Australian farmland proves itself a hot commodity

With more assets listed in recent weeks, it is clear asset managers see market conditions as an opportune time to make a return.

When Rabobank published its latest annual Agricultural Land Price Outlook in early October, the message was positive: “Does it get any better than this?”

The report stated that macroeconomic trends are the most supportive of Australian farmland value growth that they have been for 30 years, thanks to a combination of strong seasonal conditions, high commodity prices, low interest rates and demand for assets outstripping supply.

This has prompted several fund managers to decide that now is not a bad time to crystallize a return on their investments and to list properties, or even whole portfolios, for sale.

The latest sellers are goFARM Asset Management and Laguna Bay Pastoral Company. The firms have listed broadacre cropping assets in New South Wales and Victoria respectively; market sources say the former is likely to fetch upwards of A$60 million ($44 million; €38 million) and the latter is likely to be sold for more than A$70 million.

Earlier this year, Macquarie Infrastructure and Real Assets completed the sale of its massive Lawson Grains portfolio to New Forests and Alberta Investment Management Corporation. Aware Super put up for sale the assets managed by Kilter Rural over which it obtained control when First State Super merged with VicSuper in 2020.

In August, European family office THF Finance put a portfolio on the market and Proterra Investment Partners decided to sell the Australian farmland assets held by portfolio company the Corinella Group. In May, Auscott‘s long-term owner JG Boswell Company sold it to a PSP Investments joint venture, while Duxton put the Ace Dairy portfolio up for sale. There are plenty more properties being offloaded.

CBRE agribusiness managing director David Goodfellow told Agri Investor recently that the market was heating up ahead of the spring selling season, as family farmers returned to compete with corporates and institutions on smaller assets, which was contributing to a continuing rise in farmland values.

Records are continually being broken. Rabobank found that the median price for agricultural land in Australia had risen by 6 percent in 2020. Rural Bank’s figures were even more bullish, with the bank reporting that the median price per ha for farmland had increased by 12.9 percent in 2020 to A$5,907 per ha. This brought the 20-year compound annual growth rate to 7.6 percent, which is comparable to many other asset classes and far less volatile than almost all others.

Most – if not all – of the institutional buyers listed above are not exiting farmland investing through these sales. They intend to cash in, then recycle that capital into their other assets or put it towards acquiring new ones.

All this activity is another sign of the increasing maturity and institutionalization of the agricultural investment market, with large asset owners proving they can secure a long-term return on their initial investments as a result of these transactions.

A pool of foreign and domestic potential buyers seems to continue to grow, with many still believing that Australian farmland is undervalued relative to equivalent North American assets. So it seems that a busy, competitive market full of different kinds of opportunities for investors is here to stay.