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Informa Economics

Global Farmland Survey and Outlook - First Edition
A Centralized Source of Global Farmland Information, Analytics and Outlook

A Multi-Client Study
July 2014

 

INTRODUCTION

Over the past ten years investment in farmland switched from an asset class limited to farmers, wealthy individuals and a small number of financial institutions to a sought after and even "sexy" asset class that provides risk adjusted returns comparable to, or better than, conventional real estate and equity investments, hedge against inflation and recession, long-term stability and portfolio diversification. A new array of players, including pension funds, private equity, and general investment funds have entered the market lured by recent high returns (Figure 1) and the long-term investment thesis for agriculture and food assets: food consumption growth driven by population growth and accelerated by increased per capita income and constrained by supply of productive farmland will create returns superior to other asset class investments.

Farmland valuations have increased across major farmland supply regions (e.g., U.S., Brazil, and Australia). Moreover, opportunities for short/medium and long-term investment and asset diversification remain very attractive in established markets such as the U.S. and potentially undervalued regions that often may require a more involved investment process (e.g., frontier region markets in Eastern Europe, Africa, new frontiers in Brazil). Note the farmland price differentials across the major countries such as the difference between Western and Eastern Europe as shown in Figure 2.

 

Figure 1. Farmland Price Index Trend in Selected Regions

 

LOOKING FORWARD

Looking forward, the thesis for investment in agriculture in general and specifically in farmland remains very strong: food consumption is expected to double by 2050, but the world cannot double the supply of farmland, thus farm productivity, particularly of the major food and feed crops, needs to increase. Increased productivity leads to increased returns, and hence, higher prices for the existing farmland in existing and developing areas as the productive value of the asset increases. Furthermore, as new farmland is brought into production (e.g., frontier areas in Brazil, Eastern Europe or Africa), it will come at higher costs, thus supporting further farmland price appreciation of existing areas.

Despite the generally favorable long-term macro environment and trends, the current fundamentals have given observers of the global farmland market cause for concern. Row crop prices are well off the peak levels of recent years, certainly a reflection of better supplied markets; however, there is also concern this asset class might be overvalued.  Clearly there is a need for an immediate assessment of current farmland valuations and an on-going need to monitor the underlying drivers of farmland prices on a global basis.

 

Study details, complete prospectus and enrollment form


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Informa Economics

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