Farmland yields diverge as beef, wheat, nuts and grapes
Despite a bumper harvest, record commodity prices and rising rural land values, the annual yields generated by quality farmland fell for the fourth consecutive quarter in the three months leading up to March, the crop sector and grazing being very efficient, offset by the low yields of permanent agricultural land.
In the first quarter of 2021, total annual returns fell to 8.5%, from 11.7% in the December 2020 quarter and 14.5% a year ago, according to the Australian Farmland Index.
Income yields fell to 5.2 percent from 7.3 percent while capital growth moderated to 3.2 percent from 4.1 percent in the December quarter.
Compiled by the Asian Association for Investors in Unlisted Real Estate Vehicles (ANREV), the index tracks the performance of a $ 1.06 billion portfolio of 39 farm properties owned by major farm investors and managers, including Gunn Agri Partners, Aware Super and Rural Funds. Management.
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As in previous quarters, the index showed a strong divergence between the very high yields generated by cultivated and grazed farmland, which benefited from soaring commodity prices and bumper harvests, and the lower yields generated. by permanent plantations such as nuts, grapes and citrus fruits.
In the 12 months leading up to March 31, cultivated and grazed farmland generated a total return of 25.3%, above the index average since inception of 19%, although down from the previous year. Record yield of nearly 30% generated in calendar year 2020.
Amid fierce competition for large aggregates of livestock and crops, the annual capital value increased by more than 15 percent while yields were slightly below 9 percent.
Such strong conditions are expected to fuel competition for the 31,975 hectare Kaiuroo aggregation in the Mackenzie River beef district in central Queensland, which was put up for sale by global asset manager The Rohatyn Group. . Price expectations would be above $ 55 million, excluding livestock.
Located 221 km west of Rockhampton, the aggregation supports livestock and fattening operations and benefits from high quality cereal, fodder and cotton crops. It includes 1,650 ha of certified organic cultivated area, of which 917 ha are irrigated.
Senior Real Estate Managing Director Tom Russo, who markets Kaiuroo alongside colleagues Andrew Williams and Virgil Kenny, said large-scale, quality farms remain in high demand while supply remains limited, despite some increase in new listing volumes on the market.
“The Kaiuroo aggregation benefits from both quality and diversification, and is well established for resilient returns across cycles,” Mr. Russo said.
As prime horticultural assets continue to be in demand – as evidenced by last month’s $ 50 million sale of McWilliam’s Wines – total annual yields from permanent farmland have fallen to just 3.1% over the past month. March quarter, down from 4.8% in December quarter and well below the 13% return recorded a year ago.
The annual capital value contracted 1.2 percent while the annualized returns on income were 4.3 percent.
Index founder and farm fund veteran Frank Delahunty said the contrasting fortunes of cultivating farmland versus permanent farmland reflected the “cyclical nature” of agriculture.
A few years ago, Mr Delahunty said, permanent farmland was the best performing.
Punitive tariffs imposed on Australian wine exporters by the Chinese government, along with falling almond prices and the lingering impact of drought on irrigation costs and bottom lines, have also hurt the horticultural sector.
Commenting on the index’s latest performance, Rural Funds Management COO Tim Sheridan said Australian agriculture continued to perform relatively well despite continued disruption from the pandemic, the rising Australian dollar. and trade issues with China.
“This is reflected in the continued increase in the annualized value of farmland as demand for farm property remains high,” said Mr. Sheridan.
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