Big grain crop result but farmland index returns post record fall

Lower livestock prices also contributed to total farmland returns for the year to June falling 8.2 per cent, ending a smidge over 2pc - the lowest result since the monitor began tracking ag investment returns in 2015.

The latest numbers compare to bullish average total annualised returns of 12.16pc over the farmland index's relatively short lifetime.

The index provides a snapshot of agricultural earnings and capital valuation returns from a $2 billion basket of investment-scale properties.

The 63 different holdings monitored are involved in a range of enterprises from broadacre cereal and oilseed cropping to livestock production, permanent nut and fruit orchards and vineyard crops.

Farm income returns since early 2015 have averaged a relatively healthy 5.41pc and capital growth has been 6.5pc.

The much less prosperous 2022-23 year result could have been much worse if not for being significantly buoyed by high production results from last year's big winter grain season and good summer crops, supported by high prices.

Farm income from the annual cropping and livestock enterprise farms monitored by the index was 11.65pc.

However, farmland values on these holdings fell 1.62pc for the financial year, eroding the total annualised return to 9.9pc.

Much less rewarding were permanent crops, which represent 44pc of farmland operations monitored on the index.

They recorded total annualised returns of minus 6.63pc, with income just slipping into the red at minus 0.57pc, while capital depreciation was down 6.17pc.

Investor group, Gunn Agri Partners, noted the figures reflected a cooling in agricultural markets and land values following a sustained period of high total returns which had averaged 9.26pc annually in the three years to June 2022.

"The June results highlight the value of a portfolio approach to farmland ownership," the investor group noted in a commentary about the latest index' results.

"Current production and price dynamics between permanent crop, annual crop and livestock production systems have been subject to varying production levels and market drivers."

The vastly divergent performances by permanent and annual crop enterprises subsequently resulted in only a modest overall annual return.

However, Gunn Agri pointed out although returns were at historic lows, farmland investors had benefited from several seasons of above trend performance, and production prospects in many parts of Australia were still solid.

Despite the current market and seasonal downturn, the Australian Bureau of Agricultural and Resource Economics and Sciences was still forecasting agriculture to achieve the third highest yearly production gross value on record in 2023-24.

Farmgate agricultural production was predicted to be worth $80 billion, down from the recent financial year's record $92b.

Although Australia's total winter crop production was forecast to fall 34pc to 45.2 million tonnes, the gross value of horticulture production was expected to rise to $17.6b in 2023-24, fuelled by higher production.

The Australian Farmland Index is compiled by the Asian Association for Investors in Non-Listed Real Estate Vehicles (ANREV).

For the June quarter alone total investment returns slipped 1.73pc below the previous three month period because income fell into the red at minus 1.52pc, while capital growth was at 3.26pc.

The last five years recorded a total annualised return of 10.42pc comprising income return of 4.62pc and capital growth of 5.59pc.

Businesses contributing farm data to the index include Argyle Capital Partners, Growth Farms Australia, Manulife Investment Management Timberland and Agriculture, Rural Funds Management, Riparian Capital Partners, and Roc Partners.