Incredibly high’ NZ land prices divert dairy farm investors to Chile
The “incredibly high” bubble prices of New Zealand dairy farms have prompted a number of savvy farm investors to switch some of their new investments to Chile where the dairy sector offers “the best risk-adjusted returns in global agriculture”. The current market is supported from strong growth in Asian consumption. “[This] might lead to a potential demand overhang for dairy products of as much as 5 billion litres by 2020,” said Detlef Schoen, head of farm investments at German-based Aquila, citing analysis of OECD data.
‘Incredibly high prices’ The appeal of New Zealand as an investment target “has changed in the last 12 months”, said Andrew Sliper, a senior manager farm investments at Aquila – and a New Zealander. “As a result of Asian interest in New Zealand, land prices have gone up an incredible amount,”.
New Zealand farm prices are selling for a 400% premium to those in Chile thanks to Asian investment and easy low-cost money.
The New Zealand Real Estate institute highlighted strong demand for dairy farms in many regions, including in Canterbury, in the west of South Island, where a 1,284-hectare dairy unit sold for NZ$64.9m. “Overseas interests remain active for larger farms,”
The benefits of operating in Chile, it is not only a country with a favourable climate and rich volcanic soils perfect for grass production but is also a producer of grain, at relatively favourable prices, offering good prospects for supplementary feeds, plus importantly having political stability. “If you were in Africa, the Ukraine or other parts of Eastern Europe, you would probably be having some sleepless nights. “You might have had the prospect of a higher return, but you are dealing with the political and cultural risk of being in those countries.”
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