Rising demand for profit yielding land i.e. farmland has activated investors who see buying up land as a lucky chance to get rental money, afterwards selling the land off with multiple margins. Such business troubles the Minister of Agriculture.
Businessmen attracted by appreciating farmland
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«Interest in buying up farmland is obvious. These past years, farmland prices have gone up, sharply. Not so long ago, a hectare cost €400 to €500. Today, it’s at least four times as much,» noted an OÜ Estonia shareholder Jaanus Marrandi, adding that farmland is sure to appreciate further.
Another investor is businessman Aivar Berzin. According to Vello Teor, chief of AS Põlluvara belonging to Mr Berzin’s Vestman group, they have purchased up to 12,000 hectares of Estonian farmland. «We mainly buy close to our real estate and lease it out to farmers. We ourselves raise sheep in the vicinity of Viljandi and produce organic grains. But the main business is leasing,» said Mr Teor.
According to Mr Teor, there is a huge opportunity to make money on farmland, as land price and, therefore, also leasing prices just keep on rising. «Right now, cultivators of land have had many a good year, in a row. Grain price is good and crops above average. Amount of food decreases, people are becoming more numerous,» he explained.
Farmland selling price, according to Mr Teor, is €1,500 to even €3,000 a hectare, rental price being about €100 per hectare.
In 2011 already, AS Põlluvara made close to €1,2m of profit at a €2.5m turnover.
According to Peep Sooman, board member of real estate group Pindi Kinnisvara, farmland does clearly have growth potential. «The world lacks commodities. Every grain is in demand, actually,» said he.
However, the price of farmland and the profit available greatly depends of the location of a plot. «If it’s next to land serviced by Trigon Agri, for instance, its value will definitely rise. A plot in the woods with poor soil quality and no access is worthless,» stated Mr Sooman.
Appreciation of farmland is troubling the Ministry of Agriculture and its head, minister Helir-Valdor Seeder, who thinks farmland ought to be used by farmers, not leasers.
According to Mr Seeder, two problems plague Estonia, when it comes to farmland: firstly that random real estate may be developed on any plot of farmland; and secondly that some companies just mow the hay on their plots and produce nothing. In both cases, access to farmland is restricted to those who would wish to grow something.
With leasing, Mr Seeder sees the problem in land owners grabbing the bigger part of grants meant for farmers. «There’s a large amount of leasing contracts, the price being 80-90 per cent of the grants. The leasing price depending on the size of the grant,» explained the minister.
«Mowing the euro grass to get direct euro aid without any production – that’s a growing pan-European problem,» added Mr Seeder.