The latest dairy industry shock is unlikely to result in a flood of properties onto the market, according to real estate agents working in the area.
CBRE Agribusiness regional director Danny Thomas said while some “opportunistic” private equity firms were canvassing buying distressed assets, the main interest was coming from existing farmers. “There is interest from private equity groups, people who think they can buy things on the down, ride them through two or three years and sell them on the up,” Mr Thomas said. But banks were still willing to lend to farmers who had a good track record and were seeking to expand. “There will be well capitalised, well run, existing producers who will take this opportunity to double up, with significantly less investment than it would have cost,” he said. That was a sentiment echoed by western Victorian agent, Elders Rob Rickard.
“Realistically, some people who are wanting to sell, might hold off until things start to improve,” Mr Rickard said. Elders had sold a number of dairy properties in the south-west, in the last few months.
“We have a few family operations who are making the most of low interest rates and looking to expand (but) I can’t say I have got any more properties coming onto the market, as a result of what’s been announced,” he said. “Values dropped back after the 2007-2008 peak in the market and they haven’t really recovered since that time, so they are starting from a very low base.”
Nullawarre farmer Glenn Dalton said farmers had sold, and dried off, cows, while some had “shut up shop for good.” He criticised Fonterra for using what he said were dirty tactics to try and keep farmers supplying them.
Mr Thomas said there was growing interest in farmers thinking about changing production systems, with one potential buyer talking about converting a dairy farm to beef.
Bairnsdale Elders agent Mark Norling said he would not expect any real trends to emerge for about six months. “I don’t believe we can really tell whether prices are going down, it hasn’t really been long enough for the problem to hit,” Mr Norling said. Investment advisor David Williams, Kidder Williams, said while private equity investors might be interested, they would need to have a thorough understanding of the business. “I think some properties will be sold, but not as many as some might imagine,” Mr Williams said. He said there was no room for further capacity in the processing sector. “I think we are in this for a while, with European milk production, quotas, Russia, Ukraine and a tempering of demand out of China, maybe this could be a two-year process.”
