Cerrado Land Prices
Cerrado land prices are often no quoted in monetary units such as
dollars, euros or the Brazilian currency, the real. Instead,
per hectare prices are expressed in sacks of soybeans. For example,
a tract of land may be on the market at 50 sacks of soybeans/ha.
With soybeans at US$10 per sack, this is the equivalent of US$500/ha.
If land is priced at 250 sacks of soybeans, and soybeans are US$20/sack,
this is the equivalent of US$5,000/ha. The tradition of pricing
land in sacks of soybeans derives from the period of high inflation
many years ago and continues today.
has no notable commodity price support system so land prices do
not reflect government policies as in the USA and the EU. Brazil's
frontier land prices are largely driven by commodity prices, rising
with high prices and falling with low prices. Over the past few
years there have been major shifts in world soybean prices and Brazilian
frontier land prices have moved accordingly.
should be noted that land appropriate for pasture, Eucalyptus and
oil crops such as jatropha or castor beans is typically priced in
reais--the local currency--per hectare and not sacks of soybeans
per hectare. For the foreign investor investing in US dollars ro
Euros, an important factor influencing the dollar/Euro price per
hectare is the exchange rate. With the appreciation of the real
in the last few years, the dollar/Euro price of land has increased
transaction prices vary with payment arrangements. There is no institutional
source of credit for land purchase in Brazil so land is typically
sold with seller financing (see Financing
and Credit). With seller financing the transaction price will
be higher than a cash sale price. Cash sales are rare and when they
occur, prices are often significantly discounted.
There are wide price disparities in land prices. Developed land
sells for much more than undeveloped land. Highly productive cerrado
land--land cropped for 7 to 10 years or more--with electricity,
good access and location close to input and output markets brings
the highest prices while remote, undeveloped, dryer land is far
cheapest land in Western Bahia is located in lower rainfall areas.
Much of this land is not suitable for dryland crop farming without
irrigation. The potential productivity of this land is as great
as land in high rainfall areas, but requires investment in irrigation
infrastructure to achieve high productivity levels.
Western Bahia, most of the land in the high rainfall areas has been
opened However, there are a few tracts that remain virgin. These
tracts often have "problems" such as being tied up in
unsettled estates, high debt load or ambiguous ownership.
Time and Investment Payoff
fertility investments typically do not pay off on dryland farming
the first year. Soybean yields two to three years after opening
will be good, but several years of fertility investment and soybean
production are needed before newly opened land can become sufficiently
fertile to produce corn and cotton (see opening
Put another way, soil fertility expenses on new land during the
first few years are high relative to returns. Land cropped 7 to
10 years has sunk investment in soil fertility. Per hectare production
costs may be nearly the same on new and developed land, but returns
will be higher on developed land due to higher yields.
short, higher land prices for developed land reflect the time and
investment needed to boost soil fertility.
Newly opened irrigated land becomes productive in a shorter time than does dryland. This is due to soil biological/biochemical interactions. On dryland, these interactions essentially stop during the dry season. On irrigated land producing two to three crops per year, the interactions take place continuously.
A decision buyers face is whether to buy virgin land or developed
land (there is relatively little irrigated land on the market).
This decision is not always a matter of choice. The amount of developed
land for sale in frontier areas is less than the amount of virgin
land for sale. Millions of hectares of dryer virgin land are available
and can be readily purchased in large tracts of 5,000 ha, 10,000
ha or more.
In Western Bahia, the demand for improved and virgin land is rising and land prices are increasing. As noted above, much of the virgin land has been opened. In these areas farmers can no longer expand simply by opening new land. Consequently, they are bidding up prices on developed land. Brazilian and foreign firms are buying large tracts of virgin land in the dryer areas for irrigated agriculture. Using 100ha-pivot irrigation systems, they are opening the land to produce high value crops such as coffee and cotton.
Cheaper Land in New Areas
areas of the cerrados to the north of Bahia, land is considerably
cheaper. For example, in newly opening areas in the states of Piauí
huge tracts of flat-as-a-tabletop land
with good access are on the market for a fraction of the price of
land in Western Bahia