Farmers reap benefits as land prices boom

AUSTRALIA’S property price boom isn’t stopping at the city limits, with bumper crops and low interest rates putting farmland at a premium.

Agricultural land prices boomed in 2020 and are set to climb for at least the next five years, according to lender Rabobank, with a lack of available land on the market setting up a tussle for those who want a slice.

Rabobank’s newly released Agricultural Land Price Outlook shows all states, barring NSW and South Australia, had double-digit growth in median value per hectare as the nation’s rural sector enjoys an economic sweet spot.

The value of Australian farmland grew by an average 6.1 per cent in 2020 to a median of $5552 a hectare, with several states enjoying a far more impressive rate of growth. Rabobank said Tasmanian farmland jumped by 28.3 per cent in value to a median $15,999 a hectare and Victorian farms grew by 15.8 per cent to $10,981.

Meanwhile, Queensland agricultural land improved by 15 per cent to $2734 a hectare, and farms in Western Australia are worth 14.1 per cent more than they were in 2019 at $3244 a hectare.

“Not in the last 30 years have the macro settings been so supportive” of agricultural land price growth, the new report says, with prices of most major agricultural commodities either at, or near, record levels thanks to shortages and a dramatic economic rebound from Covid-19.

The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) expects the value of farm production to reach $73bn in 2021-22, an impressive 8 per cent above last year’s $68bn record, and 17 per cent above the five-year average.

Generous recent rainfall is supporting future growing conditions, while a lack of supply is playing a role in squeezing agricultural land prices higher. With 45 per cent fewer sales recorded in 2020 compared with 2019 – and interest from both onshore and offshore buyers remaining strong – prices are tipped to accelerate through to 2023, and peak in 2026.

“We think it’s likely that commodity prices will remain supportive for the next 24 months, while we expect interest rates will stay at record lows until at least 2024,” Rabobank senior analyst and report author Wes Lefroy said.

“For land price growth to reduce faster than our base case, or even for a downward correction to occur, we would need to see a multi-year interruption to a combination of commodity prices, production, or interest rates.”

Mr Lefroy says buyers are still likely to take a tilt, with farmer purchasing intentions at their highest in at least the past five years.