Tasmanian farmland has continued its stellar growth recording a surge of 28.3 per cent in a year, taking its median farmland price to $15,999/ha. There has been another 22.3pc increase for the first half of 2021.

Victoria came in second nationally, both in terms of its 15.8pc growth and $10,981/ha pricing.

Those growth rates compare to 6pc year-on-year growth in 2020 for farmland nationally.

Report author Rabobank senior agricultural analyst Wes Lefroy said lockdowns in Victoria had seen 'tree changers' compete with existing farmers for smaller blocks, particularly in regions surrounding Melbourne.

Serviced by a train line and the site of ever-expanding residential estates, the lush, rolling green hills of the Baw Baw region east of Melbourne became Victoria's most expensive land per millimetre of annual rainfall.

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Supply was also tight.

"In some regions, we have observed a growing number of land owners looking to exit at the top of the market," Mr Lefroy said.

"Overall, though, the number of sales fell 40pc in 2020. At the current pace, the number of sales is likely to decline again in 2021."

The Tasmanian property market was even tighter, with just 86 sales publicly recorded in 2020.

Demand is not showing an sign of ebbing in Tasmania, either, which has become attractive for its rainfall and irrigation water.

"There continues to be a steady flow of buyers moving south from Queensland and NSW, which continues to support demand," Mr Lefroy said.

The concentration of corporate farming was now very high in some regions, he said, particularly among north-west Tasmanian dairy properties.

In such a tight market, FOMO is understandable and Rabobank expects national farmland prices to remain firm during the next five years, with growth at its sharpest in the next two years.

"We think it's likely that commodity prices will remain supportive for the next 24 months, while we expect interest rates will remain at record lows until at least 2024," Mr Lefroy said.

Rabobank's "base case" forecast is for national farmland prices to lift 10pc in 2021 and 8pc in 2022.

"As macro forces begin to ease, so does growth, falling to 5pc in 2023," the report said.

"In 2024, 2025, and 2026, we expect lower growth of 2pc, 1pc, and 1pc, respectively, as the market 'takes a breath' and as productivity gains catch up to prices.

Stagnation or even a down-shift in prices was still possible but only if there was "a multi-year interruption", he reported, to a combination of commodity prices, production, or interest rates.

Within Victoria, however, the upward trend in prices had been patchy, the report showed.

The Rabobank report compared the price of land in different regions with rainfall and even production performance and reliability data, discovering there were still relative bargains to be found.

Only modest increases had occurred in the Moira, Wellington and Campaspe regions.

"For those buyers who do their homework and have the flexibility within their business to seek inter-regional purchases, there may be greater productive value to be had for their capital investment," Mr Lefroy said.

Such limited expansion opportunities encouraged buyers to extend their search across rainfall and climatic zones.

"Typically, buyers move from regions that saw strong price growth early in the cycle toward regions where growth hasn't been as high," Mr Lefroy said.

"One such example is buyers from south-eastern South Australia looking east, into western Victoria, and buyers from the Ballarat region moving west."

Australia's most expensive farmland per millimetre of rainfall is South Australia's Yorke Peninsula, with the top price paid there approaching $60 a hectare per millimetre of annual rainfall.

Rainfall, though, isn't everything when it comes to the performance of Australian farmland.

To help better gauge value, Rabobank has partnered with Digital Agricultural Services to measure both the productivity and reliability of different farming regions.

Productivity increases from left to right and variability increases towards the top of the chart.

Put simply, regions in the lower right hand column of the chart hit the sweet spot of reliably high production.

The smaller the bubble, the lower the price. The colour of the bubble simply shows which state the region is in.

For example, the chart shows that the red region priced at $2574/ha presents incredibly good value compared to the less productive and less reliable region, still in Queensland, priced at $8368/ha.

Wes Lefroy was reluctant to name the regions publicly.

Still, he said, the principle was sound and was supported by data suggesting that farmers were looking beyond areas where price growth had outstripped productivity performance.

In the early stages of the current phase, Mr Lefroy said, land price growth was primarily driven by four main regional factors.

They were high and/or consistent rainfall, a lot of farmers with expansion plans, lifestyle benefits, and the ability to grow high-value or multiple production types.

"Now, regional trends have been overwhelmed by the strength of the macro factors," Mr Lefroy said.

"That is, regions that scored low on those four metrics are now recording upticks in growth, fuelled by strength in the three macro factors: prices, production, and interest rates.

"This includes demand from both local buyers and buyers from higher-priced regions who have expanded their search for land with greater productive value."

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