After a period of low interest rates, improved seasonal conditions, consistent rainfall averages and strong returns from farm produce farmland prices continued to surge until this year and there is fresh concern that Australia’s future food and fibre production is being threatened by such surging land prices.
Figures released by the Rural Bank’s annual Australian Farmland Values report show the Federation Council area continued its repeated growth for the year 2022 with a median price per hectare of $12,214 representing an impressive 20.7 per cent compound annual growth rate over the past 5 years.
Since the mid-1990s Federation Council area medium values have increased dramatically from around $1,000 per hectare to just over $12,000 per hectare.
The median price per hectare of farmland in the Riverina Murray increased by 14.7 per cent in 2022 to $6,942 per hectare. Not only was this the sixth consecutive year of growth in the median price, each of those years has also seen double-digit growth. Overall, the median price has increased by 180 per cent since 2016.
Across the river in Indigo Shire farmland values have soared to $20,016 per hectare in 2022, representing an incredible compound annual growth rate of 21.1 per cent over the last five years.
While higher farmland values are great, NSW Farmers Young Farmers Council chair Martin Murray said the increases meant young people looking to enter the industry will find it harder to get a start.
“Like we’re seeing in the housing market, the rising property prices are good for older people looking to sell but are really tough for the next generation,” Mr Murray said.
“Where we differ from housing though is that farms need to be able to turn a profit, and these price jumps are just outpacing our ability to earn more from the land.
“With rising interest rates and the cost of fuel, fertiliser and electricity going up, we’re going to need to see some serious investment in farm productivity to help farmers simply make ends meet in the future.”
Mr Murray said input prices to produce food and fibre from that land have also increased, meaning high yields and commodity prices that has been driving the price rises has been eaten up by inflation.
“The rise in agricultural land prices is a double-edged sword – good for those wanting to sell, tough for those wanting to buy,” Mr Murray said.
“The big problem for Australia and our future food supply is if we don’t get young farmers coming through, we won’t have anyone to grow our food in the future – it’s that simple.
“This is something New South Wales Farmers has been actively working on for a while now, and we’re going to need partnerships from industry and government to solve it.”
Brian O’Shea from Paull & Scollard Nutrigent Ag Solutions in Corowa said the big rise in land values in the area has stabilised in 2023.
“They have (farmland values) definitely stabilised from last year, and there are fewer listings on the market compaered to previous years,” Mr O’Shea said.
“The issue now is the rising prices of chemicals, fertilisers and diesel etc. The banks are getting tougher and farmers taking a more holistic approach to working through their costs plus seeking independent advice such as agronomists and running much more tight business.
“Farmers unfortunately buy at retail prices and sell wholesale prices and it is getting tighter out there,” he said.
Head of Agribusiness Development Rural Bank Andrew Smith said that overall, 2022 was an outstanding year for Australian agriculture but within a year it has have turned around.
“La Nina conditions produced a third consecutive year of above average rainfall. This factor combined with above average commodity prices has created many opportunities for excellent farm incomes,” Mr Smith said.
“This in turn has translated into sustained momentum for Australian farmland values as buying power remained firm and supply tightened as landholders had fewer reasons to sell.