Australian Farm Index steady despite COVID-19 headwinds

Despite the uncertainty of the long-term impacts of COVID-19, agricultural returns have remained strong.

Agricultural returns have remained strong despite a global economic downturn wrought by COVID-19. Picture: Zoe Phillips

AGRICULTURAL property has largely escaped the headwinds of the coronavirus, with the annual return for the 12 months to June 30 steady at 12.81 per cent.

The annualised total return, as recorded by the Australian Farmland Index, was slightly up compared to the same time last year when it was 12.49 per cent, but marginally down from a high of 14.91 per cent for the previous quarter to March 30.

This compares with a drop of about 10 per cent in the Australian equities market for the year to June 30.

The AFI tracks income and land appreciation performance using data provided by 37 properties worth a combined $979 million run by major corporate farm managers, Argyle Group, gofarm Australia, Rural Funds Management, Hancock Agricultural Investment Group, Laguna Bay and Gunn Agri Partners.

Gofarm Australia managing director Liam Lenaghan said it appeared Australia’s farming sector had “so far avoided the economic fallout of COVID-19”.

“We are seeing widespread interest from institutional investors attracted to farmland’s defensive characteristics. Many investors also recognise the considerable upside in returns that can be achieved from transformational investments in under-utilised and undercapitalised assets,” Mr Lenaghan said.

“Over the coming year the sustained growth in farmland values may be challenged by the headwinds of slowing global economic growth and rising trade tensions. Nevertheless, the agricultural sector has a strong track record of delivering competitive returns during periods of wider market volatility, with investments in farmland providing an excellent natural hedge against inflation and uncorrelated returns to other asset classes. The long-term outlook for Australian agriculture remains very positive.”

The index recorded a total return of 2.83 per cent for the June quarter and a quarterly appreciation return of 1.37 per cent, compared to 4.26 per cent and 0.59 per cent respectively for the previous quarter to March 30.

The report said while there remained considerable uncertainty about the long-term impacts of COVID-19 across the economy, the outlook for Australian agriculture remained strong, buoyed by an improvement in seasonal conditions across the eastern seaboard, low borrowing costs and an Australian dollar trading at well below the 10-year average.

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