The latest Bayleys’ Rural Market Update for the dairy sector compiled by its Insights & Data team points to buyer confidence, buoyant demand, and a positive outlook for the 12 months ahead on the back of
strong long-run milk prices and global demand for New Zealand products.
Last financial year, Bayleys transacted over 100 dairy property deals – more than one-third of the total dairy farms
sold nationwide.
In releasing the report, Bayleys’ national director rural, Nick Hawken said REINZ figures show the total value of
dairying land sold across New Zealand exploded in the 12 months from 1st April 2021-31st March 2022, to $1.524bn – more
than double the value sold in the 2020-2021 period.
“In total, 40,958ha of dairying land was sold nationwide in 2021-2022 according to REINZ.
“Bayleys’ transactional data shows traditional dairying areas like the Waikato continue to dominate, however Southland
and Canterbury have seen a surge and are now a significant part of the national picture,” Hawken said.
“Higher dairy prices in the commodity market have actively improved farm profitability which in turn has increased the
appeal of dairy land for buyers, including investment entities and private investors that have diversified their
portfolios to include dairy assets.”
Hawken said confidence is back in the market from both an investor and lending perspective, with sophisticated market
fundamentals coming into play.
“The dairy industry was starved of liquidity for many years, but has seen solid returns since 2019
largely because of elevated commodity prices, but underpinned by the wider intelligence of the industry.
“Dairy farmers today have a far better understanding of how their day-to-day operations can influence the supply chain.
“When multinationals like Nestlé double-down on responsible sourcing programmes prioritising carbon neutrality and an
ethically-produced ingredients policy, it is clear that the game is changing and farm owners and investors recognise
this.
“Those investing in the dairy sector continue to chase solid commodity prices and returns, but are also increasingly
attracted to the underlying fundamentals of the industry, understanding that they are investing in a high-value
nutrition market that has longevity.
“As a result, there have been increased levels of capital flowing from both the debt and equity markets into dairy.”
From an investor and lender standpoint, the spotlight remains focused on the dairy industry’s environmental impact and
Hawken said proven stewardship is currency in the property market.
“Come transaction time, those dairy farms with a well-documented track record of environmental stewardship and with a
sound carbon philosophy are likely to reap the rewards,” said Hawken.
“As buyers become increasingly cautious about environmental standards, saleability increases for farms with A-grade
environmental audits and/or are on track to meet long-term targets, with banks supportive of well-capitalised dairy
businesses with sound supporting data..
“Dairy property as an asset class requires full stakeholder buy-in, with banks signalling that a farm environmental plan
to underpin lending will become mandatory within the next couple of years as sustainability-linked lending benefits
become more prevalent.”
Hawken said strong cash yields in the dairy sector have enabled capital investment on-farm, seen some farm owners on the
acquisition trail for neighbouring properties to improve efficiencies and assisted in reducing the burden of
environmental compliance.
“However, we need to acknowledge that while farm gate returns are looking rosy, there are challenges in the broader
market given inflationary headwinds, rising operating costs, staffing shortages interest rate uncertainty.
“The emphasis on the Future Maintainable Production Equation (FMPE) continues as margins are squeezed, but for now, it
seems there is some freeboard above the waterline for most operators.”