Australian farmland returns top 14% on annualized basis – ANREV

Annual farmland continues to outperform permanent farmland in the ANREV Australian Farmland Index, driven by high commodity prices and bumper yields.

The total return on investment in Australian farmland reached 14.68 percent on an annualized basis for Q1 2022, one of the highest returns figures since the beginning of the covid-19 pandemic.

The figures, reported in the latest edition of the Australian Farmland Index compiled by the Asian Association for Investors in Non-Listed Real Estate Vehicles (ANREV), comprised an income return of 7.21 percent and capital growth of 7.10 percent.

The total return of 14.68 percent is much higher than Q1 2021’s figure of 8.46 percent. It is also the third-highest annualized return since the pandemic began, only beaten by Q1 2020’s figure of 14.91 percent and Q2 2021’s 15.07 percent.

The quarterly return for Q1 2022 stood at 2.53 percent, comprising an income return of 2.02 percent and a capital growth of 0.51 percent, which was only slightly down on the previous quarter’s return of 2.83 percent.

Annualized total returns for annual crop farmland continue to outperform permanent farmland in the Australian Farmland Index, continuing a trend that has lasted for more than 12 months. The total return for annual farmland was 39.22 percent, with strong capital growth of 27.16 percent driving this. Income returns for that segment of farmland stood at 10.28 percent.

Permanent farmland returns remained relatively stable, recording a 7.46 annualized total return that comprised an income return of 6.12 percent and capital growth of 1.25 percent.

The figures paint a picture of Australian farmland’s defensive attributes, demonstrating relatively stable returns over a long period despite volatility in other sectors brought on by the pandemic, Russia’s invasion of Ukraine and growing fears of inflation.

In commentary on the index, contributor Gunn Agri Partners said: “The overall result [for Q1 2022] remains strong from a historical perspective, with above-trend returns generated by annual production systems.

“The performance of annual farmland over the full year to March has been strong due to above-trend income contributions, a result of above-average winter and summer crop harvests on the Eastern seaboard and soaring beef cattle prices as exporters and re-stockers fiercely contribute to compete for stock.

“Projections are for another strong year for crop producers. ABARES currently forecasts the gross value of crop production to reach A$45 billion ($31 billion; €30 billion) in 2022-23, the second highest on record following the record high of A$48 billion in 2021-22. This reflects near-record winter crop production coupled with high world grain and oilseed prices.

“A contribution to income growth from livestock production is also expected, and while prices are forecast to ease, ABARES forecasts the gross value of production for livestock to rise by 1.2 percent to A$35 billion in 2022-23.”

The ANREV Australian Farmland Index was established in 2015 and compiles data from 65 properties with a total market value of A$1.81 billion, with annual crop farmland representing 48 percent of the properties by number and 38 percent of the properties by market value.

The index’s current contributors are Argyle Capital Partners, Aware Super, Growth Farms Australia, goFARM Australia, Gunn Agri Partners, Manulife Investment Management, Riparian Capital Partners and Rural Funds Management.

ANREV took over responsibility for compiling the index in 2020, following its previous managing by ANREV’s affiliate organization in the US, the National Council of Real Estate Investment Fiduciaries.