By Carlos Graffigna, Contributing Reporter
RIO DE JANEIRO – As residential and commercial real estate markets across the world have submerged into recession over the last year, the value of farmland has steadily risen, driven by several factors and the strong worldwide demand for food.
Investors, disenchanted by traditional real estate markets, have turned their attention to farmland in countries where large tracks of land are still available for purchase. This tendency has directly influenced prices in Brazil, as large areas of sometimes unused land have suddenly experienced great interest from capital investors from both inside Brazil and foreign investors.
According to INCRA over five million hectares of farmland in Brazil are currently owned by foreign individuals or companies, although this number could be much higher considering the statistics do not account for ownership by Brazilian companies with either all or part foreign share interest.
According to a report (pdf) by agricultural policy specialist Tom Caphart written for the United States Congress, various factors account for these higher values including increased production of oilseeds and grains destined for biofuels and higher agricultural production costs derived from raise in energy prices. Other reasons include the doubling of the world’s population since 1960 and also the current loss of almost 50 million acres of land per year to industrial development and urbanization.
INCRA estimates that over the last decade, land prices for agricultural use in Brazil have increased by almost 350 percent and even though they do not expect such a similar steep rise over the next few years, they do foresee a continuing increase in the value of farmland.
Shifting business attitudes towards food production could play a part. Discussing world food demand last March in response to increasing farmland value in the US, Bob Swires, chairman of Illinois Land Value Survey and Conference, stated that “investors are seeing agriculture as a producer of energy, not food and that is making investment in land very attractive”.
There are some concerns for investors attempting to capitalize on the land market here in Brazil however, like continuous attacks from the Movimento dos Trabalhadores Sem Terra (MST), an organization which has turned to violence in order to show their discontent with current land legislation.
Also, there’s the tendency of legislators to create restrictions on land ownership for foreign individuals and international corporations. To know more about the process of how to purchase land in Brazil, please see our article Buying Property in Brazil.