Russian land prices are amongst the cheapest among major agricultural nations, depressed by a switch to selling among farm operators, with even the most expensive sites costing less than one-fifth of French or German values.

The cheapest land, at $250 a hectare, is worth some 2% of those in the major European Union producing states.

Research by SovEcon has estimated the maximum price of Russian farmland at about $2,100 per hectare, in the southern region of Krasnodar, whose proximity to major Black Sea port attracts a premium.

"Farmers in Krasnodar get higher prices for their crops because prices are higher at deep sea ports even than shallow ports," besides values on the domestic market, Andrey Sizov, the SovEcon managing director, said.

However, most Russian farmland sells for a lot less, with the Krasnodar average at $1,711, and land selling for $548 per hectare in Voronezh, in the heart of the black earth region, which avoided the worst of Russia's dryness this year, underpinning yields at the likes of Black Earth Farming and Ekosem Agrar.

In Saratov, in the Volga Valley, land averages $331 per hectare, with some going for less than $250 per hectare.

'Market remains depressed'

The prices compare with an average of $4,500 per hectares in eastern European Union countries, and $11,250 per hectare further west in France and Germany, the bloc's main agricultural producing nations.

Prices in Brazil and the US average $9,000 per hectare, and in Argentina $7,000 per hectare.

"The Russian market remains depressed," Mr Sizov said, flagging the tendency among operators to consolidate landbanks, a tendency highlighted by farm group Alpcot Agro earlier this month, which highlighted a focus on profitable operation rather than maximising area under crops.

"The amount of offers is quite high, but we do not at the moment see any effective buyers."

Ban deterrent

The market's malaise contrasts with the 2006-2008 boom time, when a rush into agricultural investment thrust Russia into the spotlight, fuelling the creation of large landbanks, and the formation of a number of farm operating groups.

However, besides the fallout caused by the collapse in crop prices in 2008-09, amid the world economic downturn, investors have also been deterred from investment in Russian farmland by export curbs, which deny growers the ability to tap high international prices.

"We had several investors talking about buying farmland in 2010," Mr Sizov said.

But when an export ban was announced that summer, amid the worst drought on record, "they halted all their plans".

Market rebound ahead?

Russia's refusal to repeat the ban this season, despite another drought-depleted harvest, is one reason to believe that the country's farmland may become more attractive to investors once again, Mr Sizov added.

Already there are signs of interest from Russian groups, with Metropol, a non-farming enterprise, taking control Sakho, Siberia's biggest agricultural holding company, while A1 Group, part of the Alfa Group insurance-to-gas conglomerate, has said it will look at agricultural investment next year.

Ultimately, Russian farmland "will see an increase in interest from big funds, which are not looking at the country right now", Mr Sizov told Agrimoney.com.

"Looking around the world, there are not many places which have large amounts of land available with water and infrastructure – and most importantly, with land at low prices."