Rabobank report finds ag land prices are expected to hold firm in 2020

Agriculture land prices are expected to hold firm this year, defying the effects of a severe COVID-19 global recession, a new report has found. See the three reasons why ag will be on top.

A new report has found while much of the global and local economy is being severely buffeted, Australian agricultural land is expected to remain “largely unscathed”.

AGRICULTURAL land prices are expected to hold firm this year despite a severe COVID-19-led global recession, according to a major report released this week.

The Rabobank report found while much of the global and local economy was being severely buffeted, Australian agricultural land was expected to remain “largely unscathed”.

The three reasons agricultural land would be spared are:

FARM profitability in an anticipated good season in 2020;

A TIGHT sales market, and;

SUPPORT from low interest rates and a weak Australian dollar.

However, Rabobank warned the outlook for Australian agricultural property was not without risk in the current climate due to the threat of a deeper-than-expected global recession and a significant interruption to Australia’s access to major agricultural export markets or a credit crisis.

It comes as rural properties have sold for tens of millions of dollars in the past two months, some prior to auction, with areas such as the Mallee and Snowy Monaro achieving new price benchmarks.

Rabobank’s analyst Wes Lefroy said positive production prospects, off the back of significantly-improved seasonal conditions – along with commodity prices supported by a weaker Australian dollar – should underpin a profitable season for most Australian farmers in 2020-21. Which augurs well for agricultural land prices.

“Farmer operating profit, in our view, is the primary driver of Australian land prices,” Mr Lefroy said.

“In particular, sustained periods of profitability provide farmers with the financial capacity to buy more land.

“And despite the drought that has gripped much of the east coast over the past three years, reported three-year average farm operating profits are at their highest point since at least 1990 in Western Australia, South Australia, Tasmania and Victoria. Further, they are above the 10-year average in all states, except NSW”.

Colliers International’s Henry Mackinnon said it was currently a buyers’ market for farmland.

“The market is still very strong and we’re seeing a lot of inquiries particularly for beef or sheep assets as well as good quality irrigation properties with water security,” Mr Mackinnon said.

“Under the current circumstances we are seeing a lack of supply for assets but they are still coming on to the market and agricultural land is still making profitable prices”.

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