Regional Review
Issue No. 16 - April/May 2004
Mixed year for SA Grain Farmers
By contrast, farmers in the Mallee, lower Mid North and central/lower Eyre Peninsula have had quite a reasonable year. Benchmarking results indicate returns on capital of up to 12% on the Eyre Peninsula and the Mallee. Having said this, many northern mallee farmers will only breakeven when 2002 (the drought) is combined with the 2003 season.
The drought in 2002 will take at least two years of average to above—average performance for many Mallee farmers to begin to resume business plans that were in place before the drought. This is extremely frustrating for some, but a nature of the location and the industry.
Volatility of seasons, yields and prices and the resulting extreme lumpiness in cashflow and profitability has not stopped real estate prices in the Mallee more than doubling over the past year or two. Mallee farmers are generally very confident and see 2002 as an abberation. Their resilience and commitment are fabulous.
The lower north again has been a consistent performer. For the fourth year in a row all clients who have been benchmarked in this region have generated a profit.
Land prices have also increased, and have basically doubled over the past five years. Prices being paid are as high as $6,300 per hectare for cropping land. This really begins to challenge the viability of grain growing when land is so costly. Returns on capital are now struggling to reach 4%, although capital growth has been outstanding. Substantial increase in rural land price has been a general trend right across the state, (except for the upper north).
This increase in rural land price has been driven by a substantial reduction in rural property listings and a continued strong demand by farmers to increase business scale in order to achieve sustainable economies of scale and consistent profitability. This is being matched by an increasing professionalism and willingness to adopt new technology.
Other drivers of real estate prices includ...
