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/State	Pastureland		Agricultural Land
	Reals per Hectare	Dollars per Acre	Reals per Hectare	Dollars per Acre
Northeastern
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
Center-West
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
Southern
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