Global Food Forum 2023: Aussie farmland values at a crossroads

Farm prices have settled at record levels, but an uncertain seasonal and economic outlook has institutional and family buyers “cautious”.

Liam Leneghan, managing director, goFARM Australia, Kristina Hermanson, head of APAC and Africa, managing director at Nuveen Natural Capital and David Williams, managing director, Kidder Williams at The Australian Global Food Forum 2023. Picture: Arsineh Houspian.

Australia’s rural property market is at a flexion point with farming families and institutional investors carefully weighing up where and how to invest in a market with increasing economic headwinds.

After record farmland value returns and yields over the past several years, buyers are more wary about purchasing more land in the face of softening commodity prices, rising interest rates and the increased cost of labour.

goFARM Australia managing director Liam Leneghan told the Global Food Forum on Thursday farmland values were priced “millimetre perfect”.

“Returns have been brilliant; 20 per cent in the last year and 8.5 per cent compounded annually over the last five years,” Mr Lenaghan said.

“There has been a lot of money made beyond the value of land and water.

“Now we are cautious. There are some big economic headwinds and there is also the emergence of value sinks.

“There is also added interest in biodiversity, some optionality in renewable energy and carbon- so there is some push and pull there.

“With A-class and B-class assets, there are some assets that will perform, but some that might pull back.”

Kidder Williams managing director David Williams told the Global Food Forum farmer-to-farmer demand for the property next door had dried up, with many investing in other ways.

“I think it is a tail of two cities. There is still lots of demand coming out of North America and Canada, particularly from the pension funds and Ivy League schools,” Mr Williams said.

“But with farmers buying the farm next door, that has stopped.

“What I have noticed is that everyone is about as proactive as I have seen. Everywhere I go corporations and farmers are using water more efficiently, less waste and are going after carbon credits and sustainability.”

Nuveen Natural Capital head of APAC and Africa Kristina Hermanson said investment in existing assets under management was part of their strategy.

“From our research, farmland against higher interest rates as a measure of inflation does perform well with about an 8 per cent spread, but it is not the only factor at the moment,” she said.

“For us natural capital investment and agricultural production can work in harmony and it is not an either/or.

“Improving farming practices, improving soil health and water retention are part of natural integration. For us it’s about how can we use those nonproductive areas for biodiversity or carbon.”