Global demand for farmland in 2024

Farmland values have risen sharply in many countries in the last two years but, with commodity prices having softened and no immediate end in sight to higher interest rates, what’s next for global land markets?

On the back of the spike in commodity prices and profitability, land prices peaked at record highs in 2022.

In the US for example, farm sector income jumped by 20% in 2021 compared to 2020 as commodity prices increased due to supply chain constraints and higher post-pandemic demand.

Another 20% increase came in 2022, largely due to supply side pressures caused by the Russia-Ukraine war, raising Net Farm Income (NFI) to a record US$183 billion high.

This pushed the corn belt land market upwards, with a 23% increase in values over the two-year period from 2022-23. For example, the number of farms sold in Iowa in 2022 for $20,000/acre or more was 50, compared to none in 2020.

Australia also saw land values jump in 2022, pushing the national median price per hectare upwards by 20% to AUS $8,506/ha, approximately £1,790/acre.

This was also on the back of a 20% price increase in 2021 and whilst there was huge variability across the country, the impact in Australia was remarkably consistent with other developed markets.

Brown&Co has International offices in Poland, Romania and the Caribbean where our Agri-Consultants are well placed to work with clients across Europe, the USA, South America, the Caribbean and the wider globe.

A 20% land value increase was also seen in 2022 in Poland, but growth has slowed to a much more modest 4% in 2023 as the reality of declining crop prices and high costs have dampened confidence.

One of the biggest increases in land values was in Romania, with prices tracking upwards by 26% in 2022. In 2023, the market slowed to a 1% rise after drought hit the south and substantial volumes of crop entered from Ukraine, impacting negatively on profitability.

Where does this leave markets going forward?

There are a number of factors at play.

There is little sign that the war in Ukraine will end soon and the most direct impact this is now having is dampening crop prices and therefore profitability in the immediate surrounding countries is under severe pressure (including in the UK).

While inflation has fallen sharply in several countries, interest rates may not come down quite as fast as anticipated particularly given heightened energy prices; this combined with higher costs of ag production and lower crop prices mean confidence could well be dampened throughout the remainder of 2024.

However, the fundamentals remain strong and the advantages of land investments in times of high inflation have been brought into sharp focus recently. There remains interesting opportunities and sound strategies in lesser-known markets. Brown&Co is currently marketing a 44,000-ha grass fed beef operation with immense levels of innovation and infrastructure in Paraguay, where foreign land ownership is welcome. Land prices here are circa US $1,500/ha and production costs are around 50% less than in the USA. With recent approval to start beef exports to more and more international markets, plus major infrastructure projects such as the Bi-Oceanic Corridor, leading to improved access and lower logistics costs - this looks as though it might follow neighbouring Uruguay which has seen a fifteen-fold increase in land prices over the last twenty years.

In all the markets discussed, the volatility of commodities and increased interest from institutional capital seeking alternative strategies to bond and equity markets, points to sustained demand for land in 2024 and beyond. But the inflationary pressure on global costs of production that were massive in 2022-23 will bring change in global ag production trends as some land types, climatic zones and ownership models run out of capital and ambition for ag production costs at marginal levels of return.

To find out more about our International Land Agency and Agri-Consultancy work, click below.

Find out More

Visit International Website