Australian Farmland Index shows horticulture-return decline, grains and livestock gains

The Australian Farmland Index measures the health of corporate agriculture. Here is our analysis of the latest quarterly results. VIEW DATA

Returns from farming have slipped for the fourth quarter in a row, according to the latest Australian Farmland Index report.

Returns from farming in Australia have slumped for the fourth quarter in a row — but still remain healthy, according to the latest Australian Farmland Index.

The index, based on 39 corporate farms collectively valued at more than $1 billion, showed total returns for the first quarter of 2021 were 0.88 per cent, much lower than the 3.86 per cent for the previous corresponding period.

That was made up of 2.03 per cent for income return and -1.16 per cent for farm value.

On an annualised basis, total returns were 8.46 per cent, almost half the 14.47 per cent for the 12-month period to March 31, 2020.

The decline in returns is a reflection of the weighting of permanent horticultural farms to annual farmland assets.

Australian Farmland Index	Q1 2020	Q1 2021
Quarterly Returns
Total Return	3.86%	0.88%
Income Return	4.13%	2.03%
Appreciation Return	-0.27%	-1.16%
Annualised Returns - Past 12 months
Total Return	14.47%	8.46%
Income Return	8.50%	5.15%
Appreciation Return	5.56%	3.17%
Annualised Returns - Since Inception (Dec 2015)
Total Return	14.04%	13.13%
Income Return	6.53%	6.31%
Appreciation Return	7.19%	6.54%

The index is assessed on 30 horticultural farms and nine cropping and livestock properties.

The total quarterly return for the horticultural farmland for the first three months of 2021 was 3.08 per cent, compared with 13 per cent for the previous corresponding period.

But the total quarterly return for the cropping and livestock properties was 25.34 per cent, much higher than the 17.56 per cent recorded for the same period last year.

Rural Funds Management, one of six corporates contributing data to the index, said good seasonal conditions and strong commodity prices contributed to the high returns for cropping and livestock.

It said good rain last year contributed to the second biggest grain crop on record and boosted pasture growth on livestock properties.

“Within the cattle sector, rainfall has aided pasture growth and, with an above-average rainfall outlook, has reinvigorated producer demand,” the company said.

“Slaughter numbers remain low, indicating that producers are still restocking and/or growing out of cattle.

“These factors have contributed to farm gate prices remaining high.”

RFM chief operating officer Tim Sheridan said good grain across most of Australia since late last year had bode well for the rural sector this season.

“Australian agriculture has continued to perform relatively well despite the ongoing disruption of the (coronavirus) pandemic, the higher Australian dollar and the trade issues with China,” Mr Sheridan said.

“This is reflected in the ongoing uplift in annualised farmland values, as the demand for agricultural property remains high.”

AFI proponent Frank Delahunty said he was looking for more corporate farms to contribute to the index.

Mr Delahunty said the US index began about 30 years ago with properties collectively valued at $US350 million ($460 million) but had now grown to $US13 billion ($17 billion).

He said the AFI began in 2016 at $540 million and grew to $1.3 billion at one point.

The farms are now collectively valued at $1.06 billion.

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