Farmland prices a mixed bag in SA, with Eyre and South East up but others falling in 2021 says Rural Bank Report

Rural Bank's Australian Farmland Values 2022 report showed SA's median price climbed 8.4 per cent in 2021 to $5940 a hectare.

It's a solid headline result but the outcomes for vendors varied dramatically with their postcodes.

The Eyre Peninsula surged a median 30.2pc and the South East region lifted 9pc but prices went backwards in the Adelaide and Fleurieu region at -7.7pc, and the Yorke and North region at -8.7pc.

The EP was boosted by corporate buyers, particularly in eastern parts of the region, according to the report.

Rural Bank regional manager agribusiness Neil Verringer said the demand for farmland off the back of low interest rates, high commodity prices and good production had been very strong.

"This increased demand has continued to push farmland values higher across most of the state, particularly throughout the EP and SE regions - and in some cases making them unaffordable and unviable as stand-alone operations for a number of farmers," he said.

"This increased supply of farmland was observed across all regions as some farmers looked to cash in on the record high land values, which didn't dampen the strong competition from buyers who pushed farmland values across the state to record highs."

In contrast, Rural Bank senior agricultural analyst and report author Michael Curtis said, the regions that had falls in land prices were dominated by transactions in lower-priced locations.

"The Adelaide and Fleurieu region, for example, had a greater proportion of sales on Kangaroo Island where values are lower, which can really drag the the overall regional median lower," he said.

The prolonged dry conditions in parts of SA had also taken a toll on the farmland market.

"While, overwhelmingly, the picture for the country was of favourable seasonal conditions, that bit of western and northwest Vic and southeast SA were relatively dry," Mr Curtis said.

"I think that's reflected in the lower growth of those regions for farmland values in the last year that weren't as positive as some other cropping regions.

"They still were able to achieve some relatively good cropping production in those regions so there's still plenty of optimism there but the lower growth in prices is probably reflective a bit of the seasonal conditions there."

A good season might result in farmland prices lifting there again but Mr Curtis said it was more complicated.

"Let's see how this year plays out," he said.

"The southeast of SA and northwest Vic had a pretty good run of growth before 2021, so there could have been a bit of consolidating in the market as well."

Nationally, farmland prices grew 20pc in 2021.

The median price per hectare soared to $7087/ha in 2021, making it the biggest national price rise in dollar terms ever recorded in the 27-year history of Rural Bank's Australian Farmland Values report. It's also the largest rise in percentage terms since 2005.

WA led the pack at 36.3pc, Qld came in second at 31.3pc and Vic wasn't far behind at 30.4pc.

Markets were far less bullish in NSW at 8.3pc and Tas, 7.6pc. The NT was the only place where land prices fell - down 18pc.

Rural Bank general manager sales partnerships and marketing Simon Dundon said the long-term performance of the market was impressive.

"Overall, growth in farmland values has exceeded residential property prices in Australian capital cities, which have had a lower compound annual growth rate of 5.4pc over the past 18 years," Mr Dundon said.

"Farmland value growth also outperformed the ASX 200 over the past 20 years, which has CAGR of 4.0pc, making a strong case for farmland to be seen as an asset class in its own right."

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Rural Bank predicted a rosy national outlook.

"Our overall view for 2022 is that there's still plenty of demand to sustain what's been a competitive marketplace, coming off the harvest of a record winter crop at pretty good prices and the livestock sector is going really strongly as well," Mr Curtis said.

However, he said, rising interest rates and higher input costs would both dampen price growth.

"We'll maybe start to see the market slow down a bit but, at the same time, there's still plenty of demand," Mr Curtis said.

"I don't think supply is going to rise again, as it did in the last couple of years, so that points to another increase in values from a national perspective but regional trends can always be a little bit different."

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