News

Rural real estate market not blunted by exotic disease concerns

Terry Sim, August 3, 2022

Elders executive general manager real estate Tom Russo – market is currently not fazed by exotic disease concerns.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXOTIC disease incursion concerns might have dented producer confidence and livestock markets, but the real estate sector is yet to be impacted, according to two major players.

Elders’ executive general manager – real estate Tom Russo said everyone is talking about what an EAD outbreak might mean, but he didn’t think it was influencing behaviour yet.

“And there are starting to be discussions had in the marketplace around, ‘well if there was an outbreak, what would that do to the value of farming enterprises?”

“So I think it is definitely something that is playing on people’s minds from the point of view of just understanding what the impact would look like if it was to happen,” he said.

“But I certainly haven’t seen and can’t point to evidence of anyone varying investment strategies or decisions around it at this point.”

The Department of Agriculture Forestry and Fisheries has said a Lumpy Skin Disease or Foot and Mouth Disease outbreak would be devastating to Australia’s livestock and associated industries through international trade losses, market disruptions, animal health impacts and production losses. FMD alone could cost Australia around $80 billion over 10 years, DAFF has estimated.

Mr Russo said he is also not seeing a cooling in demand for quality farming land.

“There is so much demand for good country.

“It’s still there and some of the big players that are aggressively out there looking for opportunities have certainly not stopped doing it at all.”

Mr Russo said despite recent rate rises, rates are still historically low.

“And because of the commodity and seasonal cycles that we’ve been through in recent times, the collective balance sheet of Australian farmers is probably better than it has ever been.

“The debt levels are very low and the deposits are very high, and so therefore interest rate increases have a much less impact than say had we have been going through a period of really bad commodity prices, drought and stress in the industry,” he said.

“So the industry is healthy and can withstand this and the other point is commodity prices are still really high, so the margins in the farming businesses are still really good, notwithstanding cost of funds has gone up.

“That’s slowing things down either.”

Mr Russo said the EAD concerns might prompt people who have already decided to sell to “accelerate selling”.

“I don’t think at this stage it’s going to prompt people who have a really long-term view to just say ‘oh, this is all too scary, I’m going to get out’

“That’s probably the distinction.”

Mr Russo said the advent of another FMD outbreak overseas is not new, “it’s just a lot closer to home.”

“We’ve never had it get in before and we’ve got pretty robust systems and everyone is sort of not panicking, but being cautious.”

Strong appetite for rural property – CBRE

CBRE Agribusiness managing director David Goodfellow said the common and vocal feedback he is getting is that most farmers in Australia’s livestock sector have known about FMD’s presence in Indonesia since it discovery and disclosure to the Australian Government in 2019 “and that we are proud of our tight border control processes which should continue to be very highly protected.”

“There is lots of support for the previous and current governments’ initiatives to actually directly assist Indonesia, with funding and personnel, in dealing with this problem in Indonesia to protect them and other countries from this outbreak rather than only focusing on Australia,” he said.

“Indeed, this is a mindset that is very consistent with the cultural history of Australia where, when faced with adversity, Australians are known to go to the aid of our friends and colleagues to assist them rather than just fighting to protect ourselves.

“Indeed, Australia has previously participated in two World Wars on this same principal – “go and look after your mates”,” Mr Goodfellow said.

“The funding and the assistance that Australians have provided to Indonesia has been very generous and, as a nation, we should be very proud of the support we have provided, and of who we are as a community.

“On this basis, we haven’t yet seen a decline in the strong appetite from investors who are eagerly looking to invest further in the Australian livestock industry, with the strongest interest at the moment coming from locals plus from Japan and from the United Kingdom,” he said.

“Most investors recognise that Australia still has at least three years to go before we can rebuild our cattle herd to somewhere close to 29 million head, where we were in 2017 before the drought kicked in, so we expect future livestock prices (and livestock farm profits) to remain well above the 10-year average for many years to come.

“This bodes well for the sheep sector as well as the cattle sector.”

Mr Goodfellow said some people are talking about rising interest rates possibly having an impact on investment appetite too.

“But the reality is that rising interest rates normally correlate with rising inflation which correlate with rising food process, which correlate with rising commodity prices which correlate with rising farm revenues and rising farm profits.

“In brief, moving though a cycle of rising inflation normally means rising farm profitability and rising land values,” he said.

“This is why so many farmers, and their children, are smiling right now and continue to look for opportunities to expand.”

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