Increasing arable area boosts land values

Increasing arable area boosts land values

Modern farming techniques of soil amelioration are now commonplace in agriculture to make land more productive, which in turn drives its value up. The Reefinator (pictured) is a soil amelioration method that rehabilitates rocky country, that would have previously been left untouched and turns it into highly productive farmland.

Mollie Tracey, Farm Weekly, 24 Mar 2020

SOIL amelioration has taken the agriculture industry by storm over the past five years.

And after a few years of these techniques being implemented, the effects have begun to show in farmland values and farmers' equity.

Given that soil amelioration can improve productivity and sometimes increase the amount of arable land, it seems a no brainer that over time farmers should see an increase in their land values and balance sheets.

Rabobank agricultural analyst Wes Lefroy said soil amelioration practices had contributed to the growth of WA farmland values in recent years, but haven't been a major driver.

He said productivity was a main contributor of land values, so being able to increase a farm's productivity through soil amelioration, such as deep ripping, liming or claying, would "be reflected in the capacity of the land to produce and therefore, the actual value of that land as well".

Herron Todd White director and valuer David Abel said he knew of WA farmers taking up methods to improve their soil, which was likely to increase the value of their land.

"I am aware that a number of properties across the Wheatbelt regions are undertaking soil amelioration works with a view to increase productivity and land use in some cases," Mr Abel said.

"Soil structure/type/fertility is one of many factors that are considered in a market transaction and undertaking works that may increase capability and productivity is likely to be a benefit to a potential purchaser and therefore, likely to be accounted for in their assessment of value.

"However, the works also need to be financially viable and in some instances the works are unlikely to yield a return on investment that warrants the investment in the first place.

"This is not a one rule for all proposition and therefore there is no general premium used in the marketplace for soil amelioration works.

"As agri technology allows purchasers to become more sophisticated and undertake more research into historic farm data, these works may lead to tell their own story into what the land is capable of producing post works and resulting in the investment decisions becoming more weighted towards this factor."

One soil amelioration method that has prompted a great deal of interest in recent years is the Reefinator, by Rocks Gone, which debuted in 2014.

The Reefinator is designed to dig up common laterite rock or limestone and crush it, to create topsoil which can be sown to crop, effectively converting unarable land into arable land.

Mr Lefroy said the Reefinator was "a bit unique because it increases the arable area and therefore the value of the land due to the amount of total tonnes that can be produced from that farm".

"Whereas a lot of other soil amelioration practices such as liming, deep ripping, delving etc, they are improving the quality of existing land," Mr Lefroy said.

"The benefits of a Reefinator can be greater than just opening up more land because it can increase the farm's ability, whereas farms that have, for example with pH or water holding capacity, the lowest hanging fruit for the farmer is going to be removing the biggest constraint on yield.

"So from a farmer's perspective, it is important to understand what is the biggest constraint on yield and what is the biggest source of potential efficiency - is it having longer run lines or opening up more area with a Reefinator or is it increasing the actual productivity of the existing area (through other soil amelioration methods)."

Lake Grace-based Elders rural real estate specialist Ron Dewson said rather than buyers seeking land with large amounts of rocky outcrops with the intention to reefinate, he found there was high demand for properties that had already been reefinated.

"Reefinating certainly adds value and from what I have heard - the first couple of crops grown on reefinated soil have been terrific," Mr Dewson said.

"Buyers are certainly keen on properties that have been reefinated.

"And if a property has soil tests, tissue tests, good water, good fencing etc, buyers will pay accordingly."

Mr Dewson said broadacre property prices were based on the arable area, so being able to maximise the arable area would benefit its value.

"I would say it could also increase your equity but how you would quantify that amount, I don't know and it would only work as long as production levels go up, which from what I hear, they do," Mr Dewson said.

"The Reefinator is another good tool to have in the modern farming tool box.

"If a paddock needs reefinating, it should be reefinated, just like if a paddock needs lime or spraying, it should have lime applied or be sprayed."

Rocks Gone sales manager Darren Smith, who also farms at Kukerin, said the machine can essentially turn unarable land into arable farmland that has been found to produce excellent crops.

He has a Reefinator himself and said it revolutionised the way he farms.

"I purchased a farm no one would really buy and as I reefinate, my equity just goes up and up," Mr Smith said.

"There's a lot of people cropping that wouldn't have been able to crop at all before.

"It's been a real game changer - farms are getting sold with lots of rock on them that previously wouldn't have sold well, if at all.

"I spoke to a man who bought a farm at Harrismith who was going to reefinate it, so it has pushed land values up now in some areas."

The new H4 model is priced about $300,000 and Mr Smith said growers have had crops that were grown on reefinated paddocks yield significantly higher than neighbouring paddocks or above their farm average.

"It is not uncommon for farmers to say that their reefinated country has yielded their best," he said.

"My best crop last year was on a paddock that would have never been cropped before."

Mr Smith said the Reefinator has managed to hold its value well, claiming a depreciation rate of about five to 10 per cent.

Earlier models retailed new between $120,000 to $170,000 and at a recent clearing sale in South Australia, a Reefinator RGV200 sold for $120,000 and a Reefinator dolly sold for $12,000.

Two regions have been hotspots for Reefinator sales - the Moora, New Norcia, Dandaragan and Badgingarra areas and around Lake Grace, Dumbleyung and Kulin.

Mr Smith said customers have been mostly farmers, with a few contractors and some farmers have been doing contracting on the side.

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