RABOBANK’S Australian Agricultural Land Price Outlook predicts Australian agricultural land is on track for another year of strong price growth in 2023.

The report, supported by farmland sales data from DAS (Digital Agricultural Services), said three consecutive seasons of good financial performance for Australia’s farm sector - driven by high commodity prices and good weather conditions for the majority of the country - is set to once again fuel “double digit” percentage growth in agricultural land prices for the year ahead, albeit easing from the record near-30 per cent increases seen in both 2022 and 2021.

The bank’s analysis of the DAS data set, which comprises genuine rural sales and excludes lifestyle and non-market transactions, showed agricultural land prices across the country rose by 29 per cent (median price per hectare) in 2022, with cropping land increasing by 29 per cent, livestock grazing land by 26 per cent and dairy by 29 per cent.

Agricultural land prices were found to have recorded double digit percentage growth on the previous year in all states, with South Australian farmland prices rising the most - at 34 per cent.

RaboResearch agriculture analyst and report author, Vitor Pistoia, said agricultural land prices across the country had soared again in 2022, with the “macro settings” having been favourable for land purchases and farming profits in Australia.

“Prices for most major commodities reached record highs, widespread rainfall supported agricultural yields - which also surpassed historical records in some regions - and interest rates were at historical lows for almost half the year,” he said.

While a decline in agricultural land prices was not forecast, the bank cautions that - after the estimated double digit percentage price increase this year, a significant slowdown in the “pace” of price growth, which had been “massive” in recent years - was expected from 2024 potentially through to 2028.

Mr Pistoia said farmland sale prices in early 2023 were still setting new records, with prices expected to continue to rise throughout 2023.

“Albeit to a lesser extent to the previous year as the combination of high property prices and increasing interest rates - along with the expected onset of El Nino, and potentially drier weather for many parts of Australia, which may hamper agricultural yields - will be impacting farmers’ appetite for buying land,” he said.

Mr Pistoia said the income outlook for Australian farmers in 2023/24, though “solid and positive” with above-historical-average prices for agricultural commodities, was still granting good profitability with recent high costs for farm inputs now easing.

However, looking out from 2024 to 2028, with the record highs for agricultural yields and commodity prices seen in the past three years unlikely to be repeated, there are expectations of a slowing pace in the growth of land prices, although with no price declines expected.

“Commodity prices are likely to remain at good levels for farmers for the next one to two years,” Mr Pistoia said.

“However, the drier forecast may result in lower yields and reduced margins, while rising interest rates will curtail long-term investment plans.

“Currently, cash already available in the system and stocks of grains and livestock ready to enter the market remain the key factors driving land price growth.”

Appetite for purchase

The Rabobank report stated that for now, farmers’ appetite for property purchase remained strong, with recent Rabobank research, conducted in Q1 2023, showing seven per cent of Australian farmers intended to buy land in the next 12 months.

New South Wales, however, was the only state where intentions to purchase land were found to have grown since last year.

States

While South Australia recorded the highest growth in agricultural land prices of all states in 2022 (34 per cent), this had not been evenly distributed across its regions.

Median agricultural land prices in Victoria jumped by 28 per cent in 2022, according to the report - after a massive 40 per cent increase the prior year - with all regions in the state continuing the upward trend in land prices.

In Western Australia, prices paid for farmland had reached a record high, following three consecutive good seasons.

The state’s average agricultural land price increased by 22.5 per cent in 2022, bringing the value to just over AUD $6000 a hectare.

Property deals

Based on the analysed data, the report found agricultural land deal sizes were increasing, especially in Queensland and NSW where 22 per cent and 14 per cent of sales exceeded $10 million respectively.

“And overall, according to our data set, 11 per cent of cropping and 13 per cent of Australian grazing land sales in 2022 exceeded AUD $10 million,” Mr Pistoia said.