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Pastoral options provide strategic opportunities

A contraction in forestry sector interest in pastoral land has cleared a path for red meat farmers wanting to expand their farming operations and capitalise on realistic land opportunities.

Bayleys’ latest pastoral sector market report has underscored the opportunities that still exist for pastoral farmers seeking new farm opportunities, despite current challenges to the sector.

Reporting a total of nearly 74,400ha sold in the 12 months to 31 March 2024, the update acknowledges the slide in profit margins experienced by the sector, with red meat commodity prices sitting below their five-year average, while on farm costs have continued to push upwards.

However, Bayleys National Rural Director Nick Hawken says there remains much to be optimistic about, despite that outwardly gloomy commodity value profile.

“Those revenue and cost pressures are an undeniable reality. However, farmers who are in a position to expand their farm operations have possibly one of the best windows for some time to look at farm purchase options.”

Of total land area sales during the period to 31 March 2024 Otago claimed the greatest area sold, being 20% of the total area, followed by Manawatu-Whanganui at 16%, Southland at 14% and Waikato 10%.

Despite the tighter farm operating conditions, for the key regions, the top end of the mid-range price per hectare was largely unchanged or positive, compared to the prior year’s values other than for Manawatu-Whanganui and Waikato where the shift is minimal.

Waikato in particular had a mid-range price per hectare of $21,042 to $55,040, compared to $19,354 to $56,732 previously. For Manawatu-Whanganui region, the mid-price ranges were between $10,869 to $37,472 (compared to $11,674 to $42,095).

After a period where intense forestry interest has pushed pastoral land prices beyond the reach of many potential farming buyers, pressure has declined, partly due to continuing uncertainty over the ETS scheme and volatility in future carbon returns.

The contraction of forestry purchases coincides with the demographic reality of an average older farmer age group who may be wanting to exit, and in some cases, they are more compelled to sell due to increasing pressure of higher costs and interest rates on farm.

Hawke’s Bay agent Tony Rasmussen says there is no denying things are tough on farm at present, but the longer-term prospects remain positive for those who can identify the opportunities.

“Cattle returns are holding up, and stock ratios will change on farms. So, you can expect those farmers who stick with breeding ewes will be in a good position as things turn around.”

He says the absence of forestry owners has also meant farmers are competing on a more equal footing when it comes to purchasing properties. Similarly in Northland, Bayleys regional manager Tony Grindle says there is more opportunity than ever for farmers to compete for properties based on prices more aligned to pastoral farming than with forestry and carbon.

“We have also seen something of a stand-off in prices, as pastoral sellers come to realise they need to re-align closer to pastoral returns when pricing their property.”

He sees solid pricing coming around the $10,000 a hectare mark for high quality dry stock country in Northland.

“We are also generally seeing more confidence, on grounds buyers feel this government is committed to prosperity and investment”.

Bayleys’ insight report highlights how the direction provided from central government to halt or slow certain regulatory compliance standards will provide greater clarity going forward for rural landowners, and this is expected to help the confidence of buyers.

In the Gisborne region Bayleys agent Simon Bousfield says with foresters having stepped out of the land market, the opportunities for farmers seeking sound pastoral blocks at good values has never been better.

“We probably saw land prices peak higher than other regions with forestry interest, even up to $18,000 a hectare. With forestry out, those prices have come back below $10,000 a hectare. That represents a very good opportunity for farmers to come back into the market.”

The Gisborne region is also defining land use areas post Gabrielle which may in future also provide opportunities for farmers who can see new land use opportunities in them.

“There may be areas that will only be able to be planted in trees, and for those farmers who can see the potential, the opportunity will also be there to pick that land up at a price that reflects that use.”

With bank scrutiny of farm cash flows more intense than ever, those buyers in a position to finance with the security of an established property behind them will find they are well placed to acquire better quality properties.

That opportunity is likely to be enhanced by motivating factors like vendor age, energy, and long-term personal plans of vendors coming to the market this spring.

“Having the courage to look through current lowered returns and see the opportunity to purchase realistically priced hill country assets can be quite a leap, but one that could pay off for any farmer putting their longer-term strategy into play,” says Nick Hawken.

View the full Rural Insight report here.

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