A pioneering Rabobank report that compares the price of land in different regions based on productivity shows South Australia's Yorke Peninsula is the most expensive per millimetre of rainfall in Australia.
The region also showed a remarkable spread of prices, with the top end growing to new heights, even though the median price actually eased a little.
The same can't be said of the state as a whole though. South Australia's prices were some of the most consistent in the country and, overall, grew just 1 per cent in 2020.
Report author Rabobank senior agricultural analyst Wes Lefroy said the spread between high-quality and medium-low quality properties continued to narrow.
"Buyers place a greater emphasis on securing a purchase and less emphasis on improvements, fertility, and the development required to get properties up to potential production levels," he said.
Farmland price forecast
Rabobank expects national farmland prices to remain firm during the next five years, with growth at its sharpest in the next two years.
"We think it's likely that commodity prices will remain supportive for the next 24 months, while we expect interest rates will remain at record lows until at least 2024," Mr Lefroy said.
Rabobank's "base case" forecast is for national farmland prices to lift 10pc in 2021 and 8pc in 2022.
"As macro forces begin to ease, so does growth, falling to 5pc in 2023," the report said.
"In 2024, 2025, and 2026, we expect lower growth of 2pc, 1pc, and 1pc, respectively, as the market 'takes a breath' and as productivity gains catch up to prices.
Stagnation or even a down-shift in prices was still possible but only if there was "a multi-year interruption", Mr Lefroy wrote, to a combination of commodity prices, production, or interest rates.
Not all states the same
While Rabobank figures show 6pc year-on-year growth for 2020 for Australian farmland, the difference between states is stark and it shows South Australia has plenty of scope.
Tasmanian farmland has continued its stellar growth recording a surge of 28.3pc in a year, taking its median farmland price to $15,999/ha.
Victoria came in second, both in terms of its 15.8pc growth and $10,981/ha.
As a whole, Queensland has Australia's lowest farmland price of $2734/ha but it grew a hefty 15pc.
Western Australia was next with a 14.1pc increase taking its average to $3244/ha.
New South Wales was far more restrained with a 6.1pc rise, reaching $5653.
Value in SA
South Australia's 1pc growth of last year may be set to quicken and Mr Lefroy said the speed of price increases was "notably bigger than in previous years".
"A large portion of South Australian farm blocks are small and tightly held, meaning buyers can spread the higher cost per hectare across existing assets," he said.
"The heat in the market has impacted buying and selling behaviours.
"This year in particular, we have observed more out-of-season sales, with many listings coming on earlier than the traditional spring selling period."
Buyers were also looking further afield than usual.
"Typically, buyers move from regions that saw strong price growth early in the cycle toward regions where growth hasn't been as high," Mr Lefroy said.
"One such example is buyers from south-eastern South Australia looking east, into western Victoria."
Rainfall, though, isn't everything when it comes to the performance of Australian farmland.
To help better gauge value, Rabobank has partnered with Digital Agricultural Services to measure both the productivity and reliability of different farming regions.
Productivity increases from left to right and variability increases towards the top of the chart.
Put simply, regions in the lower right hand column of the chart hit the sweet spot of reliably high production.
The smaller the bubble, the lower the price. The colour of the bubble simply shows which state the region is in.
For example, the chart shows that the red region priced at $2574/ha presents incredibly good value compared to the less productive and less reliable region, still in Queensland, priced at $8368/ha.
Wes Lefroy was reluctant to name the regions publicly.
Still, he said, the principle was sound and was supported by data suggesting that farmers were looking beyond areas where price growth had outstripped productivity performance.
New drivers
In the early stages of the current phase, Mr Lefroy said, land price growth was primarily driven by four main regional factors.
They were high and/or consistent rainfall, a lot of farmers with expansion plans, lifestyle benefits, and the ability to grow high-value or multiple production types.
"Now, regional trends have been overwhelmed by the strength of the macro factors," Mr Lefroy said.
"That is, regions that scored low on those four metrics are now recording upticks in growth, fuelled by strength in the three macro factors: prices, production, and interest rates.
"This includes demand from both local buyers and buyers from higher-priced regions who have expanded their search for land with greater productive value."
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