Dairying's Bonanza Triggers Goldrush
NEW ZEALAND - The prospect of bumper payouts is luring farmers in other agricultural areas to switch to dairy farming.
2 July 2007
1 minute read
But although rural lenders say forecasts of increasing dairy income are starting to justify the rising cost of farm land, they are warning against making decisions based on the short-term outlook.
Banks say the number of farmers seeking finance to buy dairy farms or convert their own operations increased this year when Fonterra raised its forecast 10c to $4.15 a kg of milksolids, and leaped again when the $5.53 forecast for the 2007/08 season was announced in May.
Interest has been highest in Southland, where up to 60 farmers are likely to switch to dairying in the next year, up from 30 last year.
Reserve Bank Governor Alan Bollard warned last year that it was increasingly hard to justify prices paid for rural land based on estimates of the future income from the land.
But with the record dairy payouts looming, prices have kept rising, and the Real Estate Institute says the national median dairy farm value was up 21 per cent in May to $2,930,000.
