THE number of Central Western Queensland properties hitting the market is expected to increase in the next six to 12 months following a massive turnaround in seasonal conditions.
Rockhampton based Herron Todd White valuer Michael Chaplain said the pressure to sell would be driven by record high prices for store cattle which was likely to limit the ability of producers to restock coming out of extreme drought.
The challenge would be more difficult for landholders with second grade assets who may struggle to attract agistment/leasing tenants to provide an immediate income stream, he said.
“The past month has seen a swing to more positive seasonal conditions across most of Central Queensland, particularly for those central western areas around Winton, Longreach and Barcaldine which have been crippled by severe drought in recent years,” Mr Chaplain said.
“There have been some impressive rainfall totals up to 200mm in some of these areas. The response in these areas will be slow given the cooler conditions. However, with the seasonal outlook expected to be wetter than average, any additional rainfall from here on will surely do good.
“The impact of this unseasonal, and in some cases record, rainfall on the property market in these areas remains to be seen.”
Mr Chaplain said producers were being faced with a number of options:
1. Buy back in at record prices
This will not be an option for many landholders who have already exhausted their borrowing capacity.
2. Generate cash flow from agistment or leasing
Given the low national herd numbers, and potential abundance of available agistment/leasing options, we could see supply begin to outpace demand which may place downward pressure on agistment rates; Properties with second grade improvements (fencing, waters and stock handling facilities), or in isolated areas with poor access, may struggle to attract tenants.
3. Utilisation of non traditional funding options
We expect to see an increase in the uptake of non traditional funding arrangements through the likes of StockCo who take security over the stock as opposed to the land assets, which can put hooves on the ground without having to increase existing bank debt levels, but essentially this is still more debt to service. Bringing in an equity partner may also be an option, however this comes with complexities which may be difficult to navigate for the average producer.
4. Wait for stock prices to come down.
This is not a likely option as many producers have already incurred limited, if any, income in recent years. The prospect of holding out for any longer is not an attractive one in most cases.
5. Sell into the grass market and exit the asset.
This action may ultimately be the best/only option for some producers who may not see any of the above options as a viable long term solution.
“These factors essentially leave many landholders stuck between a rock and a hard place, whereby they will have an abundance of feed and not many mouths to eat it,” Mr Chaplain said.
