Aussie grain land a bargain

30 Jan, 2013 01:00 AM
Comments
17
 

IT MIGHT not seem cheap to the average Australian farmer, but almost nowhere in the world offers better graingrowing value than a hectare of cropping country in Australia.

The cost of the land required to grow a tonne of Australian wheat averaged below $US900 in the period between 2005 and 2011 - the second lowest (behind Hungary) in a global study of 14 significant farmland marketplaces.

Costs in the US, Brazil, Britain and New Zealand were near or above $US2500/t and topped the list in Denmark at about $US3800 according to research compiled last year by UK-based property marketers Savills.

The Savills study, released in August, goes a long way to explaining why Australia is increasingly popular as an investment target for overseas capital.

"It highlights what many overseas strategic investment groups have been awake to for some time - Australia is a sleeping giant in value," said NSW-based rural property sales specialist Philip Jarvis.

"It costs about $1000 to grow a tonne of wheat in NSW at Dubbo or Wagga Wagga, but $6000 in Iowa in the US Midwest."

Savills also rated Australia second highest in a global farmland index score which balanced yields and investment returns with the economic, agronomic and infrastructure risks of investing in farmland in different parts of the world.

Unlike many countries considered politically and economically safe to invest in, the international real estate firm's rural land analysts said Australian values were coupled with good productive earning capacity.

"With the exception of farms located close to major cities, Australia still offers a rural land investment environment where land values are supported by their respective earnings potential in a safe environment relative to today's political and economic turmoil," said Western Australian consultant to the study, Richard Price.

Mr Price said new productive irrigated farmland was being still being opened up in some parts of Australia, unlike most of the developed world where farming was subject to tightening land use limits.

He noted Western Australia's wheatbelt (an area equivalent to the landmass of Britain) was also worthy of overseas investor attention given it exported 90 per cent of its grain production and developing Asia was close by.

Although last year's WA farmland values eased, returns on land capital of 4.2 to 20.1pc in medium to high rainfall areas in the past decade had helped drive a doubling, and even trebling, in farm prices.

The average cost of buying enough land to grow a tonne of wheat in WA ranged from $US850 to $US1150 at Geraldton to $US1300 at Wongan Hills.

Savills' index showed South Australia's Yorke Penininsula as having our most expensive wheat country - $US1500 to $US1700/t, or just above the average for Canada, Poland and Romania.

Despite farmland values up by 11 to 15pc in Australia in 2011-12 to average $1606/ha and 29pc in NZ to $24,488/ha, both were just below the global index average for the previous eight years.

The federal government has just issued a reminder that the cut-off date for submissions on the design of a national foreign ownership register for agricultural land is tomorrow (February 1).

Agriculture Minister Joe Ludwig has urged public input on how a register could comprehensively monitor the size and location of foreign-owned farm holdings.

Information about the foreign investment register can be found at www.treasury.gov. au/Consultatio nsandReviews/Submissions/2012/agr icultural-land

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READER COMMENTS

inverell
30/01/2013 4:05:32 AM

Land here is expensive. We have no subsides, no yield crop insurance like the US, unreliable rainfall, generally poor soils, a Government that wants to destroy Agriculture, no strong farming advocates, high growing and living costs compared to the rest of the developed world and continuous Government interference to reduce profit and increase costs. The land here should be half the price it is. If it was so cheap than why aren't farmers buying it up not overseas interests. Reason we know the true value, they don't!! And Andrew doesn't either it seems.
Inverell
30/01/2013 5:07:16 AM

As any good real estate agent knows there is more to a property than its sale price. What about yield, risk, capital gain etc etc. Just because it may seem "cheap" compared to other land doesn't make it value in the market place. I think Australian farmers are in a better position to comment than Savills in the UK, and we aren't rushing out to buy more land at present. Just the opposite, we are selling out in droves.
x
30/01/2013 7:01:32 AM

Its obvious that Savill has not had a good look at the fundamental issue of profitability in the Aussie grains industry!
The Serf
30/01/2013 7:42:00 AM

Savills should be focusing on the security of their investment in the land. Savills needs to understand that Fee Simple here is not the same standard accepted worldwide; the State governments control and regulate all land and they can apply any law to an existing title and deprive all beneficial economic interest with no compensation. No such thing as a Taking here. You should look hard at the taxation/labor/marketing structures and conduct a costs benefits analysis re profitability before committing to investment. Profit currently is very low if at all, and you don't own the land...
Peter Saunders
30/01/2013 8:06:13 AM

Relying on a property sales specialists for impartial comment and advice on land values is not dissimilar to asking cannibals for advice on whether or not meat is under priced.
William
30/01/2013 8:21:47 AM

Wheat today is only worth about $300 FOB Newcastle, if it is costing you “about $1000 to grow a tonne of wheat in NSW at Dubbo” then you are in the wrong game my friend! If you were just to look at land values in isolation you might have half a story here (ignoring your $1,000 wheat!?) but when you take into account all the points that our man from the sapphire city correctly points out and also add into the equation that we are at the bottom of the world providing us with a significant sea freight disadvantage we are not as sexy as you might suggest..
Action
30/01/2013 9:57:34 AM

When it comes to wheat, Australia wins hands-down on one front: RISK, both production and price. Caveat Emptor!
Far West
30/01/2013 4:22:57 PM

Another armchair expert.
Bigpen
30/01/2013 5:04:37 PM

The price of farming land Europe US is much dearer but more relates to its proximity to Oxford St or Central Park (ie its use for other purposes) than the return to be generated from farming and subsidised at that. I notice noone is quoting the price of farming land in Iraq or Kazakstan.
Aaron
30/01/2013 6:39:46 PM

There is no where in the world apart from Australia where you can have a mother of all droughts and still produce an exportable surplus. That is attractive to overseas interests who fear export restrictions in tough seasons as we have seen in South America and Russia in the last few years.
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