Why is Brazilian Cerrado Land So Cheap?

Brazil's cerrado land is, without doubt, the cheapest highly productive agricultural land in the Western Hemisphere, and perhaps the world. By any measure, productive cerrado land is extremely inexpensive relative to good agricultural land anywhere in the Western World.

Why?  A major reason is simple supply and demand. There is a staggering amount of land in Brazil's frontier and not enough Brazilian capital to buy and develop it. International investors could provide the needed capital, but there has been a void of reliable information on frontier investment opportunities. A key objective of AgBrazil is to fill this information void.

The vastness of the cerrados is awesome. The area of unopened Brazilian cerrado land believed suitable for dryland and irrigated agriculture is estimated to be greater than all of the land area of Western Europe or the US land area under agricultural cultivation.

There is another reason why cerrado land sells for significantly less than US or Western European farmland producing an equal or even lower net return. Brazilian farmers and investors demand a high return on their investment. There are no government subsidy programs, interest rates are high, credit is limited or unavailable and a long history of high inflation makes investors wary of government monetary and fiscal policy. Inflation has been under control since 1994, but investments that do not have the potential to return at least 25 percent per year are rejected out-of-hand by Brazilian farmers and investors.  

Cerrado dryland farmers expect to pay off their land investments in four to five years. Farmers investing in pivot irrigation systems expect to pay off their total investment, including land costs, in two to three years. These expectations have been met when management is capable and technology is state of the art.

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