2023 Rabobank report: Aussie farm prices predicted to rise

A new report has revealed what might be next for Australian farm values after three years of soaring price rises.

A new report has detailed a positive outlook for farm prices this year.

Australian farm debt is soaring amid consecutive years of record farmland price growth - and those values are tipped to increase further in the coming year.

Reserve Bank of Australia data shows total Australian rural debt has surged from $68.5 billion in 2017 to almost $102 billion by the end of 2022.

During that same period, Australian farmland values have spiked with a near-record 30 per cent increase in the national median price per hectare in 2021 and last year, according to Rabobank.

The RBA’s records show the rural commodity boom since 2017, paired with good weather conditions for the majority of the country and low interest rates, has given farmers the confidence to take on more debt, which has in turn driven up demand for land.

Rabobank this week released a buoyant outlook for Australian farmland prices, forecasting “double-digit” growth this year, while predicting growth to remain positive - but at a significantly slower rate - from 2024, potentially through to 2028.

RaboResearch agriculture analyst Vitor Pistoia said forecast drier conditions this year could hamper farming families’ ability to purchase more land.

Borrowing on the boom: RBA statistics show how booming commodity prices have given farmers the confidence to take on more debt.

“Farmland sale prices in early 2023 are still setting new records,” he said.

“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.

“Commodity prices are likely to remain at good levels for farmers for the next one to two

years.

“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.”

The bank’s report found last year there was a 29 per cent jump in the median price per hectare nationally, with cropping land increasing by 29 per cent, livestock grazing land by 26 per cent and dairy by 29 per cent.

In Victoria, the report found median agricultural land prices jumped by 28 per cent last year, according to the report – after a whopping 40 per cent increase the prior year.

In contrast, Elders’ rural property update found Victoria’s median price per hectare reached $12,937 with 22.5 per cent growth last calendar year.

The Elders’ report was less optimistic than Rabobank stating the “market is

looking for some direction” with historically low interest rates and commodity price fully factored into land values.

Similar to the Elders’ report, Rabobank found South Australia had recorded the highest growth in agricultural land prices of all states last year with 34 per cent.