As Brazil’s Land Market Slows, SLC Agricola Pursues First Large Farmland Acquisition in Two Years | Global AgInvesting

As Brazil’s Land Market Slows, SLC Agricola Pursues First Large Farmland Acquisition in Two Years

As Brazil’s Land Market Slows, SLC Agricola Pursues First Large Farmland Acquisition in Two Years

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Brazilian farming operator SLC Agricola has announced its first large-scale farmland acquisition in at least two years as the Brazilian farmland market slows.

 

SLC subsidiary LandCo purchased 13,288 hectares of farmland in Brazil’s top soybean and corn producing state, Mato Grosso for R$77.99 million (US$19.64 million). This acquisition brings SLC’s portfolio to approximately 321,000 hectares,  giving the company total land holdings the size of the U.S. state of Maryland.

 

On a per hectare-basis, the purchase price equals R$5,870 (US$1,455) per hectare, nearly half the R11,000 (US$2,727) per hectare valuation set for the SLC portfolio by Deloitte Touche Tohmatsu in July of this year.

 

After counting some cropland twice – because of double cropping within one year – and including land the company leases from other owners, SLC Agricola claims to crop 370,000 hectares of land per year, and states that its recent purchase aligns with the company’s strategic growth plan which targets developing its portfolio and increasing the profitability of its agricultural operations.

 

After a wait of two years, SLC has pursued this deal just when Brazil’s land prices are softening as was indicated in the latest Deloitte Touche Tohmatsu survey, which showed that the value of SLC’s portfolio appreciated at 7% year on year, compared to growth of 19% in the previous year.

 

Although land prices are down, the prospects for profitability for Brazil’s agricultural producers have strengthened as the country’s currency weakens as a result of an economic crisis in the country, government overspending, and an administration unable to impose austerity measures.

 

While a weakening real has also resulted in increased production costs for Brazil’s farmers, dollar-denominated international crop prices have sustained the potential for profits. As the real hit an all-time low against the dollar, the research institute Cepea estimated last month that Mato Grosso soybean farmers selling at the port of Paranagua are likely to see a return of approximately 17%.