After a period of low interest rates, improved seasonal conditions, consistent rainfall averages and strong returns from farm produce farmland prices continued to surge until 2023 year but there is still concern that Australia’s future food and fibre production is being threatened by such surging land prices.
Figures released by the Rural Bank’s annual Australian Farmland Values report show the Federation Council slightly dipped for the year 2023 with a median price per hectare of $10,699 but an impressive 14.5% compound annual growth rate over the past five years.
Since the mid-1990s Federation Council area medium values have increased dramatically from around $1,000 per hectare to just over $10,699 per hectare.
The Riverina Murray recorded a year-on-year increase in median price of 22.9% to $8,746/ha. This was the largest percentage increase across the state’s regions in 2023. This followed an increase of 17.6 per cent in 2022, as well as being the seventh consecutive annual increase, with values climbing 252.7 per cent over this period.
Across the river in Indigo Shire farmland values have soared to $$24,464 per hectare in 2023, representing an incredible compound annual growth rate of 22.5% over the last five years.
Brian O’Shea from Paull & Scollard Nutrient Ag Solutions in Corowa said the big rise in land values in the area has stabilised in 2023.
“They have (farmland values) definitely stabilised again from last year, and there are fewer listings on the market compared to previous years,” Mr O’Shea said.
“The demand is still strong, and the prices at the moment are viable and sustainable.”
Mr O’Shea said the costs of rates, chemicals, fertilisers and diesel etc make it tough for farmers. The banks are getting tougher and farmers taking a more holistic approach to working through their costs plus seeking independent advice such as agronomists and running much more tight businesses.
“There is a lot getting done by Nutrient in the ag space, both in Australia and globally. We are lucky to have them here in the region.
“But Farmers unfortunately buy at retail prices and sell wholesale prices and it is getting tighter out there,” he said.
Head of Agribusiness Development Rural Bank Andrew Smith said that While 2023 saw a rise in the national median price to cap off an extraordinary period for farmland values, it also marked a shift in the market as the pace of growth was considerably slower.
“Australian farmland values have recorded a decade of unbroken growth. Following three years of above average rainfall and rising agricultural commodity prices, 2023 was a vastly different year for Australian agriculture as drier conditions, falling commodity prices and sustained high interest rates contributed to a cooling off in demand for farmland,” Mr Smith said.
“There was still sufficient demand, coupled with record low supply, to push farmland values to new record highs.
“It is clear that the market has changed from two or three years ago when unprecedented growth in values was occurring. Buyers have been more considered in their purchasing decisions following the shifts in the operating environment.
“At the same time, sellers maintained high price expectations and have generally been willing to see properties sit on the market for extended periods.
“With the key drivers of farmland values set to remain in a holding pattern in 2024, it is likely that the market will see a plateau in values.
“There is little to suggest that there will be a widespread resurgence in demand for farmland purchases nor a greater pressure to sell for prices below recent levels. Rather, a continuation of firm, but not rampant, demand coupled with ongoing tight supply should see farmland values hold near current high levels.”
While higher farmland values are great, NSW Farmers Young Farmers Council outgoing chair Martin Murray said the increases meant young people looking to enter the industry will find it harder to get a start.
“Like we’re seeing in the housing market, the rising property prices are good for older people looking to sell but are really tough for the next generation,” Mr Murray said.
“Where we differ from housing though is that farms need to be able to turn a profit, and these price jumps are just outpacing our ability to earn more from the land.
Mr Murray said that stubborn high interest rates and the cost of fuel, fertiliser and electricity going up there is going to be a need for serious investment in farm productivity to help farmers simply make ends meet in the future.
Mr Murray said input prices to produce food and fibre from that land have also increased, meaning high yields and commodity prices that has been driving the price rises has been eaten up by inflation.
“The rise in agricultural land prices is a double-edged sword – good for those wanting to sell, tough for those wanting to buy,” Mr Murray said.
“The big problem for Australia and our future food supply is if we don’t get young farmers coming through, we won’t have anyone to grow our food in the future – it’s that simple.
“This is something New South Wales Farmers has been actively working on for a while now, and we’re going to need partnerships from industry and government to solve it.”
