Investing in Australian agriculture

An introduction
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Contents
Executive Summary 4
Australia as an investment destination 6
Trends in productivity growth in Australian agriculture 10
Farm income and proftability 13
The importance of farm size and economies of scale 17
Capital returns and trends in Australian farmland values 20
Factors affecting farm values in the Australian Wheatbelt 23
Australian farm debt and equity levels 27
Foreign investment in Australian agriculture 28
References and data sources 31
Contents
Executive Summary
Highly transparent and secure real estate market
Strong, stable democracy with an effcient legal system
and very low level of sovereign risk (Moodys sovereign
rating of Aaa and S&P and Fitch rating of AAA).
Rated amongst the top three most secure markets in the
world to buy and own real estate (Jones Lang LaSalle
Global Real Estate Transparency Index, 2012).
Foreigners afforded exactly the same freehold ownership
rights as Australians.
No government approval required for private sector
farmland investments below AU$231 million.
Very strong economy
21 consecutive years of uninterrupted GDP growth.
Highest GPD per capita of any large economy
(US$69,000, 2012 forecast).
Ranked the most resilient economy in the world
during the fnancial crisis (Institute for Management
Development, World Competitiveness Yearbook 2008).
Lowest government debt of any large western economy
(net government debt of 9.5% of GDP, 2012 forecast).
Soundest banking sector of any large economy (ranked
fourth in the world by the World Economic Forum,
2011-12).
Low rate of unemployment (5.1%, mid-2012).
Rich in natural resources with lowest population density
of any large economy.
Australian farmland is attractive to
investors because it combines the benefts
of frst world governance and stability
with the scale and prices of developing
nations.
Citi Private Bank, Wealth Report, 2011
Australias robust economy, strategic location and investment friendly business environment have made the country one of the
worlds top destinations for foreign investment, with FDI infows of over twice the OECD average (% of GDP basis, 2011).
The agriculture sector in particular is attracting growing investor attention, offering a high level of ownership security coupled with
low farmland prices and a reliably proftable agricultural sector. This section summarises some of the key attractions for agricultural
investors.
Major agricultural producer and exporter
Diverse climate, rainfall patterns and soil types allowing
for a wide range of agribusiness enterprises.
Well developed supply chain and export infrastructure.
Highly skilled agricultural labour force.
National gross farm income of AU$53 billion (2011-12)
with agricultural output more than doubling since the
80s.
Vast grain growing area covering 46 million hectares
(three times the total land area of England).
Grain production up by 69% and exports up by 176%
in last fve years (2007-08 to 2011-12).
Food self suffcient, exporting two thirds of its agricultural
production.
Third largest exporter of wheat after USA and the
European Union (15.9% of global exports, 2011-12).
Ideally located to capitalise on the rapid rise in demand
and changing diets in emerging markets, with grain
exports to China up by more than 200% in fve years
(2007-08 to 2011-12).
Compelling investment fundamentals
Large farm sizes facilitate greater economies of scale and higher farm income.
High level of farm income without government subsidies producing reliable annual rental returns of 5%+.
Strong and consistent record of land value appreciation, averaging 9% annually over the last 10 years.
Lower farmland prices than any other large agricultural exporter (measured on a land price per unit of production basis, under
half the price of United States, New Zealand, United Kingdom and Brazil).
R&D and cutting edge management practices driving ongoing increases in farm income and productivity (agricultural labour
productivity more than doubled in the last 20 years).
Low levels of farm debt (less than 25% debt to equity ratio).
No asset price bubble with almost all buyers still being local Australian farmers (98.5% of farm businesses 100% Australian
owned).
Socially responsible investment (world leaders in adoption of sustainable farming practices).
Grain production up by 69% and exports up by 176% in last fve years (2007-08 to 2011-12).
Food self suffcient, exporting two thirds of its agricultural production.
Third largest exporter of wheat after USA and the European Union (15.9% of global exports, 2011-12).
Ideally located to capitalise on the rapid rise in demand and changing diets in emerging markets, with grain exports to China
up by more than 200% in fve years (2007-08 to 2011-12).
Foreign investors are afforded exactly
the same freehold ownership rights
as Australians.
Australia as an investment destination Australia as an investment destination
Beyond the excellent investment fundamentals of its
agriculture sector, there are also a number of macroeconomic
factors that make Australia an attractive investment
destination. This should help to foster further foreign
investment infows and bodes well for the future of the
Australian agricultural sector, both in terms of asset values
and rates of income.
The Australian economy continues to perform well off the
back of 21 consecutive years of uninterrupted growth. In
2008 during the fnancial crisis Australia was rated as the
worlds most resilient economy in the rankings published
annually by the Institute for Management Development
(IMD).
After 21 consecutive years of
uninterrupted GDP growth Australia
now has the highest GPD per capita of
any large economy.
Figure 1: Annual change in GDP for Australia, the US and the European Union, 2001 to 2010
The outlook for the Australian economy remains buoyant as it continues to beneft from emerging market demand and a substantial
pipeline of investment in the natural resources sector. At 3 people per square kilometre, Australia has one of the lowest population
densities and highest per capita natural resource reserves of any nation.
With China (population density of 141 people / sqkm), India (population density of 372 people / sqkm) and a number of other
emerging markets on its doorstep, Australia is well positioned to take advantage of rising demand from these economies.
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Australias government bonds are rated Aaa by Moodys and AAA by S&P and Fitch. At US$69,000 per capita, Australia has a higher
GDP per capita than any other large economy, its government debt to GDP ratio is lower than any other large Western economy
at under 10% (2012 forecast), and it has an unemployment rate of 5.1% (June 2012), also amongst the lowest of any Western
economy.
Figure 2: Population density of selected Western and emerging market countries, 2011
Figure 3: General government net debt as a % of GDP for selected large economies, 2012 forecast
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Australia
Australias banking system is rated as one of the soundest in the world (ranked 4th of 142 countries by the World Economic Forum)
and the country is recognised as having has a higher quality of life and level of prosperity and economic freedom than almost any
other Western economy. Looking forward, Australia has the economic strength and policy bullets to enable it to withstand future
external shocks better than the great majority of the worlds economies.
Figure 4: Unemployment rate for selected large economies, June 2012
Figure 5: GDP per capita in US$ for selected large economies, 2012 forecast
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Heritage = Heritage Foundation & Wall Street Journal; Legatum = The 2011 Legatum Prosperity Index Rankings; WEF = World
Economic Forum, The Global Competitiveness Report 2011-12; IMD = Institute for Management Development, World Competitiveness
Yearbook 2012; JLL = Jones Lang LaSalle, Global Real Estate Transparency Index 2012
Finally, Australia also ranks amongst the most secure countries in the world to own property, having consistently been ranked one of
the top three most transparent property markets by the Jones Land LaSalle Global Real Estate Transparency Index (has held position
1, 2 or 3 of over 80 countries in the index since JLL frst published the Transparency Index in 2004).
Rated amongst the top three
most secure markets in the
world to buy and own real
estate.
Global ranking index name
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Index of Economic Freedom Ranking 2012 183 Heritage 3 10 6 14 26 67 92 22 99
The Legatum Prosperity Index Ranking 2011 110 Legatum 3 10 6 13 15 18 30 21 42
Soundness of Banks Ranking 2011-12 142 WEF 4 90 1 111 87 27 45 72 16
Resilience of The Economy Ranking 2012 59 IMD 5 23 18 43 6 42 44 48 7
Quality of Life Ranking 2012 59 IMD 5 19 6 24 7 17 27 21 41
Real Estate Transparency Index 2012 2012 97 JLL 3 1 6 1 12 7 20 25 27
Position in ranking shortlist
First Second Third
Australia as an investment destination Trends in productivity growth in Australian agriculture
After centuries of working in a relatively challenging environment Australian farmers are amongst the most effcient in the world
measured on a factor productivity basis. The Australian mixed cropping-livestock production system has also helped to make
Australians some of the worlds most versatile farmers.
Their achievements have in large part been facilitated by a long-term commitment to agricultural research and development by the
Australian government. There has been a signifcant increase in real terms in Australian public investment in agricultural R&D over
the past 50 years, from AU$131 million in 195253 (measured in 200607 dollars) to $778 million in 200607. The breakthroughs
achieved as a result have allowed Australian farmers to enjoy signifcant ongoing gains in productivity and farm incomes.
Figure 6: Labour productivity growth in Australian agriculture compared to other resource sectors (change in gross value added per hour
worked, 1996-97 = 0)
Labour productivity (i.e. change in gross value added per hour worked) in the agricultural sector has been particularly impressive,
with productivity having almost doubled in the last 15 years (1996-97 to 2010-11) compared to a drop of over a third in other
resource sectors. This has been driven primarily by the adoption of mechanised farming technologies and the increasing size of
farms allowing greater economies of scale (i.e. each farm worker is able to farm a larger area of land more effciently).
This is further evidenced by the fact that the ratio of operating surpluses to capital in the Australian agricultural sector has more
than doubled in the last 20 years (1991-92 to 2010-11). Whilst non-land net capital (depreciated value of all capital stock within
the agricultural sector including machinery, plant and equipment) has increased by only 33% from AU$83 billion to AU$110 billion
over the last 20 years, the operating surplus of the agricultural sector has increased by 203% from AU$9.3 billion to AU$28 billion.
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Over the past 30 years (1977-78 to 2007-08) the overall productivity (measured in terms of total factor productivity) of Australian
broadacre farms has increased by an average of 1.6 % annually. This productivity gain refects a long-term decline in input use,
averaging 0.6% during the period, coupled with an increase in output averaging 0.8% a year (albeit with notable year to year
variations due to fuctuating seasonal conditions).
Figure 7: Change in the operating surplus to capital stock ratio of Australias agriculture sector, 1991-92 to 2010-11
Figure 8: Annual total factor productivity growth for different farm types in the Australian Wheatbelt, 1977-78 to 2007-08
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Note: Total factor productivity (TFP) is the indicator
most commonly used to measure long-term increases in
productivity due to technological progress and improved
management practices. TFP is the ratio of all production
outputs to market (crops and livestock produce) to all the
inputs used in the production of those outputs (land, labour,
capital, materials and services).
The broadacre agricultural sector encompasses all farms
generating most of their income from dryland cropping, beef
and sheep farming activities. Within the broadacre sector,
productivity growth has been highest for cropping specialists
(those farms with a strong emphasis on grain production)
who have benefted most from new mechanised farming
technologies and increased farm scale, averaging productivity
growth of 1.9% a year.
Despite reducing input use by an average of 1.7% a year,
sheep specialists have been the worst performers because
output also declined at an average annual rate of 1.5% over
the same period.
Due to its more reliable climate and larger average farm sizes
Western Australia has achieved the highest rate of productivity
growth of the Australian states. Western Australian output
has increased by an average annual rate of 1.8% over the
last 30 years whilst input use has reduced by an average
of 0.5% annually, resulting in average annual productivity
growth of 2.4%. This is three times the productivity growth
rate of Queensland (0.8%), more than twice that of New
South Wales (1.0%) and comfortably higher than South
Australia (1.8%) and Victoria (1.3%).
Figure: 9 Annual total factor productivity growth of all broadacre farms in different Australian states, 1977-78 to 2007-08
Since the ability to effectively plan input use one of the most important determinants of total factor productivity and farm profts,
rainfall reliability and extreme weather events have a major impact on investment returns. For a more detailed analysis on the
relationship between yield variability and investment returns, please see some of the other reports available in the downloads
section of the Land Commodities website.
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WA SA VI NSW QLD
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Farm income and proftability
Long-term trends in farm proftability are jointly determined by changes in farm productivity (i.e. output generated per unit of input)
and farmers terms of trade (i.e. ratio of the price received by farmers for the outputs they produce to the prices paid for the inputs
used in production). As is the case for farmers the world over, terms of trade for Australian farmers have been on a declining trend
over the long term. By contrast, productivity in Australian agriculture has been on a long-term upward trend.
Figure 10: Long-term trend in input and output costs and farmers terms of trade, 1991-92 to 2010-11
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Index of prices received by farmers Index of prices paid by farmers Linear
Farmers terms of trade
In the case of Australia the rate of productivity growth has
exceeded the rate of decline in farmers terms of trade.
As a result, the gross value of farm output has been on a
long-term upward trend, increasing at a faster rate than
farm costs. Thus, one of the key measures of farm fnancial
performance, net value of farm production (i.e. the value of
farm production less the variable cost of production), has
also been on a long-term upward trend (notwithstanding
short-term ups and downs along the way due to seasonal
conditions and fuctuations in commodity prices).
Grain production up by 69%
and exports up by 176% in
the last fve years.
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Gross production value* Farm costs** Net production value
* The gross value of production is the value placed on recorded production at the wholesale prices realised in the marketplace.
** Farm costs are the sum of payments made by the farm business for permanent and casual hired labour (excluding operator or
manager, partner and family labour), materials, services, produce purchased for resale, livestock purchases and transfers onto the
property, interest and payments to sharefarmers. Capital and household expenditures are excluded from total cash costs.
Net production value is the gross value of farm production less the total farm cost
Figure 11: Long-term trend in farm fnances, 1991-92 to 2010-11
High level of farm income producing
reliable annual rental returns of 5%+
for landowners.
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Gross farm income* Total farm costs** Farm net pre-tax profit
* Gross farm income is the total of revenues received by the farm business during the survey year, including revenues from the
sale of livestock, livestock products and crops, plus the value of livestock transfers off a property. It includes revenue received from
agistment, royalties, rebates, refunds, plant hire, contracts, sharefarming, insurance claims and compensation, and government
assistance payments.
** Total farm costs are the sum of payments made by the farm business for permanent and casual hired labour (including operator
or manager, partner and family labour), materials, services, produce purchased for resale, livestock purchases and transfers onto the
property, interest and payments to sharefarmers and depreciation.
Farm net pre-tax proft is the gross farm income less the total farm costs
Figure 12: Recent fnancial performance of the Australian agricultural sector, 2007-08 to 2011-12
Gross farm income for the Australian agricultural sector in 2011-12 was AU$53.1 billion. With total farm costs of AU$37.6 billion,
net pre-tax farm proft was AU$15.5 billion. This equates to an average gross margin on Australian farms in 2011-12 of 57% and
a net pre-tax proft margin of 29%.
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Farm gross margin Farm net pre-tax profit
Australian farmers have achieved this fnancial performance despite having one of the lowest levels of government subsidy support
for agriculture of any major agricultural producer. Australian total producer support in 2010 was 2.65% (as a percentage of sector
revenues) compared to the OECD country average of 19.87%.
Figure 13: Recent proft margins in the Australian agricultural sector, 2007-08 to 2011-12
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Russia OECD European
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China Canada United States Ukraine Brazil Australia
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Figure 14: Comparison of agricultural producer support estimates for different regions, 2010
The importance of farm size and economies of scale
Smaller farms achieve lower rates of return than larger farms. Thus, for the purpose of assessing the likely income and rate of return
on investment in large commercial farms, data averaging the performance of all farms within a particular sector can be misleading.
This is particularly true of the grains industry where larger farms with economies of scale are able to earn a higher return on capital.
As such, there has been a trend towards consolidation in Australian agriculture as farmers buy out their neighbours to create larger
individual land holdings. Over the last fve years (2005-06 to 2009-10) the total number of agricultural enterprises in Australia has
decreased by 13% from 154,000 to 134,000 as 20,000 smaller farms have been absorbed by their larger brethren.
Figure 15: Consolidation trend within the Australian agricultural sector, 2005-06 to 2009-10
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Despite the area sown to grains having increased, the
number of farms in the Australian grains industry has fallen
by over 40 % since 1975. This has resulted in a near doubling
of the average area cropped per farm and an increase of
approximately 140% in wheat production on a typical grain
farm over that period. Larger broadacre farms generally also
crop a higher proportion of their land area on an annual
basis, with farms turning over in excess of AU$1 million
cropping on average 27% of their land annually compared
to only 10% for farms turning over AU$100,000.
Australias large farm sizes facilitate
greater economies of scale and higher
farm income.
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% of land area cropped annually Total farm size (ha)
Advances in modern commercial farming machinery in recent years, particularly with respect to power and size, now allow a single
owner operator family to successfully manage a cropping enterprise of thousands of hectares, thus increasing the value of scale.
Larger farms that can afford to invest in large machinery are able to respond to soil moisture opportunities better by undertaking
tillage and planting operations in a timelier manner.
Particularly in rainfed agriculture, this ability to more fully capitalise on (often feeting) planting or weed control opportunities is a
distinct agronomic and economic advantage. As a result, larger farms are able to achieve signifcantly higher grain yields, with farms
in the AU$1 million annual turnover category having averaged annual wheat yields of 1.8 tonnes per hectare over the last twenty
years (1990 to 2010) compared to only 1.0 tonnes per hectare for farms in the AU$100,000 annual turnover category. These larger
farms also generate more than double the revenue per unit of land area, having averaged AU$217 per hectare compared to AU$91
per hectare over the period.
Figure 16: Relationship between farm size and cropping intensity in broadacre farming, 1990 to 2010 (average over period)
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Annual cropping yield (t/ha) Annual revenue per unit area (AU$/ha)
Due to the fact that scale allows arable farmers to increase income at a faster rate than costs, historical data very clearly shows that
the investment performance of grain farms increases markedly with cropping intensity (degree of focus on cropping) and size (total
area cropped). Over the past 20 years (1991-92 to 2010-11) the largest 20% of grain farms (measured in terms of cropped area)
have consistently earned over twice the cash income of the smallest 20% of grain farms.
Figure 17: Relationship between farm size, yields and revenues in broadacre farming, 1990 to 2010 (average over period)
Australias robust economy,
strategic location and
investment friendly business
environment have made the
country one of the worlds
top destinations for foreign
investment
Capital returns and trends in Australian farmland values
Because Australian farmland values vary so widely due to the countrys diverse climate conditions and farm types, a national level
analysis of Australian farmland prices should only ever be used as a rough indicator of price trends on a regional basis. Nevertheless,
some generalisations can still be drawn:
1. Australian farmland has shown reasonably consistent value appreciation (and continues to do so) in most regions and
agricultural sectors.
2. Australian farmland prices are very low by international standards, especially by comparison to other Western farmland
markets.
Looking at Australia as a whole, average rural land values have risen year on year in all but three of the last 20 years. Notwithstanding
a notable fall in 2011, which was the frst fall in values since 1993, average Australian rural land values had risen for 17 straight
years. The 2011 fall was driven primarily by the extreme fooding of 2010-11 which negatively impacted land prices in some areas
(in particular in Queensland where the cost to the agriculture sector was estimated at AU$1.6 billion).
Figure 18: Aggregate value of Australian rural land assets, 1992 to 2011
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The total value of Australian rural land assets in 2011 was
AU$265 billion, up from AU$57 billion in 1992, equivalent to
a 367% rise over 20 years. Over this period total land value
appreciation was almost six times higher than the total rate
of infation of 64%.
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Land value index Inflation index
Although there are obviously wide variations in performance across different regions of the Australian Wheatbelt, the average
compound annual price appreciation for Australian rural land over the last decade (2002-2011) was 8.8%, equating to a 133% rise
in average prices over the period.
Given the rise in the value of the Australian dollar against many other currencies during that period, returns were greater for many
foreign investors in Australian agriculture. Ten year capital returns for US dollar investors were 254%, equating to a compound
annual capital return of 13.5%, or 243% over the period and 13.1% annualised for sterling investors.
Figure 19: Rural land value appreciation and Australian infation,1991-92 to 2010-11 (1991-92 =0)
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Figure 20: Ten year capital return for rural land owners in a selection of currencies, 2002-2011
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AUD EUR USD JPY GBP
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Despite this impressive performance, Australian farmland still remains very reasonably priced compared to many other farmland
markets. This is true of both of many Western farmland markets and some of the more popular emerging market investment
destinations, implying signifcant scope for further growth in Australian farmland values.
Measured on a land price per unit of production basis, at an average of US$950 per tonne of wheat produced annually, Australian
land prices are less than half those of the United States (US$2,400 / tonne annual wheat), New Zealand (US$2,500 / tonne annual
wheat), the United Kingdom (US$2,575 / tonne annual wheat) and even Brazil (US$2,400 / tonne annual wheat).
Figure 21: Average annual compound capital return for rural land owners in a selection of currencies, 2002-2011
$0
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Figure 22: Comparison of global farmland prices per tonne of wheat produced, 2011
Factors affecting farm values in the Australian Wheatbelt
Farm prices across Australia vary widely depending on a range of factors:
1. Factors dictating yield potential Soil quality, rainfall (extent, timing and reliability are all important), external water
supply (of particular importance for livestock, perennial or horticultural enterprises), temperature (typical growing season
temperatures and temperature extremes) and solar exposure.
2. Other factors affecting farm proftability On-farm infrastructure, proximity to input suppliers and market (given the large
land area covered by the Wheatbelt, proximity to port is a key determinant of farmgate prices and production margins).
3. Other factors affecting price Farm size and proximity to urban areas.
Of these variables, the two most important determinants of broadacre farm pricing are rainfall and farm size. Generally, the further
from the coastal regions the lower rainfall, yield potential and farmland prices. However, within each rainfall zone, farm size
becomes the dominant pricing variable with there being a very clear and consistent inverse relationship between per hectare land
prices and farm size.
Land Commodities maintains a constantly updated database of all commercial scale farms (with a price tag of AU$2 million and
above) available for sale in the Australian broadacre sector. The following series of graphs show the relationship between price and
size for farms available for sale in Western Australia in different rainfall zones in early 2012.
Figure 23: Relationship between property size and price, 300mm to <400mm rainfall zone of Western Australia
The average compound annual
price appreciation for Australian
rural land over the last decade was
8.8%, equating to a 133% rise in
prices over the period.
Figure 24: Relationship between property size and price, 400mm to <500mm rainfall zone of Western Australia
Figure 25: Relationship between property size and price, 500mm to <600mm rainfall zone of Western Australia
Figure 26: Relationship between property size and price, >600mm rainfall zone of Western Australia
Farmland prices are also higher closer to urban areas. In very close proximity to urban areas the potential for permitted use rezoning
and real estate development obviously infuences value. However, even within an hours drive of major urban areas where there is
little potential for future development, farmland prices will generally be higher.
This is due primarily to the fact that farms are a lot smaller within commuting distance of cities. In these areas prices are driven
primarily by hobby or lifestyle farmers as opposed to professional farmers or investors. For these types of lifestyle buyers farm
investment fundamentals are not the primary purchasing consideration, so they tend to pay higher prices on a per hectare basis.
Having only one major city (Perth with a population of 1.8 million), Western Australia has the lowest population density to farmland
area of any Australian state, with only 5 people per thousand hectares of wheat growing land. New South Wales, with a larger
urban areas (Sydney: 4.6 million people) has a population to wheat land density nearly four times higher at 19 people per thousand
hectares. Victoria, a small state with a large urban population (Melbourne: 4.2 million people) has an even higher population to
wheat land density of 38 people per thousand hectares.
Australia has lower farmland prices
than any other large agricultural
exporter.
Figure 27: Population to wheat land density for different Australian states, 2011
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New South Wales Victoria Queensland South Australia Western Australia
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Unsurprisingly, of these states farm sizes in Western Australia are highest and land prices lowest. In New South Wales where farm
sizes are roughly a third of the size of Western Australia, farm prices are higher and in Victoria where farm sizes are around a quarter
of those in Western Australia, land prices are even higher still.
Capital returns for US dollar
investors over the last decade
were 254%, equating to a
compound annual land value
appreciation of 13.5%.
Australian farm debt and equity levels
Farm equity levels in Australia are high by international standards with debt to equity ratios being on a declining trend over the long
term. The average level of debt as a percentage of total farm equity (i.e. land value plus the net value of capital stock) of Australian
farms has remained below 25% for the last decade (since 2001-02).
Figure 28: Debt as a percentage of total farm equity, 1991-92 to 2010-11
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As of 2010-11 total farm debt as a percentage of total farm equity stood at 24%. Total farm debt for the Australian agriculture
sector was AU$64 billion against total farm equity of AU$375 billion (being the sum of AU$265 billion of land value and AU$110
billion net capital stock).
Foreign investment in Australian agriculture
Figure 29: Percentage of agricultural businesses with more than 50% foreign ownership, 2010
0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6%
New South Wales
Victoria
Queensland
Western Australia
South Australia
Australia
Foreign ownership of rural property is effectively unrestricted
for all but the very largest investors. For non-government
investors, any investment below a threshold of AU$231
million doesnt require the approval of the Australian
authorities. Furthermore, foreign landowners can own
land freehold with exactly the same ownership rights as
a local Australian landowner. For investments above the
AU$231 million threshold or for investments of any size by
a government / sovereign controlled investment entity, the
approval of the Australian Foreign Investment Review Board
(FIRB) is required.
Despite the lack of investment barriers and the recent
surge of interest in Australian agricultural assets, the actual
proportion of transactions involving foreign or investment
buyers still remains at very low levels. Although there is no
offcial data on transactions, based on Land Commodities
own records of major farmland transaction (any sale above
AU$2 million) that have taken place in Australia since late
2010, we estimate the proportion of transactions involving
non-local farming buyers to be comfortably below 5%.
What this shows is that farm prices in Australia are still being
set by real commercial farming buyers and any meaningful
upward price pressure on valuations from speculators and
investment buyers is yet to materialise. Unlike some other
more mature farmland markets, this is good news for
investors who are still relatively early to the Australian market.
In 2011 the Australian Bureau of Statistics published the
results of the Agricultural Land and Water Ownership Survey,
the most comprehensive survey of foreign ownership to date.
According to the survey 98.5% of all agricultural businesses
are 100% Australian owned, with only 1.0% of agricultural
businesses being 100% foreign owned.
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%
New South Wales
Victoria
Queensland
Western Australia
South Australia
Australia
Figure 30: Percentage of agricultural land under foreign ownership, 2010
When measured on the basis of land area the foreign
ownership fgure is higher, with 11.3% of Australian
agricultural land being 100% foreign owned, indicating
that foreign ownership has almost doubled since 1984 (the
last time a similar survey was conducted) when foreign land
ownership stood at 5.9%.
Foreign ownership of rural
property is effectively
unrestricted for all but the very
largest investors.
0% 2% 4% 6% 8% 10% 12% 14%
Mushroom and Vegetable Growing
Nursery and Floriculture Production
Deer and Other Livestock
Poultry Farming
Grape Growing
Beef Cattle Feedlots (Specialised)
Dairy Cattle Farming
Other Crop Growing
Fruit and Tree Nut Growing
Mixed Livestock-Arable Farming
Figure 31: Percentage of agricultural land under foreign ownership for different enterprise types, 2010
The fact that foreigners own only 1% of businesses but
11.3% of land area is an indication that there is a strong
focus on large scale farms amongst investors. This is
consistent with the fact that the most popular enterprise
type amongst foreign investors are mixed livestock-arable
farms, the sector in which farm sizes are the largest. Foreign
ownership currently stands at 11.7% of the mixed arable-
livestock agricultural land area in Australia.
Almost all farm sales are
between local Australian farmers
and 98.5% of all agricultural
businesses are still 100%
Australian owned.
There is a strong focus
amongst investors on large
scale Wheatbelt farms.
References and data sources
Agricultural and Resource Economics and Sciences, Agricultural Commodities Statistics, 2012
Australian Bureau of Statistics, Agricultural Land and Water Ownership Survey, December 2010
Australian Bureau of Statistics, Agricultural Land Use and Selected Inputs Data Series, 2012
Australian Bureau of Statistics, Australian International Trade Data Series, 2012
Australian Bureau of Statistics, Australian National Accounts, National Income and Expenditure Data Series, 2012
Australian Bureau of Statistics, Crops and Pastures Data Series, 2012
Australian Bureau of Statistics, Selected Agricultural Commodities Data Series, 2012
Australian Bureau of Statistics, Value of Agricultural Commodities Produced Data Series (chain volume measure), 2012
Australian Foreign Investment Review Board, 2012
Australian Government Department of Agriculture, Fisheries and Forestry, Australian Bureau of Agricultural and Resource Economics and Sciences, Agricultural
Commodities Statistics, 2012
Food and Agriculture Organization of the United Nations, Agricultural Statistics Database, 2012
Heritage Foundation & Wall Street Journal, Index of Economic Freedom Ranking, 2012
Institute for Management Development (IMD), World Competitiveness Yearbook, 2012
International Monetary Fund (IMF), World Economic Outlook Databases, 2012
Jackson, T 2010, Harvesting productivity: ABARE-GRDC productivity workshops, client report prepared by ABARE for the Grains Research and Development
Corporation, Canberra, March.
Jones Lang LaSalle (JLL), Global Real Estate Transparency Index, 2012
Liao, B and Martin, P 2009, Farm innovation in the broadacre and dairy industries, 2006-07 to 2007-08, ABARE research report 09.16, Canberra, November.
Mallawaarachchi, T, Walcott, J, Hughes, N, Gooday, P, Georgeson, L and Foster, A 2009, Promoting productivity in the agriculture and food sector value chain: issues
for R&D investment, ABARE and BRS report for the Rural R&D Council, December.
Mullen, JD 2007, Productivity growth and the returns from public investment in R&D in Australian broadacre agriculture, Australian Journal of Agricultural and
Resource Economics 51, 359-384.
Nossal, K and Gooday, P 2009, Raising productivity growth in Australian agriculture, ABARE research report, Issues Insights 09.7, Canberra.
Nossal, K, Zhao, S, Sheng, Y and Gunasekera, D 2009, Productivity movements in Australian agriculture, Australian Commodities, vol. 16, no. 1, March quarter, pp.
216230, ABARE, Canberra.
ODonnell, C 2010, Measuring and decomposing agricultural productivity and proftability change, Australian Journal of Agricultural and Resource Economics, vol. 54.
pp. 527560.
ODonnell, C, Chambers, R and Quiggin, J 2010, Effciency analysis in the presence of uncertainty, Journal of Productivity Analysis, vol. 33, pp. 117.
Organisation for Economic Co-operation and Development (OECD), Agriculture and Food Statistics, 2012
Organisation for Economic Co-operation and Development (OECD), Producer Support Estimate by Country, 2012
Savills International Rural Research, 2012
The 2011 Legatum Prosperity Index Rankings, 2011
The Australian Trade Commission (Austrade), Benchmark Report and International Data Comparisons, 2012
United States Department of Agriculture, Production, Supply and Distribution Database, 2012
World Bank, Agriculture & Rural Development Database, 2012
World Bank, Economic Policy & External Debt, 2012
World Economic Forum (WEF), Global Competitiveness Report, 2011-12
Zhao, S, Sheng, Y and Gray, E 2010, Productivity in the Australian grains broadacre and dairy industries, conference on the Causes and Consequences of Global
Agricultural Productivity Growth, Washington DC, 1112 May 2010.
t. +41 44 20 55 970
f. +41 44 20 55 971
info@landcommodities.com
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Land Commodities Asset Management AG