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Farmland prices set for continued "modest" growth in year ahead - Rabobank

Rabobank

Australian farmland prices are expected to grow modestly in 2026, continuing the trend seen over the past year, Rabobank says in its latest annual Australian Farmland Price Outlook.

 

The report, by the specialist agribusiness bank’s RaboResearch division, says the outlook for agricultural land prices in 2026 points to “moderated” growth, with the median price per hectare set to increase by approximately two per cent in its “base case” forecast.

 

This expectation is driven by the combination of a mixed outlook for agricultural commodity prices, elevated farm input costs exacerbated by the Iran war and the prospect of further interest rate increases.

 

It follows similarly constrained growth in Australian farmland values last year, the bank says, with the median price per hectare of all agricultural land types nationally increasing by 0.4 per cent in 2025. While this was a turnaround from a 2.6 per cent decline seen in 2024, it was considerably below the averaged annual growth rate of approximately 11 per cent over the past decade.

 

Report lead author, RaboResearch commodity analyst Paul Joules said the bank’s view was that the market had now transitioned into a new phase, characterised by more moderate growth and that this cycle was likely to persist over the coming years.

 

“Our base case forecast expects Australian agricultural land values to continue rising in 2026, with the median price per hectare projected to increase by around two per cent year-on-year,” he said. “And the expectation is for similarly moderate growth in land values from 2026 to 2031, with the market having firmly entered a weaker growth cycle, driven by higher interest rates and softer commodity pricing.”

 

2025 prices “held firm”

 

The report said the bank’s analysis – of a high-quality data set sampling Australian commercial sales across the country analysed by a team of professional appraisers* – found Australian agricultural land values had “held firm” in 2025. This was despite a complex environment for agricultural commodities across the course of the year, RaboResearch said.

 

Mr Joules said lower interest rates had likely helped underpin market stability, with the official cash rate cut by 75 basis points over the course of 2025.

 

Farmland price growth in 2025 was found to have been driven by grazing land, which recorded a three per cent increase in median price per hectare on the previous year. This contrasted with arable (cropping) land values, which declined by one per cent over the same period.

 

“Land purchasing conditions improved year-on year in 2025,” Mr Joules said, “supported by three RBA rate cuts over the year. This made land acquisitions more attractive, particularly in the latter part of the year.

 

“Strong returns in the livestock sector help explain why most price appreciation occurred in grazing land, while in contrast, negative growth in arable land prices partly reflects deteriorating cropping sector margins, which declined year-on-year.”

 

At the same time, Mr Joules said, farmers had contended with “sticky” input costs through 2025, including elevated fertiliser prices. “However, while grain and oilseed prices were disappointing, a bumper winter crop harvest helped partially offset the impact of lower prices on producers’ overall financial performance,” he said.

 

Land price moves varied across the country, the report found, with South Australia and New South Wales showing the largest increases in the median price per hectare of grazing land – at 23 per cent and 22 per cent respectively. New South Wales though also saw the biggest fall in arable land prices in the nation – with the median price per hectare of this land type in the state declining by 11 per cent. Arable land prices in South Australia however increased the most in the year, with median price per hectare up 13 per cent.

 

2026 – challenging farm budget conditions

 

Looking ahead, the report said, conditions for farm budgets are challenging in 2026, with farmers under significant pressure from rising input costs and a mixed income outlook across commodity sectors.

 

“Taken together, these dynamics imply only modest support for further land-price appreciation and underpin RaboResearch’s view that (farmland) sale activity may slow from current levels,” the report said.

 

Mr Joules said elevated farm input costs amid the Iran war – combined with rising interest rates – underpinned RaboResearch’s more subdued outlook on farmland price growth in 2026.

 

“A key challenge, and one likely to remain a recurring theme in 2026, is the supply shock stemming from the Iran war,” he said. “The conflict has already driven fertiliser and diesel prices to exceptionally high levels, which are expected to have a material impact on margin potential across the sector.”

 

Added to this, Mr Joules said, there are signs the RBA could raise interest rates further in 2026, following two hikes at the beginning of the year. 

 

Grazing land is expected to again “outperform” arable land during the year, with higher projected price growth, the report said, supported by relatively resilient livestock commodity prices.

 

“Beef prices are forecast to hold up given the strong global demand, although poorer seasonal conditions could see prices ease,” Mr Joules said. “Reduced sheep supply should continue to underpin sheep and lamb prices and the recent lift in wool prices could persist on the back of tightening Australian supply. And while we remain cautious about dairy, farmgate milk prices are expected to remain mostly unchanged.”

 

Modest improvements were anticipated in grain and oilseed prices, Mr Joules said, with canola potentially benefiting from elevated oil prices. “Nevertheless, global supply could cap upside,” he said. 

 

Mr Joules said forecasts were also indicating El Nino conditions may develop around mid-year. “El Nino conditions typically result in rainfall deficits in eastern and southern Australia and weaken grain and oilseed production,” he said.

 

Foreign investment

 

The report said foreign investment in Australian agricultural land had rebounded in 2024/25, following a decline in 2023/24.

 

Preliminary data indicates a 34 per cent year-on-year increase in new foreign investment within the agricultural sector, RaboResearch said, with total inflow of capital reaching AUD 7.1 billion in 2024/25.

 

Mr Joules said Australian Tax Office data indicated livestock land accounted for 87 per cent of foreign-held agricultural land, with foreign investment heavily concentrated in the Northern Territory, Queensland and Western Australia.

 

Investment performance

 

The report said when it came to investment performance, Australian farmland had overall generated returns broadly in line with the ASX 200 in the period since 1999.  However, there was a “real distinction” in compound annual growth rate (CAGR) over the past seven years, it said.

 

“Since 2019, farmland has delivered an exceptional CAGR of 10.72 per cent, with residential land the next-best performer at 8.84 per cent,” Mr Joules said. “This reflects the fact the sharp upswing in agricultural land values began in earnest from 2019, likely supported by strong harvests and elevated commodity prices.”

 

*The report analysed more than 2000 sales from 2025 from a data set comprised of in excess of 16,000 sales across the country since 2019. This high-quality data represents a sample of the Australian commercial farm sales market.

 

 

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Rabobank Australia & New Zealand Group is a part of the international Rabobank Group, the world’s leading specialist in food and agribusiness banking. Rabobank has more than 125 years’ experience providing customised banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank is structured as a cooperative and operates in 35 countries, servicing the needs of more than nine million clients worldwide through a network of more than 1000 offices and branches. Rabobank Australia & New Zealand Group is one of Australasia’s leading agricultural lenders and a significant provider of business and corporate banking and financial services to the region’s food and agribusiness sector. The bank has 87 branches throughout Australia and New Zealand.