Cropping Land Value in Australia Surges, Limits Expansion Opportunities for Wheat Farmers
Mon, April 19, 2021

Cropping Land Value in Australia Surges, Limits Expansion Opportunities for Wheat Farmers

The price of cropping land in Australia has increased at a faster rate than other agricultural land. / Photo by Todd Klassy via Shutterstock

 

The price of cropping land in Australia has increased at a faster rate than other agricultural land and this makes it more difficult for wheat farmers to expand their acreage. This is based on a report by the global Agri market news provider AgriCensus, citing data released by Dutch financial services company Rabobank.

 

Cropping land prices at 1 percent CAGR

The data shows that prices of cropping land reached a compound annual growth rate of 9.1 percent for the last five years and this means that farmers cannot easily expand their farm to fully capitalize on the wheat prices. Their remaining option would be to purchase land in cheaper regions. 

Rabobank’s agricultural analyst Wes Lefroy told the daily that the demand for cropping land in Australia has been “intense” during this period. As the land prices increase, it also limits the expansion opportunities of crop farmers in the country and they end up being land-locked. Dairyland in Australia also increased with a 5.1 percent CAGR and there was a 2 percent increase for pastoral grazing land. 

Farmers in the country have the option to find relatively cheaper land outside their preferred region but they have to be mindful of the operational costs as well as the complexity that interregional purchases may bring. Lefroy emphasized that the cost and travel times between places may dampen the “economies of scale,” referring to the saving in costs gained by the increased production level.

Rabobank stated that although the city house prices in Australia have “come off the boil,” prices for agricultural land continue to increase driven by high demand for such properties and positive macroeconomic conditions.

 

Drought conditions in Australia

Australia has also experienced drought conditions for the last two years and this has impacted the nation’s wheat production. Financial newspaper Nikkei Asian Review recently reported how the worst drought to damage Australia in more than half a century has undermined the country’s agricultural products output. The drought doesn’t just affect Australia but also threatens to disrupt the worldwide market that is dependent on AU’s exports.

 

Australia has also experienced drought conditions for the last two years and this has impacted the nation’s wheat production. / Photo by Jasper Suijten via Shutterstock

 

The wheat shortage experienced by Australia has, for instance, spilled over to noodle eaters in Indonesia. Noodle makers and flour mills in Indonesia have instead relied upon Argentina and the Black Sea countries, garnering backlash from Indonesian consumers. They observed that noodles produced from such wheat were darker compared to the Australian wheat. This forced the noodle makers to use chemical additives and a bleaching agent just to change the product color to somehow resemble the Australian wheat hue. Consequently, it fueled food safety concerns.

The Department of Agriculture of the Australian government shared last month that their nation is “back on track” to produce an estimated 33.8 million tons of grain in 12 varieties during winter crop production ending in fiscal year June 2020. Such volume, though, remains 16 percent below their 10-year average. The agriculture department has also mentioned that the growing conditions in Queensland and New South Wales were particularly “unfavorable.”

 

Australian farmers earnings: 24 percent lower

Based on the estimates of the Reserve Bank of Australia, the earnings of the country’s farmers were 24 percent lower in the first quarter of 2019 compared to the second quarter of the previous year. One of the causes of such a decline was the drought as well as higher causes linked with feed and water.

In August, the central bank’s monetary policy statement also revealed that further weakness is to be expected in the activities in the rural areas in the next quarters due to “drier-than-average conditions.” Farming also accounts for 3 percent of Australia’s GDP. This means that if the drought continues, it will create a dent in their economy. Another concern is the increasing instances of bushfires, which tend to happen in December. Strong winds and high temperatures increase the risk.

Meanwhile, the US Department of Agriculture states that Australia exported nearly 9.84 million tons of flour and wheat from 2018 to 2019 fiscal year. This amount accounts for about 5 percent of the global exports. 

 

 

Australia’s crops and livestock products

The Food and Agriculture Organization (FAO) of the United Nations, a specialized agency to achieve food security, has also shared Australia’s export quantity (in tonnes) of wheat in the following years:

2010: 15,888,042
2011: 17,675,181
2012: 23,535,862
2013: 18,001,619
2014: 18, 282,773
2015: 17,053,209
2016: 16,148,016
2017: 21,985,900

Imports of wheat in Australia are also detailed as follows:

2010: 186
2011: 1,133
2012: 1,485
2013: 1,688
2014: 1,263
2015: 1,218
2016: 991
2017: 1,212

Globally, the top exporters of wheat are: United States of America (27,205,279.63 export quantity), Canada (20,246,054.38 export quantity), Russian Federation (19,830,712 export quantity), France (18,915,166 export quantity), and Australia (18,569,075.25 export quantity). The dataset is averaged from 2010 to 2017. Meanwhile, the top five importers of wheat are Egypt, Indonesia, Algeria, Italy, and Brazil.

The trade database presented by the FAO includes all food and agricultural products exported and imported annually by all countries globally. They gathered, processed, and disseminated the information based on the International Merchandise Trade Statistics Methodology standard.