Land Banking - Agricultural Land Banking

Agricultural Land Banking

While most land banking is based on the prospect of urban areas expanding at the expense of rural areas, in various parts of the world agricultural land is expanding at the expense of virgin land. The purchase of virgin land that has been identified as suitable for agriculture because of its climate, topography and soil properties, where the buyer has no intention to work the land himself or lease it out, would be agricultural land banking.

Such lands are often rather far away from existing infrastructure when purchased by the land banking investor, therefore prices being low. The investor anticipates that, because of the area's natural productive potential, an agricultural infrastructure (sufficient roads, specialised contractors, grain storages) will develop, with more land put under cultivation and land values multiplying.

Agricultural land banking is found where large tracts of fertile virgin land still exist, where valuations are low and where legislation allows large land holdings (free hold) by domestic and foreign investors. Typical countries for such investments during recent years have been Argentina, Brazil, Uruguay, Paraguay. where land prices appreciated accordingly.

Though the perception that the world’s fertile land is a limited and valuable asset is by no means new, it received renewed public and media attention with the global food crisis, when phrases like peak wheat or peak soil” . were coined.