August 28, 2015

Data from SLC Agricola indicates that farmland values in Brazil are following the same trajectory as those in the U.S. and UK with value growth showing a sharp decline and difficulty keeping pace with the inflation.

SLC, which controls 308,719 hectares of Brazilian land, said that the value of its portfolio increase by 7% from R$3.19 billion (US$900 million) to R$3.40 (US$960 million) in the 12 months ending at the end of July, while inflation increased 7.4% over the same period.

On a per-hectare basis, land values within the SLC portfolio increased at a slower rate than inflation at 5.1% to R$11.019 per hectare (US$3,104 per hectare), but these figures could be skewed by the inclusion of 5,600 hectares of reserve land set aside for conservation at the behest of the Brazilian government.

Whether including reserve land or not, land value growth for the past year was significantly lower than the previous year ending in July 2014, which saw SLC’s overall land values increase by 19%, and on a per-hectare basis increase by 17.4%.

This slowdown in Brazilian farmland value growth follows true to a forecast made by Itau BBA earlier this year when the bank predicted a slowdown in growth that had been running at 8% above inflation for the past five years. In January the bank stated that above average global commodity inventories and ongoing low prices will likely translate to flat land prices in 2015.