Australia-Drop in farm values.

AUSTRALIA-DROP IN FARM VALUES.

Victorian dairy farm values jumped during the past two years on the back of rising milk prices and corporate investment but a more uncertain outlook could reduce interest in the sector.

The Australian Financial Review reports that dairy farm values across southern Victoria, which encompasses both Gippsland and the Western Districts, had increased by 46 per cent from 2006 to the end of 2008, according to a Dairy Farm Value Index created by valuers m3property.

"There have been other influences in dairy farm values which have been acting in concert," m3property director Daniel Thomas said, citing the demise of the northern irrigation areas of Victoria and the climactic drive in the south because of the rainfall.

"There has been competitiveness of managed investment schemes, too, and corporates buying land," Mr Thomas said.

But the Australian Bureau of Agricultural and Resource Economics (ABARE) is forecasting a 19 per cent drop in milk prices over the next year, leading some agents to change tack, although Mr Thomas is confident that values will not plummet as credit and milk prices dry up.