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International farmland still fertile in recession

12:36 | 18.08.09

By David Doyle

International farmland values will remain robust throughout the recession, according to a report from Savills.

The property consultancy said the doubling of the global population since 1960, as well as the loss of around 50m acres of agricultural land a year to economic and industrial development, urbanisation and population growth, was keeping farmland values stable.

Henry Wilkes, director of investment at Savills, said: ‘No wonder farmland values are expected to continue to grow across the world, as food and bio fuel demand increases on the back of population and wealth growth for a finite product, farm land.

‘Technological improvements in agriculture will be vital to feed the world’s population.’

Parts of South America, including Brazil, as well as recent EU entrants such as Romania and Bulgaria, are where Savills anticipated some of the best returns. It said this is because entry values are often low, especially where agricultural production is currently underdeveloped or underperforming.

In South America, Brazil, which has seen growth of 350% since 2000, Paraguay, Uruguay and Argentina have been the strongest perfomers and the research predicted the countries would see the best performance in further upward land price movement.

The research said that in central and eastern Europe between 2004 and year end 2008, Lithuania saw an increase in land values of 550%, whilst Romania and Slovakia recorded rises of 350% and Bulgaria and Latvia 300%. Despite this, land prices are still set to be below global averages in these areas, Savills said.

Ian Bailey, head of Savills rural research, added: 'Although there is now more commodity price volatility, against a backdrop of low interest rates the industry is well placed to weather the current recession and prosper in the future.

‘Areas where land is relatively underdeveloped or under performing and where values are low, and high levels of management skills are available, with working capital you will see higher agricultural profitability and therefore capital appreciation.’

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