A bit of a longer commentary this week but there has been a 3 week gap since the last auction and there has been a reasonable amount happening!
Volatility in the market remains contained but the last month has effectively seen WMP prices drop back from the $3,000/t - $3,300/t trading range into a $2,900/t - $3,000t range.
As the chart below illustrates (WMP prices in yellow and SMP prices in pink), notwithstanding this move lower in WMP, the market does still feel a little like it is defying gravity and pressure remains for prices to soften somewhat further.
Just before the election the National party announced the carve up of Landcorp.
The policy announcement started me thinking about the importance of young farmers and farm ownership. The question of who will own our farmland in 20 – 30 years is one I ponder a lot; if we don’t do something about it we will end up with land owners and farmers being different people.
Farm ownership was a readily achievable goal for aspiring farmers up until probably 10 years ago; one could shear or sharemilk one’s way into buying a first farm.
The chart from CIP below tells the story of the last 6 auctions – an extended period of low volatility.
Readers will recall, however, that the last 2 auctions have disappointed with slightly negative outcomes, despite robust markets leading into the auction and expectations of a 3%+ price rise in GDT.
This week that trend remains in place, with futures markets continuing to suggest well supported markets across WMP (+3%), butter (+2.5%), and AMF (+2.5%) and SMP (+1.5%).
Ahead of the last auction I was somewhat confidently suggesting a 3% - 5% lift in the WMP futures and a robust result across the board. The -1.6% result in the GDT auction and a modest +1.3% uptick in WMP was therefore disappointing. In some respects, this was even more so, given that my optimism was partly predicated on an expectation of interest from Chinese buyers which did indeed eventuate – as shown in the GDT / CIP chart below. Chinese buying represented 44% of the auction volume.
Environmental Farm Plans must be part of Farm Business plans.
You don’t have to look far to see and hear dairy farmers being accused of ‘factory farming’ and spewing effluent and nutrients into waterways. Politics aside most farmers accept regulations to limit nutrient loss are coming but had hoped (and in some regions are still hoping) that pragmatic solutions would be found.
To really understand the potential for growth and returns from rural land based investment, request a copy of our Investment Guide by filling in this order form.