Australian farmland prices are expected to return to modest growth in the year ahead, Rabobank says in its newly-released 2025 Australian Farmland Price Outlook.
The annual report, by the agribusiness banking specialist's RaboResearch division, says a positive outlook for key agricultural drivers is expected to see agricultural land prices rebound in the year ahead, albeit at a modest "base case" forecast of three per cent growth.
The bank's analysis – of a high-quality data set sampling Australian commercial sales across the country analysed by a team of professional appraisers* – found overall farmland prices had contracted in 2024, with the median price per hectare across all agricultural land types nationally decreasing by six per cent on the previous year.
This had come, however, after a period of extraordinary growth for agricultural land prices, the bank said, with the median price per hectare for farmland in Australia growing an "astonishing" 79 per cent between 2020 and 2023.
Price moves also varied between land types and across the country, the data set showed, with Western Australia and South Australia bucking the national trend and recording increases in the median price of agricultural land.
Report lead author, RaboResearch analyst Paul Joules said agricultural land prices will likely rebound in 2025, "but we expect growth to be modest compared with recent years".
"Buyers will be searching for value and, given the recent price drop, investment opportunities may present themselves in 2025 as buyers capitalise on weaker land values," he said.
"Unsurprising" 2024 decline
The report said the decline in farmland prices observed in the 2024 land sales data was "unsurprising" considering the period of rampant growth in recent years and factors that had weighed on the agricultural sector in the past year.
"Over the past 12 months, falling commodity prices certainly had an influence, especially given that higher interest rates and fertiliser prices have made recent declines in agricultural commodity prices more unpalatable, and land purchasing power in 2024 suffered because of this," Mr Joules said.
The 2024 sales data showed the median value of grazing land had declined by a sharp 13 per cent on the previous year, while, in contrast, arable (cropping) land remained more stable, down just 2.6 per cent year-on-year.
All states recorded year-on-year declines in agricultural land prices, except for South Australia and Western Australia.
The report found the median price per hectare for agricultural land declined by five per cent in New South Wales, Victoria and Queensland, while in Tasmania it was down 12 per cent. In South Australia, median ag land prices increased an impressive 18 per cent, while in Western Australia, they were up 12 per cent.
Mr Joules said the strong growth recorded in South Australia likely reflected a larger weighting of more expensive properties that were sold in the state last year, while more marginal properties had been harder to move, with much of SA suffering from poor seasonal conditions through 2024.
"In Western Australia, the rise in agricultural land prices in 2024 brought median land price growth over the past five years to 128 per cent," Mr Joules said, "although last year's growth was lower than in recent years and there was a reduction seen in the average size of land parcels sold."
Mr Joules said a common factor that was considered to have influenced agricultural land prices across the states in 2024 was the tightening of on-farm margins amid rising cost pressures, with high interest rates and fertiliser prices being two key drivers.
"Decreases in grain, dairy, cotton and sugar prices during the 2024/25 season added to the margin pressure," he said.
Positive drivers
However, some of these headwinds were expected to ease through 2025, the RaboResearch report said.
"The 2025/26 outlook for key drivers is supportive of land values," Mr Joules said, "with early production prospects looking promising, some key commodity prices forecast to increase and the official cash rate (OCR) expected to ease further. RaboResearch is forecasting two further 0.25 per cent cuts to the OCR this year."
For production, Mr Joules said, although soil moisture profiles are mixed "state by state", early projections for the 2025/26 winter crop point to area expansion, which will support production volumes.
"While for beef, ongoing high volumes of cattle mean production will likely remain high in 2025. For lamb, a small year-on-year drop in production is expected in 2025, following last year's record output, while milk volumes are expected to grow," he said.
For commodity prices, the 2025/26 outlook is "largely supportive", the report says. "For dairy and beef prices, market dynamics create room for upside in 2025, while for grains and oilseeds, declining global wheat stocks may provide price support," it says.
"The outlook for farm income is positive overall, with RaboResearch forecasting our Australian commodity price index to increase in 2025," he said. "And this should help partially offset inflated input costs."
RaboResearch expects the Australian farm sector will "enter a new period of steady growth", reflecting the "more normalised on-farm margins" that are anticipated.
However, Mr Joules cautioned, US trade policy and the US-China trade war added a new level of uncertainty to the commodity price outlook.
Land price outlook
The outlook for land prices in 2025 is a forecast return to very modest growth, the report says, although nothing like the levels seen from 2021 to 2023. And from 2025 to 2030, land prices are expected to experience slow growth as buyers prioritise getting the most value from their investment.
"We don't expect the same heat in the market as witnessed between 2020 and 2023 as on-farm profit margins are expected to normalise," Mr Joules said.
Foreign/corporate investment decline
The report notes foreign investment in Australian agricultural land had also cooled in 2023/24, and a return to 2021/22 and 2022/23 levels seems unlikely in the year ahead given the current economic environment.
Mr Joules said while full 2024/25 foreign investment data is not yet available, "if we cast our eyes to 2023/24, we can see that foreign investment declined 38 per cent year on year, with offshore capital inflow totalling AUD 5.3 billion". This marked the largest yearly drop in percentage terms in 14 years, he said.
The report said the pullback seen in overseas investment appeared to reflect a drop in overall corporate investment activity in Australian agriculture.
"This is particularly notable in the dairy space," Mr Joules said, "where we are coming off a period of high profitability, with returns beginning to normalise.
"This has likely taken the steam out of investment, and it could spell a return to more modest investment growth in the years to come."
Mr Joules said the pronounced growth seen in agricultural land prices in the recent years may also have contributed to the decline in corporate investment sentiment, with potential buyers adopting "more of a wait-and-see approach to procurement as margins compress".
*The report analyses over 1200 sales from 2024 from a data set comprised of more than 12,000 sales across the country since 2019. This high-quality data represents a sample of the Australian commercial farm sales market.
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