Farmland in South America: Large corporates rule the roost

As part of a our global farmland guide, Farmers Weekly asked Stephen Hall of the International Agricultural Investments team at Brown & Co and Wilfred Morren of the International Farmland team at Savills about the farmland market in South America.

See also: International farmland – Guide to the global land market

Maize being harvested in Brazil

© WestEnd61/REX

Flag_of_BrazilBRAZIL

 

 

Agent

Stephen Hall, Brown & Co

Main agricultural products

Maize, sunflower, soya, wheat and OSR

Average farmland values for good-quality arable land

Values vary from state to state and within a state depending on distance to tarmac road and/or a grain handling facility. States have different requirements for natural reserves/habitats to be maintained as part of the farming programme. These can range from 20-50% of the total areas, which affect value.
 
Farms are often traded for sacks of soya as opposed to currency, so the figures provided are an exchange of this and needs to be taken into account.
 
In the most expensive area, near Sao Paulo in the South East, arable farmland prices can range from about £3,270- £5,440/acre depending on whether the farm is in a catchment area of, for example, a sugar cane factory. At the cheaper end of the market, arable land can fetch between £1,100-£2,040/acre in Tocantins state, in the centre of the country.

Average farmland values for grassland

The same points above should be taken into account.
Again, grassland near Sao Paulo can be the most expensive, ranging from  £2,700-£5,440/acre, while grassland with good infrastructure in the western states of Mato Grosso ranges from about £950-£1,500/acre. The cheapest grassland can be found in Bahia state in the East, ranging from about £270-£540/ acre, however it is not commonly traded as grassland, but more as natural reserves.

See also: Farmland in North America – Smaller than you might think

Most desirable farm/land type

In the developed area, well-equipped and well-serviced farms near points of export or end user with either irrigation or high natural precipitation. In less developed areas, large-scale blocks of land with the ability to improve the asset through clearing (subject to conservation restrictions), liming and soil structure.

Quality of land

Varying but generally very good. Rainfall (at the right time) affects farm quality massively. Light land can experience water erosion if left as bare soil during rain seasons. Often a cover crop is planted which serves two purposes – it protects the soil from erosion during high rainfall and the trash from the cover crop preserves water evaporation during periods when the new crop is trying to establish.

Structure of farms

Large units often farmed using operation-by-operation contract farmers, while large corporate-owned units are farmed in-house. There are some tenants.

Key factors influencing land market

In late 2014, Dilma Rousseff won another term as Brazil’s president, receiving 51.45% of votes. Many have observed that during the past four years under Rousseff, Brazil has regressed from the progress it made in the first five years of the past decade. This has not been helped by low commodity prices which have damaged Brazil’s exports and inflation running at 6.1%-8.2% over the past year. 

Players in the farmland market

Large-scale international buyers working with a local farming partner to meet the foreign buyer restrictions as well as regional medium to large-scale farming companies.

Limits on foreign buyers

In 2010-11 the ability for foreigners to buy land in Brazil was limited to about 12,400 acres, with an additional restriction limiting foreigners to no more than 25% of any municipality as well as no more than 10% of a municipality to be owned by foreigners of the same nationality.


Hands holding rice grains

(c) Design Pics Inc/REX

Flag-of-UruguayURUGUAY

 

 

Agent

Wilfred Morren, Savills

Main agricultural products

Soya, rice, cellulose, beef and dairy.

Average farmland values for good-quality arable land

£3,600/acre

Average farmland values for grassland

£1,600/acre

Most desirable farm/land type

Good-quality arable land allowing a double crop with soya beans and wheat which is located in the west and centre of the country. Large-scale forestry land planted with eucalyptus.

Quality of land

There is a mix of high-quality arable land in the West and centre, grassland in the North and forestry in the East. Typically Uruguayan farms have a mix of agricultural activities combining crop and cattle on a single property.

Structure of farms

Mix of small family farms in the South, ranging from 100-750 acres, and large-scale corporate farms throughout the country. Corporate farms typically range from 1,250-25,000 acres. About 80% of all farming activity is done by contractors farming for investors and domestic landowners. Very  few landowners own machinery.

Key factors influencing land market

General elections in November 2014 maintained  the  political and economic situation with investor-friendly policies. Lower prices for commodities combined with the  economic and political turmoil in Argentina may lead to increasing demand for the higher-quality cropland in the west of Uruguay.

Players in the farmland market

Traditionally domestic investors (probably about 50% of transactions), plus farmers restructuring operations and trying to create a single holding to diminish the expenses of transport. Foreign investors used to come mainly from Argentina, but this is no longer the case and nowadays foreign investors come from the US and Europe.

Limits on foreign buyers

Foreign buyers may buy land, but there are restrictions for foreign governments or overseas government-controlled agencies. 


Soya field

(c) Image Source/REX

Flag_of_ArgentinaARGENTINA

 

 

Agent

Stephen Hall

Main agricultural products

Maize, sunflower, soya, wheat, OSR

Average farmland values for good-quality arable land

Varies within and between regions, but the biggest variation can be found in Patagonia, where the cheaper land might fetch about £400/acre while the top irrigated land could sell for about £5,400/acre. 

Average farmland values for grassland

Varies between regions from about £270/acre in Patagonia up to £800/acre in Pampa. 

Most desirable farm/ land type

Large-scale, well-equipped land with the Pampa or irrigated and well-serviced land elsewhere.

Quality of land

Variable, with areas such as the Humid Pampa containing high-quality soil and the ability to crop twice a year. The quality in more marginal provinces is often driven more by weather than land quality, where low rainfall can significantly affect yields or indeed whether a crop establishes at all. 

Structure of farms

Large farms run by tenants, corporates and contract farmers, with small to medium in-hand farmers.

Key factors influencing land market

The fiscal policies of the Argentine government do not provide a positive environment for agricultural investment. Argentina, since the country’s economic crisis in 2002, has implemented a tax levy of 20-35% on their grain exports depending on the crop type.

The government has also artificially propped up the value of the Argentine peso, making it about 40% stronger than it would be if freely traded, again not making for a positive export situation.

Inflation has spiraled out of control, increasing input costs by up to 25%/year. A combination of these unfavourable financial circumstances, in conjunction with the restriction on land ownership by foreigners, has meant the appetite for foreign investment in Argentina is low.

Players in the farmland market

The land market is now predominantly made up of local farming investors, meaning values generally reflect this limited market. The local farmer investors’ ability to expand is also affected by low commodity prices.

That said, areas such as the Humid Pampa still perform relatively well due to the high-quality soil, the ability to crop twice in a year and the illiquid nature of the market. The land market in more marginal provinces such as Santiago del Estero, where rainfall can be low and where double cropping isn’t possible, has suffered and little activity has been recorded.

Limits on foreign buyers

As of 2012, both natural persons and companies where the majority of shareholder are not Argentine are restricted to own a maximum of 2,500 acres of land in Argentina. This relates to new acquisitions and is not a retrospective change of the law. In addition to this, no more than 15% of each provincial department can be owned by individuals or companies falling into the definition above.

 


Man working in bean field

(c) WestEnd61/REX

Flag-of-ParaguayPARAGUAY

 

 

Agent

Wilfred Morren

Main agricultural products

Soy, rice, beef and wheat

Average farmland values for good-quality arable land

£4,000/acre for irrigated land

Average farmland values for grassland

£200/acre

Most desirable farm/land type

Undeveloped cattle land in Chaco, western Paraguay. Cattle land in the south of Paraguay suitable for conversion into crop or rice land

Quality of land

Cropland in eastern and southern Paraguay is of very good quality and the predominantly cattle land in Chaco can also be very fertile. Climate is more unpredictable, with a wet season from December to April and there are droughts conditions at times. In Chaco there is a lot  of bare land and tropical rain forest. The presence of water resources is important.

Structure of farms:

In western Paraguay (Chaco) properties are usually large-scale cattle ranches or undeveloped land. The size of developed properties can vary from 50,000-250,000 acres.

In the south and east of Paraguay properties are smaller and more developed with sizes ranging from 2,500-100,000 acres.

Landowners are local families or foreign corporations. In most cases owners are absentee. The size of these properties and the lack of infrastructure throughout the country means most landowners also own machinery and storage facilities while many farms have an air strip.

Key factors influencing land market:

Direct foreign investment has led to strong economic growth and increasing political stability. High (agricultural) commodity dependence increases the economy’s vulnerability to swings in agricultural production, which is frequently subjected to adverse weather conditions.

Players in the farmland market

During the past 10 years the market has mainly been regional investors from Brazil, Argentina and Uruguay (probably about 80% of transactions), plus local landowners who live in the capital Asunción. More recently they have been joined by international investors  from the US and Europe.

Limits on foreign buyers:

Foreign buyers may buy land, but there are restrictions for land within 50km of national borders. Deforestation is generally allowed on up to 50% of a property.

Upcoming webinar

SEPTEMBER
30

What does the future of farming look like post Covid-19 and Brexit?

Register today