Farm sales index 'understated' dairy slump

A RURAL Finance index of farmland sales trends has been criticised for grossly understating a slump in dairy farm values across the south-west last year.

According to the index, which took two years to produce and tracked  sales across the state since 1990, dairy land values fell 1 per cent statewide in the 2012-2013 financial year and 2 per cent in the south-west for the 18 months to June last year.

However, farmers, an accountant and real estate agents said values in the south-west over the full 2013 calendar year had fallen 20 to 30 per cent and in one case 50 per cent.

The index released yesterday in Melbourne said  land values in dairy regions had recovered from a dip in 2008 caused by the global financial crisis.

Rural Finance agribusiness general manager Andrew Smith said the figures excluded forced sales, compulsory acquisitions and inter-family transactions and would be updated when full calendar year data was available from the Valuer-General’s Department.

“We used fair market value   figures,”  he said.

Farmer Power spokesman Jock O’Keefe, of Winslow, said the Rural Finance index was  misleading for the south-west.

“Property values have come back by thousands of dollars -— nearly half in some cases,”  he said.

“Although confidence is coming back the industry’s volatility is turning new investors away.

“With the lower dollar and higher export returns, farmers should now be getting an extra 30 cents a litre payment.”

Coffey Hunt accountant Garry Smith said there was clear evidence that banks had tightened lending criteria for dairy farms based on lower equity. “Many farmers have said it was the worst year they had ever experienced,” he said.

“Although there were very few sales, most properties that did sell were at big discounts and were forced sales.

“I would think values have fallen 35 per cent.”

Warrnambool-based property valuer Roger Cussen said lower farm prices should be reflected in the next round of  municipal revaluations.

“In general terms values would have dropped 20 to 30 per cent depending on condition of the farm,” he said.

“I’m aware of only one Western District dairy farm that sold in the past 12 months that was not under financial duress.

“That farm was in very good condition and sold just shy of $6000 an acre whereas before 2008 it was $7000 an acre.

“Most of  the sales in the past year were under financial duress where soil fertility, pasture and track systems had not been maintained because of financial difficulties.

“These were properties that would have been worth $6000 to $6500 an acre and were selling at $4000 to $4500 — that’s a big percentage drop.”

Tom Luxton, of  Saffin Kerr   Bowen, said the slump started late in 2012 triggered by a poor spring and lower milk prices followed by a poor autumn and long winter.

“It was like the perfect storm and farmers had to borrow more money to feed their stock,”  he said. “That flattened any inquiry for dairy land.

“The average farmer still has financial pressures, but things will improve this year.”

The Australian Financial Review reported this week that at least $300 million worth of dairy farms across Australia had failed to sell or bring in capital partners after more than a year on the market.

Among them are the Fisher Pastoral Company’s six farms near Simpson which were placed in receivership last year. The Hines syndicate farm at Tarrone, which was also placed in receivership, is understood to have sold for about $4.5 million — about half its value in 2008.

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