Farmland Prices Remain High in Brazil

farmland prices

“…average price of areas dedicated to grain cultivation in Brazil was around US$ 8.8 thousand per hectare, showing a nominal variation of 56.39% in 12 months…”

André Guillaumon is an agronomist graduated at Escola Superior de Agricultura “Luiz de Queiroz”, in Piracicaba. Guillaumon the is CEO of BrasilAgro and member of the Superior Council of Agribusiness.

BrasilAgro is a Brazilian company specialized in the purchase and sale of rural properties and in the production of food, fibers and bioenergy, being one of the largest Brazilian companies in terms of arable land.

AgriBrasilis – How is the scenario for the commercialization of rural properties? What is expected for the next few years?

André Guillaumon – We are a company guided by a countercyclical objective, that is, when everyone is buying, we are selling and vice versa. We made two important sales last October and we believe that there is still a window of opportunity to make other sales at the same levels of return.

We are capitalized and very active in the search for new properties. However, due to several aspects, land prices are at a new level. In this way, we are being careful to ensure profitability and effectiveness in the purchase.

For the coming years, it is to be expected that the price of commodities will remain strong and will continue to be reflected in the price of land. We are well positioned and with a strong balance sheet to capture new opportunities for both purchases and sales.

AgriBrasilis – How was the value behavior of agricultural areas in recent years? With such high land prices, is it still worth buying rural properties for agriculture?

André Guillaumon – According to a study by IHS Markit, in January 2022, the average price of areas dedicated to grain cultivation in Brazil was around US$ 8.8 thousand per hectare, showing a nominal variation of 56.39% in 12 months.

Land prices are at much higher levels than in recent years, and at the same time, we are experiencing a new cycle of commodity appreciation. As a result, the farmer’s margin is still quite positive, not to mention the structural aspects, which point to a growth in global demand for food.

We believe that agriculture will continue to be one of the most important sectors of the Brazilian economy for a long time.

AgriBrasilis – How to increase the value of arable land for selling later? What are the main investments?

André Guillaumon – Search for the valorization of our rural properties is the main element of our strategy. In our view, the value of a rural property is related to the cash generation per unit of area. In this sense, we seek to maximize the return on our investments, identifying, acquiring, developing and operating rural properties that we believe have a high potential for appreciation; optimizing the yield and productivity of our rural properties through the implementation of agricultural technology and techniques; and actively managing our portfolio of properties, guided by the following assumptions: (a) combined real estate and operating return; (b) diversification of climate and cultivation risks; (c) efficient allocation of capital between investment and acquisition; and (d) realization of capital gains through the sale of properties already developed.

We invest mainly in agricultural activity, infrastructure, application of modern technologies and the best agricultural practices to increase operational productivity, allowing the cultivation of high value-added cultivations (soybean, corn, sugarcane and others) and livestock, valuing our farms and diversifying our portfolio.

AgriBrasilis – What are you looking for in a land with agricultural potential to be considered suitable for investment?

André Guillaumon – The property must present characteristics that allow it to increase its profitability through the implementation of technologies, management techniques that increase productivity, gain of scale, aptitude for growing plants with greater added value, for example, a pasture area with aptitude for for grain cultivation.

AgriBrasilis – How is the process of evaluating the value of an agricultural property carried out?

André Guillaumon – The value of farms is related to cash generation; the value of the land is a multiple of what it produces. To estimate the market value, we consider its level of development, the quality of the soil and its maturity, and the aptitude and agricultural potential.