Agricultural land is increasing in value all over the world. Demand is booming in both the farming and non-agricultural sectors.
RICS spokesperson Sue Steer says:
"Rising commodity prices and increased interest in bio fuels have resulted in a bit of a feeding frenzy for farmland as farmers compete with investors, foreign farmers and lifestyle buyers for properties. Although the availability of land increased fractionally in the last half year, supply remains constrained and insufficient to satisfy the appetites of buyers."
The world prices of food such as Corn, Wheat, Soya, Beans, Rice, have been rising very quickly over the last 18 months. And there is absolutely no end in sight. In fact, prices are expected to continue on their upward curve for many years to come.
The staple foods like Rice and wheat have suffered the largest increases over the year March 2007 - March 2008. This has led to "Food Riots" across the world.
It's not surprising then that agricultural land is increasing in value, particularly when we take the full global picture into account.
- Rising food prices, caused by an exploding world population.
- Hundreds of millions of people worldwide moving into middle class, eating more meat.
- Rising cost of Oil and the push for more bio-fuel, which comes from grains such as Corn, Sugar Cane etc.
- Climate change, causing drought in areas which were previously fertile - like the great drought currently affecting Australia - and the monsoon style rains sweeping China.
It is easy to see from these combined factors why experts are calling the increasing rise in agricultural land values "The Perfect Storm".
Location
Brazil's frontier region is booming, and the boom is destined to continue long into the future. The potential of this vast and largely untapped area--the largest virgin land mass on earth--is beyond rational speculation.
Brazil's high-plains, the cerrados, cover an estimated 207 million hectares (511 million acres), or about one-fourth of the country. Only about 60 million ha--about one-fourth of the cerrados--is now economically used.
EMBRAPA, Brazil's agricultural research organization, estimates that another 100+ million ha are suited for modern mechanized crop agriculture. More recently, the USDA estimated that between 145 and 170 million hectares (402 million acres) could be opened for crop production. This means that the agricultural area yet to be opened is more than 25 percent larger than the total crop acreage of the U.S.
The state of Bahia lies on the eastern side of Brazil, and because of its climate, and modern farming practices West Bahia's' cerrados produce some of the worlds' highest yields. Harvested crops include soya beans, corn, cotton and coffee.
The combined yields from these crops gives investors projected annualised returns of 60%+ over 5 years.
Investment Analysis
You can invest in an acre plots on this 14,000 hectacre Western Bahia farm for just £500. Minimum investment of 10 acres.
Income returns
The income returns are very high by all normal standards. The returns are certainly a lot higher that those offered by bonds, managed funds, or publicly quoted shares. This reflects the potential capital growth and rental yields associated with farmland in Brazil.
The reason for this disparity is because the land prices in the cerrado area remain exceptionally low, whilst the value of crops is tied to the world grain prices, which are high.
Capital Returns
The capital returns are high. Global prices for both residential and commercial land are falling. However, Farmland prices which have been slow over the past 20 years, appear to be at the beginning of a major boom, stimulated by the high food prices we are currently experiencing across the world.
Return on Investment
The current price of good farmland in Brazil is approximately £1,233 - £1,541 per acre. This is today's capital growth caused by "change of use" on our farmland. With just a modest 5% per annum "natural growth" you could achieve a return of £1,574 - £1,967 for every £500 invested.
Based on the minimum contribution of £5,000, this ROI would be approximately £15,574 - £19,670 plus in addition to this, the investor would already have received £1,500 for their 10% income per year on years 2,3 & 4.
This calculates to a Grand Total of £17,074 - £21,170 equivalent to an annual return of 68.3% - 78.7%.
Ethical Investing
For every 10 acre investment, 2 trees will be planted in the UK, via our partnership with the Carbon Footprint company. We will also help to fund the set up of a unique project with the FAO Telefood program.
Full Investment Brochure Available On Request.
