Sugarcane expansion and farmland prices in S\xe3o Paulo State, Brazil

Alex Wilhans Antonio Palludeto,Tiago Santos Telles,Roney Fraga Souza,Fábio Rodrigues De Moura

doi:10.1186/s40066-017-0141-5

Abstract

BackgroundBrazil is the world’s largest sugarcane producer, and its production is concentrated in south-central and northeast regions, particularly in the state of São Paulo. The land use change, principally from the increasing sugarcane production, may reflect in the farmland prices. The aim of this study is to evaluate the extent to which agricultural land prices in São Paulo are determined by variations in cultivation and prices of three products that represent a significant share of agriculture in the state: sugarcane, soy and corn, in a low-inflation environment.MethodsAnalysis is based on data from the Rural Development Offices (EDR) from 1997 to 2013. A simple panel data model is constructed with land price as the dependent variable, subdivided, according to the definition of the São Paulo State Institute of Agricultural Economics, into first- and second-class croplands. Cultivation area, unit price of the products, and lease value are explanatory variables, according to each crop. Inflation and the overall production value of São Paulo’s farming production, excluding the production values of corn, soy and sugarcane, also serve as explanatory variables.ResultsThe results show that in São Paulo, although part of the land price variation can be explained by the variables associated with their productive use, the impact of inflation indicates that land’s function in storing value contributes significantly to land prices.ConclusionsThe most prominent conclusion is that expansion in sugarcane cultivation has led to higher farmland prices in the state of São Paulo.

Highlights

Brazil is the world’s largest sugarcane producer, and its production is concentrated in south-central and northeast regions, in the state of São Paulo
Studies of land use changes and farmland prices are very useful to policy makers, who need to be able to identify the determinants of such changes
In Brazil, the large fluctuation in rural land prices during the periods of high inflation that extended throughout the 1970s, 1980s, and early 1990s stimulated several studies on the Brazilian land market

Summary

Introduction

Brazil is the world’s largest sugarcane producer, and its production is concentrated in south-central and northeast regions, in the state of São Paulo. The aim of this study is to evaluate the extent to which agricultural land prices in São Paulo are determined by variations in cultivation and prices of three products that represent a significant share of agriculture in the state: sugarcane, soy and corn, in a low-inflation environment. As noted by Reydon and Plata [41], in the years immediately following implementation of the Real Plan, there was a marked drop in agricultural land prices in the country. According to these authors, this devaluation occurred as a result of the reduced inflation rate, which diminished

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Results