Farmland values have soared but Australia's top agricultural bankers have shrugged off any fears of a bubble.
A golden combination of record low interest rates, healthy commodity prices and improved seasons across much of Australia have boosted farm cashflows and farmer confidence.
The result was a 12.9 per cent jump in the median price per hectare of farmland in 2020, according to the Rural Bank Australian Farmland Values report. Those gains seem set to be repeated.
Cash received by National Australia Bank's farming customers was up 15 per cent year-on-year in late May, regional and agribusiness executive Julie Rynski said, with NSW grain growers' receipts up 73pc in April, year-on-year.
"Customer transactions by state indicate grain production has also been driving business in Victoria, Western Australia and Queensland since late 2020," she said.
Perhaps it's not surprising then, that a Rabobank report showed farmers' assessments of their own business viability hit a new record 20-year high last month.
While many economists fear a residential real estate bubble, the consensus among Australian agriculture's top bankers is that farmland values are more secure.
Rural Bank chief operating officer Will Rayner said a downward shift in farm prices was unlikely.
"You don't necessarily see those boom-bust scenarios that you sometimes see in metropolitan areas," he said.
"People are certainly confident and want to invest in agriculture, but I don't see that elevating to a bubble or people acting recklessly. Australian farmers do understand the extreme volatility we sometimes see in the market and they behave accordingly.
"Having said that, there have been pockets that we've seen in the past. We saw it in Queensland cattle property prices when live exports were shut down but, really, it's only been that sort of black swan event with a true dislocation of a market where they don't have many alternative options.
"If you look at Victoria, in particular, you've got closer access to a variety of markets so you're less likely to see those scenarios."
It was more likely, Mr Rayner said, that farmland prices would plateau.
"The factors that have underpinned growth recently, being good commodity prices, reasonable seasonal conditions and low interest rates, are all still there and are going to provide support at current levels," he said.
"We've certainly seen a very impressive 12 or 18-month period, so a period of consolidation is probably good for the sector but I don't see any sort of major correction on the horizon."
ANZ head of agribusiness Mark Bennett said farmland prices were less closely tethered to farm profitability.
"Farmland prices have sort of followed a general real estate phenomenon and, even when we had a run of droughts and before some of our commodity prices got particularly high, land price prices were appreciating, which gets away from profitability driving that," Mr Bennett said.
"It was probably more about consolidation, with medium-to-large farms buying and expanding their operations as they build economies of scale."
Even so, he said, loan applications were generally well-considered and few failed to proceed.
"Most requests within the sector are quite sensible, because investors and the participants manage for that long term and therefore, don't push it to a point where they're going to jeopardize their own businesses," Mr Bennett said.
Commonwealth Bank of Australia executive general manager regional and agribusiness banking Grant Cairns said demand for land was widespread.
"Offshore investors, particularly some of the Canadian pension funds, see Australian land as good value in terms of global pricing," Mr Cairns said.
"We're certainly seeing family farmers with strong equity in their farms looking to either facilitate succession or expansion ... and I think it's important that experienced family farms and investors are are comfortable with the current prices."
Will Rayner emphasized the role of local buyers.
"I would probably caution people against over-playing the role of foreign investment," he said.
"Overwhelmingly, the family farming unit is dominant in the Australian agricultural sector. Don't subscribe to this fear that we're selling the farm, so to speak, because the family farming unit's still central and core to farming in Australia."
Last week, the ANZ, CBA and Westpac tipped an interest rates rise for late 2022 or 2023.
"We have never seen interest rates this low globally," Will Rayner said.
"Over hundreds and hundreds of years there haven't been comparable interest rates, so we are in uncharted waters and that's why it would make sense for all businesses to make sure they can withstand higher rates."
Grant Cairns said it was prudent to consider the full range of risks facing farm businesses.
"You have to be aware of some of the risks that are on the horizon, like changes in demand, there have been challenges with China that impacted rock lobster farmers and premium wine, or rising interest rates and that's where options to fix rates are available," he said.
"You can't be ignorant to some of the risks but farmers, more than many other industry sectors, are aware of the many risks that they have to manage and are very good at it in the main."