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May 1, 2023
by Joana Colussi, Gary Schnitkey, Nick Paulson and Jim Baltz, Department of Agricultural and Consumer Economics, University of Illinois Farmland prices in Brazil have increased significantly over the last 3 years, driven by the combination of higher net farm income, low-interest rates, and strong demand from investors. The record appreciation of land has been driven by high commodity prices, robust global demand, and a favorable exchange rate for Brazilian exporters - leading to positive operating margins for corn and soybeans, despite high costs in agriculture. This article presents an overview of farmland prices in Brazil since 2019 and perspectives for the future under an economic scenario with higher interest rates and lower commodities prices. Price of Land by Use and Occupation The most significant appreciation in the land market in Brazil occurred in areas used for grain production, followed by sugar cane and coffee, according to the S&P Global Commodity Insights report (see Figure 1). From 2019 to 2022, the average cropland for grain production value increased 128%, from $1,875 to $4,271 per acre. In the same period, the price of sugar cane land rose 94%, from $1,915 to $3,710 per acre, and the coffee land value went up 133%, from $1,514 to $3,534 per acre. The lowest appreciation was in the pasture and planted forest land areas, which increased 61% and 54%, respectively (see Figure 1). Farmland values follow the growth of Brazil's Gross Value of Agricultural Production, which reached $235 billion in 2022, the second highest in more than 30 years. According to data from the Brazilian government, crop revenue was $161 billion, and $74 billion from livestock. Soybean, corn, sugarcane, coffee, and cotton typically represent about 80% of crop revenue in Brazil. For 2023, the Gross Value of Agricultural Production is expected to go up at least 6% from the previous year, driven primarily by growth in soybean production, which should reach a record of 5,645 million bushels, according to data from the National Supply Company (Conab).
Cropland Prices in Paraná Similar to Illinois Although farmland prices have increased all over Brazil, the Southern states stand out, with most land prices above the national average. In the South, agriculture is structured in a system of cooperatives providing assistance, storage, processing, and production distribution. In addition, the soil quality and the proximity of ports are other relevant factors that add value to the land in the southern states. Moreover, there is less land to convert from pasture to farmland than in other regions such as in the Northeast. In the state of Paraná, for example, the price went up 188% in the last years, from $2,918 per acre in 2019 to $8,417 per acre in 2022 (see Figure 3). To read the entire article click here. Tweet |
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