Remarkable farm land prices set to continue although fears of an El Nino might spook some

Rabobank's report today still expects more strong price growth in 2023 but "easing" from the record near-30 per cent increases seen in 2022 and 2021.

As also highlighted by the recent Elders Real Estate deep dive into sales results, South Australia is the market leader rising by more than a third.

Rabobank says the combination of high property prices and increasing interest rates "along with the expected onset of El Nino ... which may hamper agricultural yields will be impacting farmers' appetite for buying land".

The bank says after a further double digit percentage price rise this year the heat will leave the market to trigger not a reversal but a slowdown in the "pace" of massive price growth from 2024 potentially through to 2028.

The Rabobank outlook is supported by farmland sales data from Digital Agricultural Services.

The report describes how three consecutive seasons of strong farm profits driven by high commodity prices and La Nina induced weather conditions will again fuel strong demand for agricultural land.

ABARES conference was told earlier in the year Australian farm production had rocketed beyond expectations, heading to a record value of $90 billion for 2022-23.

Rabobank's analysis found agricultural land prices across the country rose by 29 per cent (median price per hectare) in 2022.

The Elders' report found farm land values jumped another 18.1 per cent last year on top of a 18.2pc rise the year before.

The national median price per hectare rose to $8142/ha from $6891/ha in 2021.

The value of farms is basically doubling every seven years.

According to Rabobank, cropping land value rose 29pc, livestock grazing land by 26pc and dairy land by 29pc.

State by state, the bank found land prices in NSW rose in 10 out of 15 regions last year with a year-on-year increase of 19pc overall.

For Queensland, the average price of agricultural land in the state grew by 20pc.

South Australia's stellar rise of 34pc was found not to be evenly distributed across all its regions.

Median land prices in Victoria jumped by 28pc in 2022, after a massive 40pc the previous year - with all regions in the state continuing the upward trend in land prices.

In Western Australia, prices paid for farmland had reached a record high, following three consecutive good seasons.

The state's average agricultural land price increased by 22.5pc in 2022, bringing the value to more than $6000 per hectare.

Land prices in most regions of Tasmania also rose rapidly with a 26pc boost.

Report author, RaboResearch agriculture analyst Vitor Pistoia said the "macro settings" are still favourable for land purchases and farming profits in Australia.

"Prices for most major commodities reached record highs, widespread rainfall supported agricultural yields - which also surpassed historical records in some regions - and interest rates were at historical lows for almost half the year," he said.

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Mr Pistoia said early farm sales in 2023 are still setting records.

He said the income outlook for Australian farmers in 2023/24 remained solid with above-historical-average prices for agricultural commodities and some easing of farm input prices.

"However, looking out from 2024 to 2028, he said - with the record highs for agricultural yields and commodity prices seen in the past three years unlikely to be repeated - there are expectations of a slowing pace in the growth of land prices, although with no price declines are expected."

Mr Pistoia said the drier forecast may result in lower yields and reduced margins, while rising interest rates will curtail long-term investment plans.

"Currently, cash already available in the system and stocks of grains and livestock ready to enter the market remain the key factors driving land price growth."

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