Ostrich farms in South Africa, fruitful kiwi production units in New Zealand or huge arable holdings in Zambia – the global farmland market can offer a wide range of opportunities.
Farmers Weekly asked agents Knight Frank and Brown & Co what an interested investor could expect to buy in return for the cost of an average UK farm.
Each firm identified what they would consider to be the value of an average UK farm and applied that formula to the farmland market in various countries across the world.
So what would your money buy in Australia, Brazil or Poland? And where might you find the best return?
Tom Heathcote, head of agri-consultancy at Knight Frank, said that based on his own experience and knowledge of the market, he would consider an average UK farm to include 800 acres (600 arable, 150 grass, 50 woodland), one house, two cottages, and a mixture of modern and traditional buildings, for about £8m.
Agent: James D. Meagher
Typical farm: €9m (roughly £8m) would buy about 1,000 acres, including good yielding tillage land, grass and forestry, with an extensive yard and sheds with supporting infrastructure. It would probably have a few dwellings.
Fact: The average price of agricultural land is steady at about €9,000/acre. Demand is currently very strong with a stream of land parcels coming to market following a period of constrained supply because of the uncertainty around Brexit.
Agent: Tanya Ware
Farm for sale: In Chisamba, about 60 miles north of the capital Lusaka, a 5,930-acre holding is available, guided at US$9.5m (£7m). About 1,600 acres is cropped and there are also 600 breeding cows with followers and pedigree bulls. The property includes 37 dwellings, a workshop, crop storage, drying and weighing facilities, an office block and a complete fleet of machinery.
Agent: Susan Turner
Typical farm: R164m (about £8m) can buy a significant amount in South Africa. The award-winning Alto Wine Estate in Stellenbosch sold in 2020 for R191m (about £9m). The 470-acre estate has about 247 acres of vineyards, a wine cellar, homestead and some staff housing.
Farm for sale: An export-quality table grape farm in the Vanrhynsdorp and Worcester districts in the Western Cape is currently available, with an asking price of R80m (about £4m). It includes 1,952 acres (538 planted with 13 grape varieties), two packhouses and cooling systems, utility stores, and several properties.
Fact: The Western Cape receives primarily winter rainfall, providing unique climatic conditions suited to fruit and other crop production and livestock farming. Livestock includes sheep in the Karoo, ostriches in Oudtshoorn, and cattle and dairy farming in Darling.
Agent: Rhys Mischefski and Ben Turner
Typical farm: NZ$15.5m (about £8m) could buy, for example, 32 acres of intensive G3 kiwifruit production land in a good location, returning 8-13%, or a 3,140-acre upland hunting and recreational estate.
Fact: New Zealand is the world’s largest exporter of dairy products and sheep meat. Other significant sectors include horticulture (kiwifruit, avocados and apples, among others), viticulture and forestry. The temperate climate and good rainfall support low-cost pasture-based systems.
Agent: Jason Oster
Typical farm: A$14.5m (about £8m) would buy a 2,471-acre cattle farm in the south-east of the country, with basic infrastructure, established pasture and hay fields, a yard and a dwelling. Rainfall in the south-east is medium to high at 700-750mm a year.
Fact: Markets have been driven by high livestock returns in recent years, including wool, sheep and cattle prices and strong commodity prices. National livestock numbers are at all-time lows because of prolonged drought in New South Wales and Queensland.
Brown & Co
According to Brown & Co, the average farm size of BPS 2019 applicants was 640 acres.
Applying a Grade 3 rolling average land price from the firm’s database (£9,334/acre) resulted in a farm value of £6m.
Adam Oliver, partner, said: “The UK represents one of Europe’s most expensive agricultural land markets. Several other current markets may offer better operational returns, increased likelihood of capital appreciation and certainly different risk profiles.
“Always seek professional experienced help when examining other markets.”
Freehold acres equivalent to value of average UK farm: 786
Expected return on capital employed (ROCE): 3.5%
Fact: For those simply wishing to rent out their farm, the US market has a very close correlation between land rents and land values. That represents real interest for those seeking exposure to the long-run commodity market cycle, as it is frequently the US market that sees continued long-term productivity gains.
Freehold acres equivalent: 4,169
Fact: Brazil is a major player in the global agricultural trade, accounting for 7.3% of global agricultural exports. The sector represents 14% of the country’s gross domestic product (GDP), and the whole agricultural chain accounts for 28% of GDP, employing almost 18 million people. The major attraction for certain investors at the present time, though, is the effective 25% currency devaluation against the US dollar. This means that in local currency terms, farmers are experiencing record net farm incomes. Many issues exist, not least of which being the legislative framework restricting foreign investors to minority stakes, but president Jair Bolsonaro and the Ministry of Finance have indicated they are keen to facilitate foreign investment and therefore there may be changes to legislation in 2021.
Freehold acres equivalent: 1,648
Fact: Serbia presents a “pre EU” market where the yield potential in terms of soil fertility/type is among the highest in Europe. The province of Vojvodina which surrounds Novi Sad is capable of 8t-plus/ha wheat crops and 12t-plus/ha maize crops. This productive capacity of the land is the key driver of land values, which are higher than most of the surrounding EU countries. Serbia is not a member of the EU although many expect it will join in the coming years. However, any variation or reduction in EU subsidies which are expected in the coming years will not directly affect the Serbian land market.
Freehold acres equivalent: 1,851
Fact: Land values in Poland have strengthened slightly in the past 12 months with 3-4% appreciation, having risen very considerably over the past 20 years. Growth has slowed as the market continues to mature and domestic/local demand for farmland continues to drive values, maintaining an active market. The government is viewed as nationalistic and has put a stop to sales of government land, but Poland is likely to continue to be a major recipient of revised CAP funding.
Freehold acres equivalent: 2,508
Fact: Parts of Romania have just had their worst harvests in recent years, due to extreme drought. The country is also grappling with new land legislation that has the potential to disrupt the market through various restrictions. However, it has the lowest-valued farmland in Europe and therefore presents a compelling investment case.
Freehold acres equivalent: 2,609
Fact: Uruguay is known for its strong land title legislation and robust rule of law. Land values saw a 21% increase in 2019. Values range from £400-800/acre for productive grassland to £4,000/acre for the best quality land with irrigation. However, with double cropping possible in some parts, the returns, for well-managed blocks, can be above 8%.