When the grass is greener | Off-farm investment

Property markets producing stable returns are highly sought.

There is cash starting to flow in some of the farming areas of eastern Australia. A few good years coupled with higher then expected prices for commodities has left some farms with a bit more money in their pocket then they are used to having.

In the past, generations of family farming practices have influenced how periodic financial win falls are spent, which is usually by necessity to repay the loans accumulated through the not so productive years. While some areas are facing another year of drought, other areas are faring a bit better, particularly livestock and cropping areas with more reliable rainfall, such as properties located between Dubbo and Coonamble in North West NSW.

There is a small but emerging trend starting to take shape in how these seasonal profits are being invested.

Modern farmers are business people, and understand the importance of diversified income. Off-farm investment in smart business.

There is an increasing push toward quality commercial, industrial and residential investment which provide opportunities for capital growth and steady investment returns that are not linked to the agriculture sector.

It’s important for clients to have the ability to compare independently properties in different markets and to have an understanding of what is driving the returns and values in each market sector.

We are currently sourcing property in both regional areas and capital cities as farmers are repositioning their exposure to climate change and impact of globalisation on agricultural markets.

Investment yields in growth areas are showing lower returns although with the increased residential and commercial development, accompanied with improved transport facilities, is going to drive the capital values of these areas in the years to come.

Developing a strategy and actively working towards it has seen the biggest gains for my clients. There are a number of people who are considering taking the step into off-farm investments, but aren’t sure how.

Other benefits of the non – agricultural investments is with estate planning, where family members can be bought out without breaking up the main farming enterprise, allowing the farming operation the ability to retain scale and productivity required for sustainability.

Investing in non-rural property has not diminished the interest or need for farming land. Recent reports from the rural selling agents indicate that demand is still strong for good quality rural properties with scale.

Brian McAneney of Ray White , Dubbo, says that buyer enquiry levels have not abated with strong demand for grazing, mixed farming and broad acre farms almost on a daily basis.

Investing in more agricultural land is an obvious choice when farming is your business. As the supply of quality farmland becomes more tightly held, though, and as farmers are looking for more bang for their buck, options with safe and consistent returns are starting to be considered.

How much agricultural generated income will leave the sector in favour of other asset classes cannot be fully measured. The idea of off-farm income is not a new concept, but being able to capitalise on some money in the bank, or equity in the farm, maybe just another way to help drought proof the farming operation. Perhaps even more so than putting in a new dam or water trough.