The permanent plantings and viticulture sectors are the stand out performers in Australian agribusiness industry, with large transactions occurring in 2018 across macadamias, citrus, avocados, almonds and vineyard sectors.
As per the latest Colliers International Agribusiness Research and Forecast Report, the water pricing and water tradability is enabling these sectors to continue to be developed even during the severe drought event.
“Looking forward, agribusiness property values will hold firm in well recognised regions, despite the climatic challenges impacting on cashflows and cash reserves. This drought event has had higher commodity prices than we have seen in previous events over the past four decades,” said Rawdon Briggs, Head of Agribusiness, Transaction Services at Colliers International.
“It shows in the resilience of the market data. The weaker AUD and free trade agreements are supporting export activity, partially offsetting the downside risks. Australian agricultural trade surplus has grown sharply for the past decade and will continue trending upwards. Agribusinesses is now a standalone asset class and will continue to attract investment from offshore and high net worth groups adding capital.
“Colliers International track completed land deals above $5 million across Australia, with this data showing increased sales numbers YoY to 2018, as the neighbour to neighbour market kicked into gear fuelled by lower cost of debt and higher commodity prices resulting in 254 deals and $3.34 billion in sales in 2018. This calculation does not include three large deals executed in 2018, which have now settled in Q1 2019. If these had settled as planned in 2018, Australia would’ve surpassed the peak capital investment high of $3.45 billion and 242 deals completed in 2016.”
Mr Briggs added: “One of the star performers over the last year has been the Macadamia sector which is streaking ahead with increasing land prices yet steady nut supply. Recent sales in the Bundaberg and Maryborough region for Greenfield orchard development land parcels reveals a price range of $20,000 to $30,000 per hectare for land and water entitlements included. Fully irrigated established orchard sales have surged in value to be more than $100,000 per hectare, if production exceeds 4 ton/ha.
“We predict that established macadamia orchard demand will remain strong in 2019 and 2020. The recent cane land conversion sales in both Bundaberg and Maryborough demonstrates rapid expansion in the greenfield macadamia property space with circa 2,000 ha/year being planted nationally at present,” said Mr Briggs.
The Australian wine industry is showing strong growth after a challenging decade. Based on the current outlook, the industry is quickly approaching a point where demand will outstrip supply. This has translated into significantly higher volumes of property transactions.
Tim Altschwager, National Director, Agribusiness, Transaction Services at Colliers International said buyer enquiry has focussed on vineyards offering scale and efficiency or premium quality fruit. “Larger producers are also offering three and five-year grape supply agreements to secure supply and mitigate rising fruit prices.
“We observe continuing interest from overseas investors in Australian wine industry assets, particularly for premium assets, on the back of continued growth in the value of wine exports. Proven domestic industry operators are increasingly active.
“We expect this will increase competition for credentialed assets. Generally, less favourable growing conditions in South Eastern Australia will lead to a smaller 2019 wine grape crop compared to 2018. This will increase demand for wine grapes and place upward pressure on fruit prices and vineyard values,” said Mr Altschwager.
Focussing on water entitlements, over the last 12 months, ground water prices in the Lower Murray (NSW), Murrumbidgee (NSW) and Katunga (VIC) have seen a sharp appreciation nearly doubling in market value.
“We anticipate that water entitlement prices will gradually rise in 2019 although it is difficult to see another year of strong capital appreciation as was experienced in 2018,” said Mr Nick Cranna, National Director, Agribusiness, Valuation & Advisory Services.
“In the unlikely scenario we receive normal inflows into the Southern Murray Darling Basin over the winter months we still believe this will have little bearing on water investors buy mandates into 2019 and 2020,” said Mr Cranna.