In early May, Rural Bank’s annual Australian Farmland Values Report was released. Widely regarded as the most comprehensive database of rural land transactions nationally, it disregards properties considered sub-scale for commercial farming operations (lifestyle properties) to deliver a report demonstrating the true rural land value trends across Australia.
This year’s report delivered some very strong results for Australian rural land transactions in the calendar year 2020. Some notable results relevant to the Australian Farmlands Fund are outlined below: (The report measures median price per hectare.)
• For the first time in 15 years, all states and territories individually recorded an increase in median price per hectare
• The 20-year compound annual growth rate right across Australia lifted to 7.6% with 2020 delivering a strong year on year increase of 12.9%
• Victoria recorded a year on year increase of 6.9% and New South Wales 15.6%
• The Victorian 20-year Compound Annual Growth Rate is 7.2%
Access to very cheap debt capital was a major contributor to the 2020 results, this was combined with increasing profitability in the major agricultural sectors to fuel demand for Australian farmland. Strong commodity prices over the last two years in particular in beef, lambs, grains and dairy have meant farmers with strong balance sheets have significantly increased their borrowing capacity. In addition to this we have seen a continued decline in the number of rural land transactions as the number of larger, sophisticated farm businesses increase proportionally to the total number of Australian farm businesses. There are approximately 40% less farm businesses now than in the 1990’s.
There appears no obvious impediment to this trend of farm rationalisation across the country as continued uptake of technology makes farm operations more efficient and economies of scale more obtainable.
Consistent with previous reports, land transactions of scale achieved a premium to the market median as purchasers bid hard to increase scale efficiently. These trends align well with the Funds’ strategy of aggregating smaller farms in premium agricultural areas to build scale.