The buying and selling of farms are recovering, leaving unsatisfied demand for the main producing regions of Argentina
It happens amid the instability of stock and financial assets in the world, the acceptable values for commodities and the price of land.
The instability of the stock market and other financial assets at a global level, plus the high value of commodities and land, are three of the factors that weigh more and more on investors when buying a farm. These elements put the activity of the rural real estate market throughout the country on the rise. To the point that currently, the demand for agricultural land in the core zone is now totally “unsatisfied”.
This was stated by José María Bauzá, president of the Argentine Chamber of Rural Real Estate (CAIR), in dialogue with LA NACION, who also explained that medium to large-scale operations returned in value this year. Other specialists in the sector agreed, who also specified that while the price of a hectare of a good agricultural field in the core zone had been oscillating between US$12,500 and US$14,500, lately, they have gone on to carry out operations closer to the $14,500.
“Until the end of last year, there was movement, but with few operations completed because the seller’s expectations were far from the buyer’s offers, 20 or 30% below. However, towards the end of 2021 and the beginning of 2022, a different dynamic began, especially for purely agricultural fields,” Bauzá explained.
In that sense, he indicated that the activity began to rise in February. This trend continued until May and stabilized in June. Last July, with the resignation of Martín Guzmán[al Ministerio de Economía] and the soaring of the dollar, the activity stopped.
However, in August, there was a rebound: “Today, about high-value land, which is high-quality, high-yield land, demand exceeds supply.”
According to Bauzá, this phenomenon occurs because, on the one hand, agricultural commodities rose and, on the other, because “The instability of the stock market and other financial assets at a global level led to wanting to have a shelter and a change of position in tangible and finite assets such as land.” In addition, Russia’s invasion of Ukraine increased energy costs with the consequent value rise.
“The land was left with delayed values about the aforementioned factors and the values similar lands have in the region’s countries,” he pointed out.
According to the latest CAIR report, the “Rural Real Estate Market Activity Index” (InCAIR) for August was 37.06 points, which showed an improvement of six points compared to July. The index is compiled based on searches, queries, field sales publications, and operations.
Faced with these values, in CAIR argued that “the rural real estate market is slowly shedding local political and economic ups and downs, since external factors such as inflation in hard currencies, the value of commodities and the land, weigh more at the moment of decision making”.
For his part, Horacio Madero, director of Compañía Argentina de Tierras SA, indicated that the reactivation took place mainly from April and May, with more fields offered and consultations they began to materialize in the middle of the year “not only with sales above US$1 million to US$3 million, which were of the magnitude of those that had been made in recent years but also some more important”.
He said the buyers “changed their attitude and are more willing to make the investments they had been analyzing for a long time.” According to Madero, this change of position in some cases is because “they already had the money for an investment and they bet on a change of government next year and that this improves the general situation of the country.”
“Prices are firmer; Within the range of values that were managed in agricultural fields, between US$12,000 and US$14,500 per hectare, lately there have been some operations closer to the ceiling than to the floor,” he said. Clarified that so far, there has been no general rise in values. “Although the market has activated a bit, there is still not a significant number of operations that support a rise,” he added.
For the expert, “ there is not as much supply of the most demanded fields at the moment, which are mainly agricultural, or the owners of these fields aspire to higher or more attractive values in general than what they would be willing to pay in the first place. investor ”.
Federico Nordheimer, director of the rural real estate company Nordheimer, agreed with Madero regarding land values. He indicated that from the peak in 2011, with sales that reached US$18,000 per hectare, to US$12,000 after the PASO of 2019, this year, they were reaffirmed closer to US$15,000. He argued that the first half of 2022 was good because three factors made “farms attractive again.”
He first spoke of the “financial collapse of the US stock markets, with a 30% drop that made bigger players want to participate in the field in search of a more stable investment .” Secondly, Russia’s invasion of Ukraine had an influence, which triggered commodities, making it attractive to invest in food. Finally, there is the issue of food security, which means more attention is paid to agricultural production.
Source: La Nacion