January 13, 2012

Farmland Prices Soaring in Brazil, Some More Expensive than U.S.

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Strong commodity prices in Brazil and speculative buying are leading to soaring land prices across the country. According to the Parana Department of Rural Economy (Deral), land prices in Parana rose an estimated 20% in 2011. In western Parana in the municipalities of Cascavel and Maringa, top quality land sold in 2011 for as much as R$ 30,000 per hectare (approximately US$ 6,666 per acre) with the average selling price in 2011 of R$ 25,000 per hectare (approximately US$ 5,555 per acre). Deral officials indicated that land prices in Parana generally rise or fall in direct proportion to the price of grain, especially soybeans.

The state of Sao Paulo has even more expensive land with a hectare of premium land near the town of Limeira selling for as much as R$ 41,000 (approximately US$ 9,111 per acre). At these prices, the land in southern Brazil has now become some of the most expensive farmland in the world and more expensive than many areas in the Corn Belt of the United States.

The high prices in southern Brazil indicate that there is very little new land to be brought into production, so if a farmer wants to expand his operations, he must do so by out bidding his neighbors and investors when a tract of land comes up for sale.

Farmers in search of new land to clear have been moving to northeastern Brazil to the states of Bahia, Maranhao, Tocantins, and Piaui where cerrado land can still be purchased for less than R$ 10,000 per hectare (approximately US$ 2,200 per acre).

With the price of land soaring, instead of purchasing new land to expand their operations, many farmers are turning to their own pastureland in order to increase grain production. The federal government estimates that there are at least 50 million hectares of underutilized farmland in Brazil composed mainly of degraded pastures. These degraded pastures have been the focus of intense research by Embrapa where scientists are convinced that these pastures would be better utilized for grain production. In fact, nearly all the increased soybean acreage in Mato Grosso this growing season came as the result of converting pastureland to soybean cultivation.