THIS week, two farmland market reports were issued by leading farm lenders; Rabobank and Rural Bank, however, the reports appear to be at variance regarding land value movements in recent years.

Rural Bank, a subsidiary of Bendigo and Adelaide Bank, issued its Australian Farmland Values 2024, while specialist rural lender Rabobank released its Australian farmland price outlook 2024.

Both reports breakdown trends nationally, by state and by local government area (LGA).

An analysis of findings for the Southern Grampians Shire is interesting because the two banks are contradictory in their findings.

Rabobank has an analysis which shows values falling by about nine per cent between 2022 and 2023 while Rural bank reports a rise of 5.64 per cent.

Not only that, but Rabobank shows a three-year shift in values (2021 to 2023) of minus 6.85 per cent while Rural Bank gives a figure of positive 24.28 per cent.

Given that the two banks finance many farmers in the district the matter deserves some unpacking.

Firstly, it should be pointed out that the delay between the end of 2023 and the issue of the reports this week is largely due to the lag time for completed (settled) sales to be entered into the databases.

First, the Rabobank report.

This is not generally published but is issued to bank customers and The Spectator was supplied with a copy.

The report states that it is based on Rabobank’s own sales database with productivity figures derived from Digital Agricultural Services (DAS), a commercial rural valuation and land capability platform which is based, amongst other things, on Valuers General data from the various states.

Rabobank, unlike Rural Bank, does not give median land values per hectare for each municipality but provides a graph which gives dollars per hectare per millimetre of rainfall per year ($/hectare/mm/year) as a measure of value.

For example, if a property had rainfall of 650 millimetres per annum and it sold for $12,500 per hectare then the calculated price per millimetre of annual rainfall would be $12,500 divided by 650(mm) = $19.23.

Rabobank’s Food and Agribusiness analyst, Vitor Pistoia compile the report and told The Spectator that, for the Southern Grampians Shire, median prices expressed in ($/Ha/mm/Yr) were 2021: $24.38, 2022: $24.94 and 2023: $22.71.

We have applied Hamilton’s average rainfall of 620mm per annum to assess per hectare median values for the Southern Grampians Shire.

These are set out in the first table and show a rise followed by a fall in value.

Interestingly, the rise is between 2021 and 2022 which is somewhat at variance with the opinions of two prominent local rural valuers (of which more later).

On the other hand, Rural Bank’s figures (in the main table) are based on the Pricefinder database which, like DAS, also processes Valuer General’s data.

This, Rural Bank acknowledged in the opening paragraphs of the report.

The search parameters are not detailed by Rural Bank however, the report states growth of 17.64 per cent between 2021 and 2022 and a further 5.64 per cent to 2023.

This is a surprising finding.

Market commentary in recent months has been consistent in reporting a fall in values following a spike during the 2020-2021 pandemic years.

The fall was caused initially by the start of interest hikes, the first of which occurred in May 2022 and compounded by the short-term but dramatic collapse in sheep and cattle prices in late 2022 and early 2023.

In order to verify this, The Spectator spoke to two Hamilton-based rural valuers.

The two valuers were at odds with Rural Bank’s findings but somewhat closer to those of Rabobank.

Firstly, Jones Lang Lasalle (JLL) director, Jack Payne said that he identified a definite fall in values in the second half of 2022 which he considered to be the result of interest rate hikes and the fall in stock prices.

Mr Payne went on to say that vendors were now having to “meet the market” with a lower volume of sales and some properties being withdrawn without a sale.

He was of the opinion that values were stabilising and that previous price levels will return in due course.

Secondly, LMB Linke principal, Graeme Linke said he had observed steady growth in farmland values starting in mid-2016 before rapidly accelerating with the onset of COVID to a spike in late 2021 and early 2022.

He said that there was clearly a fall in the second half of 2022 of the general order of 15 to 20 per cent.

Mr Linke added that “the market is still framing itself. One cannot discern a trend until there is a good body of evidence.”

So, with the opinions of two valuers kindly provided, The Spectator made a search of farmland sales in the Southern Grampians Shire using the parameters of a land area of 100 hectares or more with a minimum sale price of $1million.

The results are set out in the smaller table showing a fall from 2021 to 2022 of 25 per cent followed by a 13 per cent recovery.

This search was made using the RPData platform which, like DAS and Pricefinder, uses Valuer General Data.

The fall in values reported by this search generally agrees with the two valuers but the recovery in 2023 may well be overstated.

All this is confusing - the contradiction between two banks compared with the concurrence between two valuers is, to put it mildly, noteworthy.

The main lesson to be learned is that bulk sales data, while useful for house price trends, is only of use if it has been carefully verified before uploading to the Valuer General.

Unfortunately, the quality of data available to the Valuer General is sub-optimal consequently, the quality of output reflects this.

In short, it is probably reasonable to conclude that if you really have a need for an accurate picture, it is best to consult a valuer.