Agricultural Land Value Trends

by | Oct 15, 2021 | Blog Posts, Industry Insights

Agricultural land value trends continue to rise.

We last provided a blog on agricultural land values in March 2019, and are pleased to provide an up-date to that blog. As the graph below illustrates the world population has increased dramatically since the Industrial Revolution, circa 1800. (1)The world population growth coincides with access to energy, which led to innovation in creating and managing food supply.
As a full service appraisal firm with offices across North America and completing engagements worldwide, we are often called to assist firms with the valuation of facilities involved in food processing. As many of our clients have grown their facility footprint, we have seen dramatic jumps in the value of agricultural land that provide the inputs for their processing. As the graph below depicts, agricultural land is at premium in certain regions. (2)

Combine the population growth with the effects of climate change and it is easy to see the trend for agricultural land values across the globe has risen and we assert will continue to rise.
Europe continues to lead the pace of growth in agricultural land values.
The Netherlands is the country with the highest agricultural land prices in Europe, with an average price of €69,632/ha in 2019. Prices in Eastern European countries are lower: €3,395/ha in Croatia, €3,361/ha in Estonia, €3,922/ha in Latvia. Conversely, land is expensive in Italy, at an average of €34 156/ha, and in Ireland, at €28 068/ha. (3)

 

In 2019, the exchange rate for Euros to US Dollars was 1 to 1.12; accordingly, 70,000 Euros (the benchmark price per hectare in the Netherlands) converted to $78,400 US Dollars. Converting hectares to acres at 1 to 2.5 meant that the land agricultural land value in the Netherlands was $31,360 US Dollars per acre.

In the United States and Canada, we see the escalation in agricultural land values as well. For 2021, the United States Department of Agriculture shows the benchmark value across the country at $3,380 per acre, up from $3,160 per acre in 2020. (4)In Canada, percentage growth rates for agricultural land continues to grow. The Prairie Provinces have exhibited rise in benchmark values for the last several years. (5)

Given the trend of rising agricultural values, it is interesting to measure the risk of land ownership; this graph illustrates the security of owning land in various countries as developed by Savills Research. They leveraged various reports and data sources to the lay the foundations of the matrix. Savills Research from 2002 to 2016 highlighted the strong and steady rise in the value of farmland globally. (6)

We assert that world agricultural land values will continue to rise in the next 3 to 5 years, in particular in those countries where an adequate risk/benefit score can be achieved, such as shown by the above graph.

 

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