAF there is a fair amount of unknowns around it at the moment. That and on farm costs have been allowed to creep too high to sustain the debt levels during lower payouts.

    • Neil

      I wonder how many of the “sales” are actually being forced by banks but not being publicised for fear of crashing the market value.

  • cows4me

    Yes you are quite right Whale there are indeed heaps. There are a variety of reasons but you are incorrect in thinking that money can not be made in the industry. Probably the main reason being that when the payout was soaring many saw dollar signs and rushed to the banks, which were only to happy, to borrow millions on that second, third ……..etc property.
    Of course payout dropped and many were struggling to only pay the interest. Many had also invested in high input feeding systems that are in themselves a deadly trap and be mindful fed costs don’t decrease because payout drops. Cows are fed tons of brought in fed to maximise production. This involves huge investment , feedout pads, 100 thousand to a million , tractors loaders and mixer wagons , half a mill , housing units, sky’s the limit. Increased stock numbers, name your figure, on the same size land area that would have only supported half the animals. So more animals bigger cow shed , could be millions and all these things need extra labour. Shares in Fonterra , $4.52 for each kilo of milksolids supplied. It adds up to millions and millions.
    Plus you have the idiots in the industry telling the young guys that they must strive for more production where they should be striving for profit, Also many farms have been increased in size through buying a neighbours property, also a trap. Many older farmers are now realising the business they built has become unaffordable for the next generation.
    Labour has become a serious issue because farming is simply seen as beneath most now days. We also face increased taxes , an example, I got my QV yesterday, our property has increased in value, so the wankers claim, by some 300,000 dollars which will of course reflect in the next rates demand this despite a full in income of 19%, explain to me how this is just.
    Yes farming is under pressure but it’s not all of our making. In our own situation we farm much different then the normal but the bank manager told us that we were in the top 10% of the region for economic farm surplus, so you can make a profit you just have to alter your mindset.

    • farmboy

      good on you cows4me sounds like we farm very much the same we are just pasture silage and hay,hay is almost a dirty word now in farming but is the cheapest to make even the gear to make it is cheap keep fighting the good fight mate I think I am almost done with this website day after day of bludger calling is gettn to me

      • Goldie

        “I think I am almost done with this website day after day of bludger calling is gettn to me”
        +1

        • Neil

          Don’t despair – I try to reassure myself a lot are exaggerated comments to get reaction – you’re right though sometimes it gets a bit much….

      • StacyMcNaught

        Dont be so precious, im sure it isnt a personal attack…no different to the “all beneficiaries are bludgers ” line, some are, most aren’t.

        • Neil

          As someone just become unemployed I have sympathy farmboy – it’s hard to NOT take comments personally – you feel like you’re walking around with a big poster on your back saying “unclean unclean unclean”…..

        • Travis Poulson

          Even the lefties hand around this blog after getting a spanking on a daily basis. The term “harden the fuck up” comes to mind.

      • trisha

        don’t forget to come back tho……cause you have some opinions we like to read

      • Will

        This “farmers are bludgers” meme just makes me laugh. City types have always been a bit touchy about how much they rely on their farmers. And it must drive them nuts when you consider how that dependence has grown, despite jobs summits and so-called “smart economy” initiatives etc. At least this site gives us the opportunity to have our say, not that Cam seems to listen. So some farmers have been caught over-exposed during a severe global downturn. Hardly news. I’d say more but I’ve a full day of hard bludging ahead of me.

        Regards.

      • kehua

        Harden up farmboy only react to criticism from someone that knows the `business and whom you respect“, you are right on the mark. The only thing that a farmer has complete say in is his direct expences, if he has any sense he will be in a low-cost regime in good times and bad wether he`s involved in Dairying or Drystock farming, most other factors are beyond his control, weather, currency, demand and standing charges such as rates, insurance , labour etc. Profitable farming is always about prudent expenditure and equity.

      • BW_Lord

        While you’ll always come across a blanket sentiment to one degree or another, from all I’ve seen most on here can balance arguments and see both sides. Cows4me put together some great points which has swayed me slightly on this post, and while there’s takers in all sectors I don’t think anyone here would label every farmer in NZ a bludger/parasite (unlike unions where that is exactly what they are and proud of it).

      • cows4me

        Thanks farmboy, same here but I do put summer brassicas in as it can get quite dry around here. Usually farm by the KISS method , I’m sure you will know what this means , seems to work just fine.

  • blazer

    Banks love land as security,almost to the exclusion of everything else these days.Never fear as in the Auck residential market asian investors will buy up the land.They have millions and millions of ‘paper’ they want to turn into hard assets.They can employ the over reached farmers as farmhands.Thats what happens with open slather asset sales eligibility and reckless bank lending.

  • parorchestia

    Over-leveraged due to over-optimism. But wait until buyers of infant formulas realise there are far better products on the market.

    • Neil

      A bit of an issue with that one too – one of them is free….not exactly a “product” though…

      • parorchestia

        The cancer is within – the very successful goats milk farms in the Waikato, No eczema, probably no asthma, and perhaps no diabetes!
        Still, dairy farmers can switch, but at a cost.

  • Dave

    Almost identical to the boom and bust mentality of many other sectors…… Residential housing, YES, Commercial Property, YES, Property Development, YES the list goes on, as long as demand is rising or returns look positive, many come in to make a quick buck, then find themselves riding the wave of ever decreasing returns on an investment that is now worth less than they paid for it. Anyone want a residential unit complex in downtown Onehunga, its going real cheap, didn’t think so!

  • david W

    Typical cyclical market. If my memory serves me right same things happened after the downturn in the 90′s.

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