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Farmland Investment in Europe

Prices for agricultural land in Europe have been growing steadily despite the economic downturn as the world population continues to grow and more foods has to be produced. Average price of agricultural land in France reached USD 7,000 in 2009 from USD 4,500 in 2007. Farmland prices in other European countries including Benelux continue to grow at a similar pace.

Same trends of agricultural land price increase are seen in Argentina, Brazil and the USA. Prices for farmland grow fast not only due to increasing demand for food but also due to the worsening condition of land itself resulted by intensive cultivation and extensive use of chemical fertilizer, pesticides and herbicides.

Agricultural lands in Eastern European Poland, Hungary, Romania and Bulgaria have soared in the past couple of years as the countries joined European Union. Farmland investment figures in Poland have now reached USD 20,000 in some areas with a better quality soil. Cheapest uncultivated agricultural land in Bulgaria is quoted at EUR 1,900 (USD 2,800) per hectare.

From the point of view of international real estate and agriculture investors the only scalable territories with agricultural land on the planet yet remain in Russia and Ukraine. Of the two, Ukraine has over 30% of the planet’s most fertile black soils and is better strategically located on the Black Sea which makes transportation of agricultural products most efficient.

With the current agricultural land investment rate of USD 600-800 per hectare according to InvestUkraine, the Agro-ecological potential of Ukraine’s soil according to FAO is 6.2 metric tonnes per hectare with current yields averaging at 2.5 t/ha.

Ukraine’s borders with the EU strech along Poland, Slovakia, Hungary, Romanian and Bulgaria by the Black Sea making logistics easy and cost-effective. Agricultural land in Ukraine cannot be purchased yet but long-term lease agreements allow agricultural investors establish effective private farms.  And, as the land sale moratorium is expected to be lifter by the Ukrainian parliament in the coming years, Ukrainian land will pick up an estimated 500-600% in real market value against this year’s investment cost of just USD 600-800 per hectare.

With agricultural lands coming short in Western and Central Europe as well as Americas, investors will have to look further to the east; and there are no doubts that Ukraine will very soon establish itself as the Europe’s main farmland as it once already carried a nickname of the Bread Basket of Europe.