THE 2021 selling season has commenced for the Western Australian rural property market and it looks to be another bullish year, with strong land prices expected to continue.
Rural Bank's mid-year outlook report stated that Australian farmland values had shown resilience during the worst pandemic in living memory.
"Whilst economic volatility has materially impacted other sectors, the long-term outlook continues to point to growth for Australian agricultural productivity and profitability," the report stated.
"Several key fundamentals from 2020 remain in play in 2021.
"Low interest rates, strong commodity prices, existing balance sheet growth, favourable seasonal conditions and tight supply will continue to provide support for farmland values in the second half of 2021."
Nutrien Harcourts WA sales manager Terry Norrish was feeling optimistic about this selling season.
"There is massive confidence in the rural market and the ag business is facing the rare situation where the season has outstanding potential and commodity prices are at mostly all time highs," Mr Norrish said.
"Sentiment would be the highest as a seller, whereas buyers and agents are looking for properties to buy and in the agent's case, market to sell."
Mr Norrish expected that all types of rural properties would see increased growth in sales or values "given the current market environment and potential that the season is experiencing".
"Land values can only go one way, which is up, given the excellent state of the season and markets," he said.
"There are large amounts of money waiting for the right parcel of land to become available and when it does there will be significant competition."
Elders senior rural real estate executive Simon Cheetham said confidence was strong among buyers, sellers and agents.
"Some sellers have been monitoring the market and have decided the time is right to sell their farm this year with plenty of potential buyers waiting in the wings," Mr Cheetham said.
"Our agents are enthusiastically listing farms across the State knowing they will receive plenty of interest and enquiry once offered to the market.
"However it definitely remains a 'sellers' market' with only limited properties being available in many areas.
"Buyer enquiry has noticeably increased in the past few weeks, primarily from local family farmers eager to know what land might become available."
Mr Cheetham expected that on the back of this season, further growth in land prices was likely.
"Areas where growers have been able to capitalise on a wet growing season and high commodity prices will definitely be interesting to observe," he said.
"The Esperance and Geraldton port zones appeared to have had the largest jump in farmland values in 2020 and are likely to remain strong given current demand and conditions.
"However, the highest percentage increases could be in other areas that have possibly been undervalued in comparison.
"For example the coastal strip between Guilderton and Greenhead has some real growth potential as growers really push production by better managing sandplain soils.
"Some of our low rainfall areas also have potential for a high percentage increase in land values if some yield projections are reached and some high rainfall grazing districts have not had the same recent growth in prices as other areas which is making them appear to be 'reasonable value' in comparison to other districts."
In previous years, family farmers have been the dominant buyer demographic driving the market and Mr Norrish anticipated this to continue.
"I feel that local family farmers are in a position of strength in that they can buy smaller units if they come up locally," he said.
"Banks are being very supportive of well managed farm units with good equity in their business.
"Larger investors require businesses of scope which are rarely for sale and they then need to start to weigh up the value of a possible purchase and if it is getting beyond their investment parameters."
Mr Cheetham expressed similar thoughts, saying that family farmers "will continue to aggressively look to expand both near to their existing holdings, as well as establishing 'bases' further afield".
Challenges facing the market this season are expected to be similar to those of previous years, with both Mr Norrish and Mr Cheetham saying that agents were facing a shortage of listings to fulfil strong buyer demand.
"(Challenges ahead) would undoubtedly be a lack of listings given that we have had two extreme high volume sales years," Mr Norrish said.
"It remains to be seen but maybe extremely high values may bring on sales."
Mr Cheetham said that although the high rainfall most areas have received so far was positive for farmers, it has posed issues for agents in marketing properties.
"As good as it has been to see such a wet growing season, simply showing buyers over some farms has become difficult due to how wet it has gotten, however that's a short term issue that can be managed," he said.
"I think the main focus and challenge for farmers will be capitalising on the unique season we are having and optimising their production.
"Getting fertiliser, herbicide and fungicide out in a timely manner has been challenging so far, and waterlogging has started to reduce yield potential in some areas.
"As good as a wet season is, it still brings challenges."
ANZ's InFocus Commodity Insights for June 2021 reported that many industry commentators have anticipated a change in the agricultural cycle for a while, which would be a scenario where major commodity prices start to decline - particularly livestock and grain, a fall in land prices and at the same time interest rates would start to rise and a tightening not just in repayments for many businesses, but the speed of their business growth.
ANZ said the fact the industry hadn't turned in the opposite direction by mid-2021 was down to a combination of factors.
"Ongoing good rain in Australia has meant restockers are continuing to pay high prices to put cattle and sheep on their grass, while global feed demand and food security issues have kept grain prices strong," ANZ stated.
"At the same time, while the economic recovery from COVID-19 has undoubtedly continued, it hasn't quite reached the point in many countries where interest rises are needed to temper it - but it will.
"Going forward, for as long as conditions stay ideal, producers will continue to maximise their opportunities.
"But as with any cycle, they should continue to have their alternative strategy ready."
Mr Cheetham said this season in particular posed great potential for farmers, which suggested farmland value would remain strong.
"There are plenty of key drivers at play but if you consider there is potential for an exceptional harvest result, commodity prices are strong overall, interest rates remain low, many farm businesses are in their strongest ever financial position and there is a positive long-term outlook for Australian agriculture, then it all augers well for farmland values to remain strong and continue to trend upwards," he said.
"However there are always unforeseen events and forces, so time will tell."