THE United Nations forecast the world population is to increase by more than 40% by 2050, which will put increasing pressure on food and energy sources.
The growing demand for agricultural commodities across the globe, according to Savills, has to affect farmland values and open up, as yet, untapped locations for investors.
Ian Bailey, Savills rural research said: "During the past few years a bull run on farmland has developed with demand for land worldwide increasing to the point where average values had to rise."
Historically farm incomes have been the key driver behind farmland values with farmers dominating the land market. Today, however high commodity prices and the growing world demand for food has brought it to the attention of private investors and banks, opening up opportunities for investment in emerging markets.
Cultural associations with land ownership.
Within Europe the emerging markets lie within the central eastern European countries (CEEC), where the value of farmland is relatively low compared to the rest of Europe.
Across the CEEC much of the land ownership is fragmented, but in Romania and Bulgaria consolidated ownership will considerably improve values. Land in Poland and the Czech Republic currently commands the highest prices with values in Hungary, where the ownership of land is restricted, being around half of these.
Further afield in South America, land in parts of Brazil is some of the cheapest productive land available. A key factor driving prices here is the cost of the inputs required to improve the land for modern farming practices. Traditionally the land is traded in terms of an equivalent value to soya beans with payment spread over at least four years, cash purchases are uncommon.
Values vary significantly and are usually dependent upon the length of time the land has been cropped.
Mark Syrett of Savills Rural, Bodmin, said: "Brazil offers extremely exciting investment opportunities for both farmland and agribusiness. The climate, agricultural infrastructure and available water resources mean that all the major crops can be grown and in some areas double cropped.
The bio-ethanol industry also is thriving, making both economic and environmental sense as well as providing biomass for electricity generation. Estimates of land available to farm but not at present in production are in the region of 90 million hectares and foreign investment is welcomed."
Increasingly, the farmland markets around the world are becoming more accessible offering new opportunities for investors and farmers, with the number of cross border deals rising.
This demand is often competing with a strong domestic interest in land from non-farmers looking to own land for residential and lifestyle reasons. All of which points to a continued and growing upward pressure on farmland values.
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