Why leasing land will become more appealing to Australian farmers

Should you be leasing land? A new report has found leasing is set to become more common. These are the compelling incentives winning farmers over.

LEASING land will become more common for Australian farmers, according to a report released today.

The report, A New Lease on Land, produced by agricultural banking specialist Rabobank, found the incentives for leasing agricultural land were becoming more compelling in an environment where limited properties were for sale.

Rabobank analyst Wes Lefroy said it was important all farmers considered the value of leasing land as part of their expansion strategies.

“The incentives for Australian farmers to lease a share of their operated area are already strong with our recent research indicating 28 per cent of farmers across the country lease some proportion of their operated area,” Mr Lefroy said

“And of those, 11 per cent had increased the area of land they lease in 2019.

“Over the next two years, we see the motivation for both current and prospective tenants and landlords to lease to become even stronger.”

The report found leasing land:

ENABLES farmers to expand without taking on debt for land purchase and mitigates the impact of weather on profit variability by diversifying farm locations.

OFFERS farm operators the option to adopt alternative business models and ownership structures.

ALLOWS farmers to expand operations either as a permanent alternative to buying land or as a pathway to buying in the future.

WILL become more common among certain farm types and sizes, particularly larger farms and cropping enterprises.

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Mr Lefroy said the number of agricultural properties offered for sale in Australia had fallen between 40 and 50 per cent in all states from 2014 to 2018.

“While we expect the number of properties on the market to increase slightly in 2020, it will remain near historically-low levels,” he said.

“Farmers looking to expand may be forced to turn to leasing, unable to buy the right property at the right price.”

The report found on a state-by-state basis, the percentage of farmers currently operating leased land varied considerably.

“For example, leasing is more common in South Australia and Western Australia, where there are many large grain producers. In those states, our research showed 45 per cent and 38 per cent of farmers respectively lease some area of land they operate,” Mr Lefroy said.

“This is in contrast to NSW, where a greater proportion of livestock producers are located, and only 17 per cent of farmers lease land.”

Victorian Farmers Federation vice-president Emma Germano said leasing land could be a good way for young farmers to enter the industry.

“All sorts of commercial arrangements have benefits, including share farming, so it’s not as simple as to buy or rent a farm,” Ms Germano said.

“But most farmers out there are the little guys who make value off their land going up.”