Higher farmland prices in France

According to a report recently published by Agreste1 – the statistical division of the French Ministry of Agriculture - farmland prices in France rose by 66 percent between 1997 and 2010. This disparity can be partly explained by the arrival of new players on the available farmland market, in particular individuals and communities that buy land at prices often higher than those quoted by farmers.

The trend is not limited to France. In fact, prices of farmland in Spain for instance were multiplied by 2.6 times between 1995 and 2008, and according to the “Rural Land Market Survey” published by the Royal Institution of Chartered Surveyors, the UK farmland market remains strong with a 14 percent price increase in the country’s North East during the 2011 first half, due to the high level of demand and the lower level of supply.

The situation is raising some concern, especially in an environment where farmland is coveted by a growing number of players, as underlined in one of our previous articles2. Indeed, higher farmland prices and their growing attractiveness in a context of rising agricultural prices should not lead some players to envision an opportunity in terms of speculation and profits. That might inflame the already high volatility of agricultural commodity prices and contribute to the creation of a real estate bubble that would tighten already turbulent markets.