May 09, 2019

Brazilian Land Prices Reflect Agricultural Usage

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

Farmers in Brazil are just like farmers everyplace else in the world, they are always looking for ways to expand their production. They can increase their production by increasing their productivity or by renting or purchasing more land. In Brazil, farmers have been continuingly increasing their productivity per hectare to a point where their soybean yields are basically on par with those in the U.S. Therefore, the best way to significantly increase their production going forward is to expand their acreage.

In 2018, there was increased interest in renting or purchasing land in Brazil due to strong soybean prices, increased Chinese demand for soybeans, and an improving Brazilian economy. The outlook for the Brazilian soybean sector in 2019 is not as good as it was in 2018, but there is still interest in renting and purchasing land.

Cost of Renting Land in Brazil - The average cost of renting land in Brazil for grain production is in the range of 12 sacks of soybeans per hectare (10.5 bushels of soybeans per acre). If the soil is highly productive or if it is in close proximity to existing infrastructure, the rent can be in the range of 15 to 17 sacks of soybeans per hectare (13.3 to 15.0 bushels of soybeans per acre).

For pastureland in central Brazil, the rent is in the range of R$ 25.00 to R$ 30.00 per year for each cow (approximately $ 6.50 to $ 8.00 for each cow).

Cost of Buying Land in Brazil - the table below, I listed some projected land values for pastureland and agricultural land in 2019 from Agroanalysis/FGV and Scott Consultoria. As you can see, there is a very wide range in land values depending on factors such as: established areas in southern Brazil or frontier areas in northern Brazil, the fertility of the soil, proximity to existing infrastructure or proposed infrastructure, the degree of technology utilized, the productivity of the region, the dominant crops, and proximity to agribusiness and ports,

The cost of buying agricultural land in 2019 is expected to increase 0.5% to 3.0% in 2019 compared to 2018. The biggest percentage increase is expected in the state of Mato Grosso. For pastureland, the cost is expected to increase 0.5% to 1.5% in 2019 compared to 2018 with the biggest increases in Mato Grosso and Parana.

Since soybeans are the dominate crop in much of Brazil, a lot of the value of the land is determined by the level of productivity for soybeans. Below are some anticipated land prices in 2019 for both pastureland and agricultural land in Brazil.

I always hesitate in converting prices in Brazil to dollars because it depends entirely on the exchange rate between the Brazilian real and the U.S. dollar. For the purpose of this exercise, I used the exchange rate of 3.8 reals per dollar. These are average prices for each state, but prices can vary widely within a state.

Land Prices in Brazil - 2019
Region/StatePasturelandAgricultural Land
 Reals per HectareDollars per AcreReals per HectareDollars per Acre
Bahia 3,700 395 5,684 605
Maranhao 3,600 325 6,450 687
Piaui 2,150 230 4,867 518
Tocantins 4,663 496 6,325 673
Mato Grosso 5,175 551 12,663 1,349
Mato Grosso do Sul 7,670 817 19,363 2,062
Goias 10,033 1,068 17,550 1,869
Parana 12,810 1,364 28,980 3,087
Rio Grande do Sul 8,686 925 22,115 2,356
Santa Catarina 14,540 1,549 31,780 3,385
Sao Paulo 21,154 2,253 29,320 3,123
Minas Gerais 8,242 878 12,978 1,382

Source: Agroanalysis/FGV and Scott Consultoria

As you can see, the agricultural land in northeastern Brazil is much cheaper than in the center-west region or in southern Brazil. It is cheaper because farming in northeastern Brazil has many challenges. It soil in northeastern Brazil generally has lower native fertility and the weather during the growing season is not as good as in the rest of Brazil. The summer rains start later in northeastern Brazil and they end earlier than in other parts of Brazil. Therefore, the growing season is shorter and the weather is more variable.

The value of land in Mato Grosso for example is highly correlated with its proximity to a paved road. If you want to buy cheap land in Mato Grosso, go a hundred kilometers down a dirt road or perhaps someplace where there are no roads at all.