Despite export grain prices generally not doing farmers many favours in the past five years, Australian cropping land values have made a perverse leap - well ahead of pastoral and dairy real estate.
Spring has continued to see grain farming country in hot demand as the pre-Christmas selling season moves into top gear, despite the drought's severe impact on crop results in much of Queensland and NSW in the past two years, or more.
Average annual growth rates for Australian cropping and mixed farmland prices have risen 9.1 per cent since 2014, according to Rabobank research.
That compares with compound annual growth rates of 5.1pc for dairy land values and, despite surging sheep, beef and wool markets, just 2pc growth for pastoral grazing country.
South Australia's Yorke Peninsula recorded the highest median price rise between 2014 and 2018 - 17.4pc, while the NSW Riverina and Wimmera jumped 13.7 and 12pc respectively.
While drought had not deterred cropping country demand nationally, recent weather patterns had been particularly helpful in attracting more buyer interest to areas with favourable rainfall and temperature trends or access to irrigation.
This was especially the case where farmers and new agricultural investor groups wanted to diversify cropping activities towards southern Australia to spread their exposure to weather risks, said Rabobank analyst, Wes Lefroy.
Initially, we saw cropping land demand swell a few years ago after a string of favourable seasons enabled farmers to expand.
He said the big dry had also dried up the amount of land coming on the market while presentability opportunities were poor, with rural listings now down to about half the number on offer in 2014.
In many cases farm balance sheets were strong enough for landholders to have opted to ride out the drought, or lease their land, rather than feel compelled to sell.
"This is limiting expansion opportunities for neighbouring croppers and mixed farmers, leaving many essentially land-locked," Mr Lefroy said.
"Initially, we saw cropping land demand swell a few years ago after a string of favourable seasons enabled farmers to expand."
"Although most grain prices were low in 2015, '16 and '17, overall production results were very good in many areas, taking average farm operating profits to near 20-year highs in most states."
Fewer buying options
Now a lack of local buying options was one factor prompting growers to hunt for land well away from their home base, and maintain consistent pressure on national market values.
"It's happening more so than we have seen in the past," he said.
On the other hand, Mr Lefroy said dairy and pastoral land price rises had seen drought, and other factors, working to subdue such strong compound price gains.
While dairying was mostly centred in southern Australia where dry conditions had been less persistent, dairy land values were hurt badly by massive milk market setbacks in 2016-17 and since, plus tougher seasons in some areas during the same period, plus big water cost rises for Murray Darling Basin irrigators in recent years.
Pastoral country, mostly in Queensland and Northern Territory, had seen slower price gains, partly because of a long run of poor seasons in many areas, and a slow cash flow recovery after depressed beef prices earlier in the decade.
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Apart from graingrowers showing more interest in moving south or having multiple operations over a spread of regional areas, Mr Lefroy said lifestyle factors and demand for certain crops also pressured prices in some regions.
Buying closer to services
"Declining rural populations in isolated areas have encouraged inter-regional purchases closer to major regional centres to meet social and family demands," he said.
"Alternatively, new demand from urban dwellers for farms close to major centres has encouraged farm businesses to seek inter-regional purchases further afield."
Buyers are factoring in security of rainfall and irrigation more than, say, a decade ago when people were happy enough to pay quite a lot of money for more marginal cropping land
Prominent selling agent with Ray White Rural International, Bruce Gunning, said low interest rates and "a lot of new players in the food and fibre market" were also keeping demand pressures on grain property values.
This was particularly notable where winter rainfall trends did not appear to have been disrupted as much as in northern NSW and southern Queensland.
"The Liverpool Plains still seems to be pretty reliable, but I think that region's climate has shifted more towards Forbes in the Central West, where we've seen quite a lot of farms changing hands," he said.
More crop choices
The Riverina was also popular because a bigger mix of crops, including cotton, are now able to grow there.
Irrigated dairy pastures were making way for more seasonal crops which offered more flexible income options for farmers trying to reduce exposure to climate risk.
"Buyers are factoring in security of rainfall and irrigation more than, say, a decade ago when people were happy enough to pay quite a lot of money for more marginal cropping land in areas like Lake Cargelligo or Walgett, despite only stripping two or three crops every five years."
Rising demand for canola and grain legumes also gave croppers useful planting diversification options to work with, rather than being too exposed to the traditional export cereal market.
Mr Gunning agreed many potential sellers in drought-hit grain and grazing areas were holding off until after the big dry broke, with support from their banks "because it won't look good for the banks if a lot of country hits the market in a drought".
However, Mr Lefroy urged farmers who were motivated to expand into different regions to seek more climate risk protection or economies of scale, to be sure the cost of not expanding outweighed the extra operational costs and complexity, including the travel time involved in managing inter-regional purchases.
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The story Cropland's defiant demand puts pressure on prices, despite dry first appeared on Farm Online.