Milk prospects give big lift to NZ grass levels

25 January 2002




Milk prospects give big lift to NZ grass levels

By Hugh Stringleman

New Zealand correspondent

LAND values in New Zealands premier dairying districts are surging on the back of record milk price predictions by the countrys Fonterra Co-operative Group.

The recently formed organisation now collects, processes and exports 95% of NZ milk and dairy products, making it reportedly the fourth-largest dairy company in the world.

Kiwi farmers are not paid per litre of milk delivered as in the UK, but receive payment based on each kg of milk solids supplied – around 7-8% of the total milk weight. The 2000-2001 season payment averaged NZ$5/kg and next seasons prediction is NZ$5.20 (about 11p/litre).

In the same way, dairy farm values are also often expressed in milk solid equivalents. This allows potential purchasers to rank properties in different districts with varying conditions.

It also indicates how many seasons they would need to maintain present output to repay the purchase price of land and buildings. Cows are valued separately, and at the moment are fetching NZ$1200-1500 (£350-435).

Current dairy farm values are between NZ$16.50-20/kg milk solids (£4.80-5.80). However, vendors in favoured areas continue to ask, and sometimes get, prices over NZ$20/kg milk solids, representing four years of turnover.

Recent sales in the dairying heartland of Waikato, central North Island, have been recorded at up to NZ$4.3m (£1.25m) for big properties producing 200,000kgs of milk solids (about 2.5m liquid litres) annually from 550 to 600 cows on a 250-day plus lactation.

Typically, these properties have three or four houses, new large rotary dairy parlours and an excellent fertiliser history. The milk solid equivalent has been as high as NZ$21/kg, reflecting the established and productive nature of these farms.

Towards the developing areas around Rotorua, Central Plateau, in the volcanic region of North Island, 250-acre dairy farms have sold recently at around NZ$18/kg milk solid equivalent.

An actual sale at Rerewhakaaitu achieved the equivalent of £368,000 (£1757/acre) for a property with two houses, a 20-a-side herringbone milking parlour and producing 70,000kg of milk solids annually, bringing in a milk-only income of £105,000.

Quotable Value New Zealand (a state-owned valuation service) reports that the average sale price of an economic dairy unit in 2000 was NZ$1,058,000 (£306,802), stock and machinery not included. During the first six months of 2001 that average sale price rose to NZ$1,136,000 (£330,000).

Many sales were of 150-cow units, now widely considered to be too small in scale for an adequate return on capital.

In long-established and weather-favourable dairying regions, a 250-acre dairy farm with 250-300 cows is now considered capable of producing more than 100,000kgs milk solids annually, giving a NZ$500,000 (£146,000) milk income.

With a capital outlay approaching NZ$2m for land and buildings and NZ$300,000 for cows, many established farmers have the borrowing capacity to expand by buying small parcels of neighbouring land or a "run-off" block nearby to assist their drystock and leave the home farm to the milking cows. &#42


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