A recovery in livestock prices and seasonal conditions at the end of 2023 has revived the Australian Farmland Index's assessment of returns from agricultural property investments.
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After two consecutive quarters of negative returns, the December quarter result lifted - slightly - into positive territory to a total 0.41 per cent.
Farm income returns grew almost 0.9pc on the September figure, however, capital growth returns continued to linger in the red at -0.48pc.
Back in September the quarter's total return was down much more steeply against the result three months earlier, to -1.66pc.
After what proved to be difficult year of sliding agricultural earnings and inflated costs, the index's 12-month rolling average return ended 2023 at -1.51pc.
Farmland income dropped to -1.19pc and capital growth was at -0.37pc.
The Australian Farmland Index monitors rolling returns from farm income and capital growth valuations based on a portfolio of 61 corporate-scale horticultural and broadacre grazing and cropping properties with a combined market value of $2.05 billion.
About 56pc of the sample holdings are involved in annual cropping and livestock operations, while 44pc are permanent horticultural assets.
Participating holdings are owned or run by some of Australia's major agricultural asset managers, including Argyle Capital Partners, Growth Farms Australia and Manulife Investment Management.
Since the index's inception in early 2015 the monitor has calculated total annualised return from investment grade agricultural assets averaging 11.29pc, with contributions from income return of 5.15pc and capital growth of 5.93pc.
The December results were down on the overall average annualised September figure of almost 11.6pc as the index reflected last year's succession of earnings and asset valuation pressures.
The Australian Farmland Index is compiled by the Asian Association for Investors in Non-Listed Real Estate Vehicles (ANREV).
The past five years have recorded a total annualised return of 9.04pc, with income returns of 4.27pc and capital growth of 4.62pc, while on a three-year scale total annualised returns have been 6.9pc, based on 3.03pc income return and 3.77pc capital growth.
The latest figures show annual farmland, which consists mainly of beef, sheep and cropping enterprises, produced a 2pc income return, but recorded flat capital growth.
Permanent farmland, comprising mostly almond, apple, grapes and orange orchards, produced a total return of -1.6pc, including a -0.49pc income return and -1.07pc capital growth.
Rural Funds Management, which contributes data from its own investment results to the index, said the end of 2023 brought a widely reported change in rural sentiment following better than expected rainfall and rising commodity prices, particularly for beef cattle and sheep.
The Eastern States Young Cattle Indicator was now approximately 65pc above the lows it reached in October 2023.
Similarly, the National Trade Lamb Indicator was about 48pc above its September 20 low point.
Cropping assets were also expecting good returns linked to good seasonal conditions and crop yields, with summer crop production forecast to remain 22pc above the 10-year average at 4.3 million tonnes thanks to average or better rainfall and high soil moisture levels in many areas.
The Australian Bureau of Agricultural and Resource Economics and Sciences expected the value of the nation's agricultural production to reach $85b in 2024-25, compared to $80b in the current financial year.
Rural Funds Management noted horticultural production values were expected to increase 3pc in 2023-24 and another 3pc in 2024-25 to AUD $17.8b according to ABARES forecasts.
The higher production values reflect bigger production yields, particularly for high value commodities such as almonds and table grapes, more than offsetting a fall in prices recently experienced.
RFM said while almond production had broadly increased in recent years, unfavourable growing conditions in 2023 impacted domestic production. Almond prices had also fluctuated due to poorer demand in the global pandemic and record production from California, the world's largest almond grower.
However, better growing conditions as well as an increase in the almond price and the prospect of the Californian not meeting production expectations had brightened the outlook for Australian investors.
Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
