Farmland returns hit seven year high, according to Australian Farmland Index

Australian farmland continues to show its resilience, with a register of prime farmland posting returns of more than 13 per cent.

A golden combination of record winter crops, historically high commodity prices and full water storages is fuelling a boom in farmland returns, according to the latest Australian Farmland Index results.

Rural land planted to annual pasture and crops is leading the charge, once again posting the best annualised return since the index began seven years ago of 40.91 per cent for the 12 months to December 2021.

This time last year, a record east coast grain harvest and high cattle prices fuelled an annualised return for 2020 for the annual pasture and crops segment of 30.26 per cent.

Overall, total farmland returns for the year to December 31 were 13.14 per cent, with the income return of 7.22 per cent and capital growth of 5.62 per cent.

The Australian Farmland Index is released quarterly and provides the financial performance of 65 different properties with a combined market value of more than $1.8 billion. Just over half of those properties are planted to permanent horticulture crops and 48 per cent are annual farmland assets, mostly livestock grazing and broadacre grain and oilseed operations.

Michael Blakeney, managing partner of Riparian Capital Partners, one of the eight corporate farming groups providing farm data to the index, said the current increase in earnings was expected to well outweigh increases in cost pressures. “The Farmland Index reflected this with the Annual Crops Index outperforming a stable permanent crop index,” he said.

“The trifecta of high commodity prices, supportive seasonal conditions and low interest rates continues to drive land values,” Mr Blakeney said.