March 5, 2015

Russia’s wheat export restrictions are causing a duality in the country’s farmland values, with continued underperformance in the southern region near ports, compared to central region markets closer to sources of domestic demand according to SovEcon.

In the south, the region responsible for Russia’s grain supply for export, land values have decreased 19.5% in 2014. Over the same time period, land values increased 22% in the country’s Central region. SovEcon view this trend as continuing through 2015 as Russian export restrictions placed a tariff of €35 per ton on wheat exports, negatively affecting prices.

Although yields are impressive in the south, domestic demand patterns are favoring land values in the Central region – the hub of the country’s livestock industry, where expansion has been driven by a need for domestic supplies following Russia’s embargo on Western agricultural products, and which is becoming an increasingly important source of domestic grain.

Because of various geo-political factors, interest by Western investors in Russian farmland has dropped significantly over the past three years, however, the decline in land prices near the country’s ports could spark interest in Chinese investors looking for foreign farmland.

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