Rural values to rise on sheep, wool, wine, fruit prices but climate factors loom

Written by The ReReport
As seen in the Source link, written by on 2019-02-04 10:39:04

Rising commodity values and the lower Australian dollar will drive demand for rural properties in 2019 with those assets producing wool, lamb, wine, fruit and wheat having the strongest price growth prospects, market experts say.

Colliers Internationals national rural and agribusiness director Rawdon Briggs – a 30-year market veteran – was particularly bullish about sheepmeat and wool-producing assets, given the increasing profitability of these sectors.

“Sheep and wool enterprises in Australia continue to be two to three times more profitable than other livestock enterprises and this trend is expected to continue into 2019,” said Mr Briggs.

Forecasts from the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) are for lamb prices to rise 18 per cent this financial year and wool prices to rise 12 per cent as export demand exceeds supply.

Mr Briggs tempered his bullishness on wool with a warning that the ongoing trade war between China and the USA was “a risk factor for the industry” given the fact that a considerable proportion of Australian wool processed in China is exported to the US as textiles and apparel.

Looking at other asset classes, Mr Briggs said horticulture would benefit from state-of-the-art mechanisation, robotics and machine learning technology and would continue to be attractive to institutional investors and families.

In viticulture, where wine exports increased 10 per cent last year to $2.82 billion as grape prices revived, Mr Briggs said there would be demand from a range of buyers for quality assets in premium regions.

CBRE agribusiness specialist Danny Thomas said he expected a “relatively buoyant” first half of the year with the key drivers being access to credit, stability of commodity prices; and the status of the ongoing east coast drought.

However, sales between farmers may experience lower demand in the second half of the year, Mr Thomas said, if the persistent drought across much of eastern Australia and tightening lending conditions create barriers for local farmers to make long-term purchasing decisions.

“At this stage, we expect institutional investment to remain strong throughout 2019, especially if our dollar remains at or around US70c, which will continue to attract foreign investors,” he said.

“Demand for grazing land suitable for sheep – for meat and wool – and demand for existing permanent plantings –almonds, citrus, etc – is expected to remain very strong.

“The greatest risk to demand for irrigated land suited to annual row crops, particularly cotton, will be the market’s perception of water availability next season,” Mr Thomas said.

He also tipped a busy year for the WA wheat belt given the “excellent season this year – relative to other parts of Australia – and the weight of institutional capital seeking a position of scale in this market.”

Agricultural lending specialist Rabobank struck an overall bullish tone in its Agribusiness Outlook 2019 report on the basis of rising offshore demand, improved market access, the lower dollar and growing investment in the sector.

But there are also headwinds, RaboResearch general manager Tim Hunt warned, including the “most obvious problem” being “climate factors”.

“For winter production to return to average on the east coast this season, above-average rainfall is required in coming months. At present, climate indicators provide mixed signals as to whether that is likely or not,” he said.

The value of farm production remains above the 10-year average, totalling $58 billion a year, despite drought conditions, according to the December quarter ABARES report.

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