Corporate-sized farm sector investors continue to enjoy big returns on their money, despite the worsening drought in eastern Australia.
Total annualised returns from a $1.1 billion mixed portfolio monitored by the Australian Farmland Index actually increased one per cent in the past financial year - up from 11.6pc in June 2018 to 12.5 for June 2019.
However, both annualised income and capital appreciation values in June were notably lower than the rolling 12-month result recorded a few months earlier on March 30 when combined returns on investment totalled 16.2pc.
In the four-years since the farmland index was established, annualised returns from the agricultural investments in the sample have totalled 14.1pc, with income at 6pc and capital appreciation of 7.8pc.
The drought's impact on revenue has been largely responsible for the total 2018-19 result slipping below the historical average to 12.5pc.
The farmland index tracks income and land appreciation performance of some of Australia's major agricultural asset investor-manager players, including Rural Funds Management, Laguna Bay, Argyle Group (formerly Blue-Sky Water Partners), and GoFarm Australia.
About 50 properties are monitored in the horticulture, grain cropping and livestock sectors, responsible for commodities ranging from almonds and citrus to pulse crops.
Total annualised income returns for the past year were 4.1pc - down from almost 5pc for the previous financial year, despite lifting to 5.6pc for the year to March 30.
Capital appreciation returns for 2018-19 were 8.1pc - up from 6.5pc the previous financial year.
Asset appreciation returns for the June quarter were dominated by annual cropping enterprises, which recorded a total return of 9.72pc, compared to just 1pc recorded across permanent cropping businesses.
"This is likely due to revaluations taking place at the end of the financial year, but may also be driven by a reduction in property sales for permanent cropping assets," noted GoFarm Australia, one of the contributors to the index.
It invests in, and manages other investors', permanent horticulture and annual grain cropping ventures.
GoFarm said the dry season meant many farmers had been forced to make tough decisions about cutting crops for hay or persisting in the hope of late-season rain.
"Drought-driven livestock sales continue, with limited demand from restockers, but strong prices for finished stock," it noted.
"This is setting up an interesting time for the livestock sectors as African swine flu spreads through Asia, potentially creating a global protein shortfall."
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The story Investing in farmland yielded 12.5pc return in 2018-19 first appeared on Farm Online.