Farm owners cash in on surging land prices

The value of Australian farmland jumped almost 13 per cent in the past year and continues to climb because of better seasonal conditions, strong commodities prices unaffected by China’s trade sanctions and low interest rates.

Rural Bank analysis shows the median price per hectare of farmland grew for the seventh consecutive year, prompting corporate investors like Macquarie Infrastructure and Real Assets to look to sell vast tracts of land and realise big capital gains.

Prices were up by 12.9 per cent yearon-year to $5907 a hectare across Australia and, for the first time in 15 years, they increased in all states and the Northern Territory.

The number of properties hitting the market also increased last year after a widespread break in drought, defying a decade-long trend of declining transactions .

The number of farm sales increased to 8187 in 2020, when 8.2 million hectares and $10 billion changed hands.

Rural Bank chief operating officer Will Rayner said a fear of missing out had crept into the market as family-run operations looking to expand competed with corporate farms and super funds for properties.

‘‘ We’ve had a couple of high-profile corporates selling into this really strong market,’’ he said.

‘‘ I think that is an indication of just how strong this market is that some of those corporate investors are looking to realise their capital gain.’’

MIRA’s Macquarie Crop Partners is selling off the biggest corporate grain farming business in Australia, Lawson Grains, with expectations it could fetch $550 million.

Another big investor, US-based Westchester Group, sold off a parcel of seven farms in the southern Riverina late last year and Australia’s richest person, Gina Rinehart, has put a massive parcel of cattle stations on the market.

LAWD Real Estate director Danny Thomas, appointed to handle the Lawson Grains sale, said there had been intense interest in the Lawson portfolio, which includes 105,000 hectares of farmland in NSW and Western Australia.

Mr Thomas predicted a lot of funds would be weighing up selling into the hot farmland market or waiting for even better returns.

‘‘ If you are a closed-in fund with a fixed timeline, everyone’s returns, the investor returns, the fund manager’s return, are going to be depleted if you have a big burst in values and then don’t crystallise the gain,’’ he said.

‘‘ There are a lot of them that are going to say ‘the market is giving us a good signal, there is an opportunity to exit and deliver a good return to investors, we should have a serious look at whether we do that now or continue to operate through to the balance of the life of the fund’ .’’

Mr Thomas said local family farm businesses had been snapping up land ahead of institutions in recent times.

‘‘ The locals are killing the institutions ,’’ he said. ‘‘ People say they [local farmers] are not making logical decisions , but I don’t go with that.

‘‘ I think they are very logical.’’

Mr Rayner said global capital was looking for ways to invest in Australian agriculture, attracted by political and economic stability, the growth story over the past 20 years and the nation’s capacity to produce clean, green food.

Many Australian farmers had the confidence to invest and expand their holdings as part of sector consolidation and in the knowledge that China was far from their only market.

‘‘ Even with the barley issue with China, we know we have plenty of other trading partners globally looking for good Australian barley,’’ he said.

Copyright © 2021 The Australian Financial Review

AFR – Wednesday, 5 May 2021 – Page 3