Real Estate Institute of NZ (REINZ) data showed prices for most farm types were down in June.
The Reserve Bank carried out a ‘stress test’ of the five largest dairy lenders late last year to assess the banking system’s vulnerability to the sector if product and farm prices continued to decline.
In a report released in March the central bank said two scenarios were tested.
The first scenario assumed that the dairy payout would recover to $5.25 per kilogram of milk-solids by the 2017/18 season and that there would be a fall in dairy land prices of 20 per cent.
Under the second scenario the dairy payout was assumed to fall to $3 a kg in 2015/16 and remain below $5 until the 2019/20 season –
– with a fall in land prices of 40 per cent.
As it stands, Fonterra’s farmgate milk price for 2016/17 is just $4.25 a kg – $1 short of the estimated average cost of production.