Australian farmland prices will continue to grow this year but at a slower pace.
Subscribe now for unlimited access to all our agricultural news
across the nation
$0/
(min cost $0)
or signup to continue reading
That's the forecast from Rabobank in its annual Australian Farmland Price Outlook released today (Monday).
The agribusiness banking specialist says after three consecutive years of "double- digit" growth, the momentum in agricultural land price increases is expected to further slow in 2024, as farm profitability levels come off record highs.
The price outlook is mixed across sector types and geographical regions, the bank says.
Rabobank's forecast is largely in line with Elders property report last week which analysed farm sales from 2023 and found prices had rebounded after a sluggish start to last year.
Rabobank is forecasting a "base case" rise of about five per cent in the median price per hectare of all agricultural land types nationally in the year ahead.
"Land prices will maintain their growth trend, but not for all sectors and regions," the report says.
The bank's analysis showed while the median price of agricultural land per hectare nationwide grew at a rate of 10.9pc in 2023, this was down on the stellar growth rates of 28.6pc and 27pc seen in 2022 and 2023 respectively.
RaboResearch analyst Vitor Pistoia said this slowing growth trend in agricultural land prices reflected a "maturing land market", with a less bullish outlook for farm profitability, along with "weather challenges" and a tighter supply of available properties.
"Australia's farming sector experienced an unprecedented positive cycle from 2020 to early 2023. Record-high commodity prices and plentiful rainfall supported profitability which boosted farm business equity and confidence in a brighter future," he said.
"Outside investors joined this booming sector and turbo-charged competition for land, supported by low interest rates."
The land market suddenly had many participants bidding - farmers willing to expand, investors pursuing capital gains and companies looking to invest in the carbon credit sector."
On the flipside, Mr Pistoia said, farmers willing to exit the industry had used the opportunity to sell at rising prices, adding to the supply of land available for the increased demand.
Now, he said, the agricultural land market is finishing this cycle and starting a new one, where the number of farms for sale and bidders is lower than before, and the financial outlook for the sector, while overall strong, is not as positive.
Farm prices in 2023 showed a higher demand for cropping land with median prices rising 20pc, while grazing land remained stable.
Dairy land prices rose 22pc in 2023.
Mr Pistoia said the contrasting price movements seen across the different land types reflected the fortunes of the sectors during the year, with cattle and sheep commodity markets suffering a "considerable decline".
The number of sales fell and large deals - sales above the $10 million - fell 33pc.
Farmland prices varied across the country with year-on-year growth in the median price per hectare in NSW 6pc, Queensland 4pc, South Australia 1pc and Tasmania 8pc.
Median prices in Western Australia rose a stellar 48pc while Victorian land prices fell 8pc.
Mr Pistoia said 2023's price growth had been "more supported by the equity that had been built in past years than the profitability outlook for the farm sector".
The report says while the outlook for key drivers of agricultural land values - including production volumes, commodity prices and farm income - are still promising for 2024/25, the "upsides are diminishing" compared with recent years.
"Some regions might see a decline in winter crop production on the back of a dry start of the season," Mr Pistoia said.
"But the chance of a La Nina in the second half of 2024 offers a potential tailwind for cropping operations.
Beef production is poised to expand on the back of good rains in large swathes of northern Australia.
The longer-term forecast for farmland prices through to 2029 indicates a further slowing, the report said.
Although the long-term view was crystal clear - farmland is in demand," Mr Pistoia said.