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Brazil land price growth slows sharply, SLC data show

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Brazil's farmland market has followed those of the likes of the UK's and US's in showing a sharp slowdown, with values struggling to keep up with the country's mounting inflation, data from SLC Agricola signal.

The farm operator - which solely or through its SLC LandCo joint venture controls 308,719 hectares of Brazilian land, an area the size of the UK county of Lancashire – said that the value of its portfolio had increased by 7% in the year to the end of last month.

The increase in the value of the portfolio, as assessed by Deloitte Touch Tohmatsu, to R$3.40bn from R$3.19bn a year before "[validated] the thesis that, even in moments of lower international commodity prices and economic slowdown, prices of land tend to, at least, follow inflation", SLC said.

Inflation in the year to the end of July averaged 7.4%, the group said, although it is on a rising trend, reaching a 12-year high of 9.56%, data earlier this month showed.

Sharp slowdown

On a per-hectare basis, the growth in land values in SLC's portfolio was slower than inflation, at 5.1% to R$11,019 per hectare, although this calculation was muddied by the inclusion this year of 5,600 reserve land at a farm in the north eastern state of Maranhão.

Brazil obliges farmers to set aside some of their land for conservation.

Whatever, the rate of farm price appreciation was significantly slower than in the year to the end of July 2014, when the value of SLC's portfolio rose by 19% overall.

Values on a per-hectare basis rose by 17.4%.

Since 2007, the value of the SLC portfolio has risen by an average of 22.0% a year.

Itau BBA forecast

The slower rate appreciation tallies with a forecast earlier this year from Itau BBA of a slowdown in price growth from the levels of 8% above inflation seen in the past five years.

The Sao Paulo-based bank in January, foreseeing that "above-average global inventories will likely prevent a recovery in commodity prices for a while", forecast "flat land prices, in real terms, in 2015".

The SLC data fail to show a significant divergence overall in price growth between the regions where it operates, which range from north eastern states such as Bahia to the corn and soybean heartland of Mato Grosso.


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