Farm prices to continue upwards trend: Rabobank

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The price of agricultural land in Australia is set to continue its climb according to Rabobank’s Agricultural Land Price Outlook.

Farmland prices increased across Australia last year

The agribusiness banking specialist forecasts land prices will climb across the next five years, with the sharpest growth expected to continue up until 2023.

Such steep increases in prices are driven by the booming agricultural economy as well as the limited available land for purchase across the country.

Favourable seasonal conditions, a predicted bumper crop harvest and widespread rainfall have all led to record production levels for most of the country’s growing regions. In fact, Rabobank suggests the macro settings of Australian agriculture are their most favourable in three decades.

"Not in the last 30 years have the macro settings been so supportive," the report says. 

Most major agricultural commodities are either at or nearing record levels despite tariffs on certain exported goods to major markets like China and other disruptions from the COVID-19 pandemic. 

And with a winter crop harvest expected to reach near-record levels, the outlook on agribusiness had remained resilient. 

"Strong production years and high commodity prices, alongside record low interest rates, have boosted farmers’ purchasing power," says Rabobank senior analyst Wes Lefroy.

"Nationally, our research is showing that farmer purchasing intentions are at the highest point in at least the past five years, with nine per cent of Australian farmers reporting that they intend to buy land within 12 months."

Land prices across the country accelerated with double digit growth in median prices across four of the six states over the past year.

Tasmania led the way with an increase on the median agricultural land price of 28.3 per cent, following by Victoria (15.8), Queensland (15) and Western Australia (14.1).

In New South Wales and South Australia, growth was lower, growing by just 6.1 per cent and one per cent respectively.

Figures from the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) show it expects the value of farm production to reach as much as A$73 billion in 2021-22 – an increase of eight per cent on last year’s figure which itself was a record-breaker.  

"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," Lefroy says.

"For land price growth to reduce, 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."

Lefroy says a short supply of available land has also contributed to its rising cost, as well as a sense of ‘FOMO’ among farmers wanting to purchase land for their operations, however he also noted that the price did not rise and fall at the same rate in different states.

"Across the country the pipeline of sales coming on to the market is historically very low, which presents a distinct lack of buying opportunities," he says.

"We have observed the ‘fear of missing out’ factor prompting buyers to enter the market earlier than they had planned.

"Markets have got tight, but not all are equally tight.

"Not all regions have seen prices rise at the same pace and while demand continues to outweigh the number of properties on the market, the demand/supply balance is not the same in all regions."

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