Argentina/Uruguay
First quality agricultural land values in Argentina have increased by two and a half times since 2003 and almost four times for second quality agricultural land, reflecting the demand from foreign investors who are attracted to Argentina and the rest of South America. The average value of first quality arable land is estimated to have increased 33% during 2010 to around US$14,000 per ha after falling -11% in 2009 due to pressure from the fall in commodity prices after the 2007/08 spike. However, there has been surprisingly few farms available to buy, as the current owners cannot find another asset class which is denominated in US$ and also provides an inflation/recession hedge.
Argentina is an attractive area for agricultural investment, as there is good value quality land, the potential to farm large areas with good legal title, sophisticated farming techniques and probably the lowest production costs in the region despite the imposition of export taxes.
Generally, markets are well established and water availability is good. Low costs and the potential for high productivity offer good investment opportunities, but location is critical.
Some foreign investors have been put off by the stance of the current government towards the farming sector. However, the Presidential elections in 2011 may lead to a change in attitude in the future. The perception of a lower political risk in Uruguay has meant that investors have seen prices rising to between and to the point that returns are now less than in Argentina. Land values in Uruguay for good quality land typically range from US$3,750 to US$9,000 hectare, but farmland is not generally as good as in Argentina, with typically more mixed farming operations and lower crop yields. Most farms would have a mix of perhaps arable, cattle and forestry enterprises, as well as larger areas of unusable land.
Savills Research
Spotlight on international Farmland Market
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