Uruguay Farmland boom has turned to a bust with prices down dramatically

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Prime Uruguay farmland used for grain agriculture has experienced a boom in the past few years, even surpassing beef as the country’s main export item, reaching a price plateau around two years ago when top cropping farms, with irrigation, topped  12,000 USD per Ha in favoured locations.

However many of these operations can be traced to money looking for safe havens, given the earlier world financial crisis, and not necessarily increasing production or looking for high yields. Therefore renting farmland has become a popular instrument for those hands-on farmers who are interested in exploiting the land, be it with grains, oilseeds or cattle for profit. Operating yields for the land owning investors, however, dropped to close to zero.

Prices for Prime agricultural farmland, now ranges between 5.000 and 8.000 US dollars per hectare, taking into account factors such as location, facilities, productivity, transport access, etc.

Renting is a different ball game because payments are usually a percentage of whatever is produced. That is anywhere from 400 to 900 kilos of soybeans per hectare depending on the production capacity of the soil.

Conditions in other important sectors of rural production in Uruguay, such as rice, forestry and cattle tend to be similar. In the rice sector sales of land are virtually non-existent given 50% of the area is in the hands of Brazilian families who have moved to Uruguay over the last decades and are reluctant to sell with sons and daughters following on in the business.

For cattle land, the drop has been more serious with a 40% drop in some regions. Land that would have sold two years ago for 4,500 USD per Ha now could expect to change hands around 2,000 USD per Ha.  At this price level, the land looks interesting for forestry production which is likely to increase if the new paper mill goes ahead in the centre of the country.

Part of these dramatic price movements can be attributed to the main buyer class (Argentine farmers crossing the river in the past to escape the populist Kirchner government’s draconian taxes ) seeing better opportunities now in Argentina whose agricultural section is now booming under a business-friendly new government.

Also, negatively there is a large overhang of farmland belonging to Uruguayan and International Agricultural Funds that bought local farmland at high prices using borrowed money and who are now weak sellers in a weak market.

Ironically the main buyers today are Uruguayans buying back in at the lower prices followed by Americans who are not only buying but seeking residency.

Contact the Gateway to South America team to learn about the best investment opportunities in the region. The company is a benchmark for foreign investors wishing to invest in Argentina, Brazil, Chile, Paraguay, Peru and Uruguay, providing expert advice on property acquisition and disposal.




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