Friday, December 3, 2010

International Farmland Prices Update

November 2010 Farmland Price Report #4
by big picture agriculture

To follow, are articles related to global national farmland prices in Canada, Eastern Europe, the UK, New Zealand, and South America. Because of the current frenzied buying of investors desiring farmland globally, I am doing separate posts on farmland "grabbing" and the listing of some of the international and institutional investors.

This is part of my series of farmland investment posts from this past quarter, in addition to these previous posts:

November 2010 Reports to date:
CANADA:

Please see my earlier post, Canadian Focus: Agriculture and Farmland Values.

Steady climb in Alberta farm land prices — (12/1/2010) Farmland in Alberta sold for an average price of $1,428 per acre in 2009, up 2.5 per cent from 2008. Between 2000 and 2009, average farmland prices rose just under 100 per cent, meaning that the value of many Alberta farmers’ largest asset doubled over the last decade. ...Farmland prices in Alberta are roughly in middle of the road among provinces. Ontario ($4,767) and B.C. ($4,143) have the highest farmland prices while Saskatchewan ($498) and Manitoba ($833) have the lowest.

Farmland prices tend to follow trends in the broader economy and (particularly in Alberta) energy prices. The last farmland price boom occurred in the 70s when oil and Alberta’s economy were flying high, but fell back significantly when the provincial economy hit a wall in the 80s (see graph).

As Saskatchewan farm values rise, investment kept limited — Growing investor interest in high-production farmland in Saskatchewan is helping push up farmland values, but the province's limits on foreign agriculture investment are not likely to ease any time soon, according to a leading ag official. Saskatchewan is one of several provinces that restricts farmland ownership by non-Canadians. The Farm Land Security Board enforces a farm ownership act that limits foreign investors to direct ownership of no more than 10 acres.


UK:

UK Farmland Values Flatten in Q3 — A recent research carried out by Knight Frank suggests that farmland values in England increased by no more than 0.8% in the third quarter of 2010. At the moment, farmland is priced at £5,816 per acre, marking a 17% annual rise. This is the highest level ever registered by Knight Frank.

Fears for UK clampdown derail farmland rally — Fears for government austerity measures have swamped the boost from higher crop prices to derail the rally in English farm prices, which have recorded their worst performance since the recession. Growth in English farmland prices slowed to 0.8% in the July-to-September period from 6.9% the quarter before, and the worst performance since the start of last year, consultancy Knight Frank said.

Strong demand keeps UK farmland prices high — Strong demand and a limited supply has kept UK farmland prices high with an increase of 8% for arable land so far this year....The average value of Grade 3 arable land in England is now £5,462 per acre, which reflects an increase of 3.6% for the quarter and a cumulative growth of 10.4% for the year to date. It means that average values are now higher than at their previous peak of June 2008 when they reached £5,170 per acre....In contrast though, average values in Scotland remained under pressure with prime arable land on the east coast, supported by a good potato and wheat harvest, performing best. Values increased by 4.1% for the quarter.

Arable land price set for further rise in 2011 — (10/6/2010)The latest figures from Savills show that prime arable land prices across Great Britain rose by 11% to £5973/acre in the first nine months of 2010. The biggest price rises came in English arable areas including the eastern counties and the East Midlands, both up by 13%, and the north of England, up 13.9%. Something of a two-tier market was developing, said Ian Bailey, head of rural research at Savills, with people looking for the best income they could get combined with capital growth, so the best commercial arable land and in some cases prime dairy land was selling well.

Who really owns the country? — The upshot is that more than a third of land is still in the hands of aristocrats and the traditional landed gentry, but it's mostly government organisations, charities and pension funds that make up the biggest ones. This is in marked contrast to 1872 when it was largely the 'great and the good' who owned the UK. The 10 largest landowners include The Forestry Commission (2.5m acres), the National Trust (630,000 acres) and the Ministry of Defence (592,800 acres). By comparison, Prince Charles is a mere pauper with just 133,602 acres.

Investors clamour for land as UK slashes spending — Indeed, farmland prices had continued over the July-to-September quarter, with the value of average arable land rising by roughly 3.5% to £5,180 an acre in Britain as a whole and to £5,462 an acre in England, the centre of agricultural production.

UK Investors Turn to Farmland in Eastern Europe — In the past months, UK land values started to decline slowly, whereas farmland in such countries as Russia, Ukraine, Bulgaria, Poland, Belarus, etc. has remained undervalued.

A chance to buy as a sitting tenant – what is the next step (UK) — Farmland has never really been a high returning investment for landlords but with land prices currently so high a farm worth, say, £7,000 an acre may only be yielding a rent of £70 an acre – just one per cent – so landlords may feel the economics don’t stand up.


EUROPE (OTHER):

Ireland's Unemployed Head Back to the Farm — Farrell's college program in Dublin turned away 250 students seeking places in its agriculture-related courses last month. Enrollment for courses at Teagasc climbed to 1,128 this year, 45 percent more than in 2007, before the economy collapsed....Agriculture now accounts for about 2 percent of the Irish economy, compared with about 16 percent in the late 1970s.....Another factor working in agriculture's favor is the decline in land prices. Developers pushed up prices to more than €58,400 ($81,140) a hectare in 2006, the highest in Europe, according to the National Institute for Regional and Spatial Analysis, citing data from property agent Savills. Last year, farmland prices around Dublin fell 57 percent, while the average price paid in the rest of the country declined 43 percent. Ireland's tough economic circumstances have changed perceptions about the country's agricultural sector. "Farmers have become a respected profession again," says Power, the economist. "And there's nothing else out there."

Farmland Prices Surge in Eastern Europe — Farmland prices in the east of Germany and Poland have been increasing rapidly, doubling since the beginning of the year, according to a report in Polish newspaper Rzeczpospolita. In some regions of Western Poland prices have gone up fourfold since Poland joined the EU, from 4 700 zloty (€1 207) per hectare in 2004 to 18 000 zloty (€4 500) per hectare in 2010.

Price of farmland in Hungary nearly doubles in ten years — The price of land in Hungary is about one-fifth that in Spain, Harmati said, answering a question. Arable land accounts for 83% of Hungary's area, or about 7.8 million hectares. Farmland makes up about 48% of arable land, forests 20%, pasture 11%, orchards 1%, gardens 1%, vineyards 1% and reeds 1%.


SOUTH AMERICA:

South America tops farmland investors' wish-list — Farmers' fields in Brazil and Argentina are among the most prized assets in a new global market for agricultural land that has sprung up alongside soaring commodity prices. Private equity and fund managers at a farm investing conference in Geneva named South America a top place to buy, lease and manage agricultural lands for profit.

Prime farmland in Argentina costs almost as much as in United States — Prices for the best farmland in Argentina’s breadbasket, the humid Pampa have risen on average 10% this year according to registered operations reports. This means the hectare of prime agriculture land in Argentina now costs almost the same as the average price of farmland in the state of Illinois, 14.000 US dollars....But, who is buying land in Argentina? According to Lanusse most are locals, and when foreigners, in very specific cases. On the other hand farm policies implemented by the Argentina government have meant that many investment funds which originally considered Argentina as an option, “have finally decided to move to Uruguay and Brazil and in second place to Bolivia and Paraguay”.

New rush of foreign investors, mainly Argentines, to purchase land in Uruguay — In the first half of this year there have been 950 farmland transaction operations registered, 9.3% more than the same period in 2009, which represents 180.000 hectares (up 25.8%) involving 451 million US dollars (up 37.5%) according to official numbers from Uruguay’s Agriculture Statistics Department.


NEW ZEALAND:

Farmland prices fall — The average price of a hectare of farmland fell by two thirds in the past year to just under $30,000, while the average dairy farm price dropped by a third, latest data from the Real Estate Institute says....The fall in values has left some farmers who borrowed heavily while land values were rising paying crippling interest for assets worth much less. [Kalpa's Note: $30,000 New Zealand dollars equal $22,554 USD & would convert to $9,131/acre USD]