Where will farmland prices stop?

Walloon agricultural land has become an investment product. Its price no longer has anything to do with its production value and this is a big problem for young farmers. The brand new Minister of Agriculture, Anne-Catherine Dalcq (MR), makes it her priority. She wants to correct the situation by promoting rental in particular.

Walloon agriculture is essentially made up of family farms, on a human scale, of around sixty hectares on average. Since the 1980s, the situation has changed significantly. At the time, there were nearly 40,000 farms, with an average surface area per farm of around a dozen hectares. Today, there are only 12,500 left for an agricultural population of 22,000 workers. An aging working population preparing for retirement. One of the main challenges for Walloon agriculture is demographic. It is also faced with increasingly tight margins that require a lot of diversification or a lot of land. However, this land is becoming more and more expensive. This creates problems of access to the profession or transmission of farms for the younger generation.

Inflation

Of course, this is not a new phenomenon. But the Walloon Agricultural Land Observatory recently issued a report which has never been so precise in understanding this uncontrolled inflation.

Since 2017, the price of an agricultural hectare has increased from 27,205 to 39,216 euros in 2023. This is an increase of 44% or 6.3% per year. Is inflation to blame? Not exclusively since without it, the increase remains 20% over the same period.

The increase in prices per hectare is observed everywhere in Wallonia, but the price difference remains significant from one agricultural region to another. For example, we will not be surprised to see that it is in Walloon Brabant that the average price per hectare of undeveloped property is the highest in the Walloon provinces: 53,129 euros. But it is more expensive since the loamy lands of Namur are currently trading on average at 64,543 euros per hectare. At the other extreme, a hectare of grassland in the province of Luxembourg will only cost you 19,402 euros.

An investment product

With these prohibitive prices, sales and acquisition movements remain relatively low: less than 10,000 hectares in 2023, or 1.1% of the agricultural area. Three quarters of the movements concerned sales, a quarter concerned donations.

Most of the buyers were still farmers (53%). The question is why are they willing to charge such prices? “Very clearly, even in 2017, we could be surprised at the prices that certain farmers were prepared to offer for a hectare of agricultural land,” explains Marc Thirion, director of DAFoR (rural land development department). This is quite simply because profitability is there: “Profitability is no longer found in the land, linked to the production of cereals, but in the value of capital. Today, at current prices, we see that no farmer was wrong. Agricultural land has become a very good investment.”
In other words, prices are the result of the market. And they actually no longer have anything to do with the profitability of agricultural production. “We are moving away from the model of capital invested in production. Farmers are now investing in a production factor,” adds the specialist.

“Farmers who are able to invest in land are mainly people who are already in place and whose farm already has some form of sustainability,” specifies Renaud Grégoire, spokesperson for the Federation of Notaries. We actually know that it is not the exploitation of wheat that makes it possible to pay such prices. Hence the problem of young people having to settle down. It’s extremely complicated for them to start an activity.” Agricultural land is becoming a speculative product like any other.

Pressure on land prices

Which raises another question: who exactly is putting upward pressure on the price? Here again, the information from the Observatory is valuable. Thus, we notice that the price paid is not the same depending on the actors. A private company not linked to agriculture is, for example, ready to pay 48,590 euros per hectare, while the average, remember, is 39,216 euros.

These companies are therefore clearly exerting pressure on prices. In this regard, the Colruyt company is undoubtedly the most emblematic example. The leading distributor in Belgium buys up land and then rents it back to farmers, not without causing some tension in the community. “But Colruyt remains an epiphenomenon of a larger problem,” tempers Renaud Grégoire. Other companies are at work. But they should not be held entirely responsible.

First, SPW Agriculture estimated that in 2020, only one farm in eight was owned by a company. This is a clearly increasing trend, but in 2023, for example, legal entities (companies) not linked to agriculture represented only 11% of acquisitions.

Then there are companies directly linked to agriculture, which still represent 5% of purchases. They are willing to put in an average of 43,143 euros. To this must be added mixed buyers (natural and legal person) linked to agriculture who even put 51,957 euros on the table and who represent 2.5% of acquisitions.

Which means that farmers themselves participate in price speculation. “This is indeed the case, but they will explain to you that they are obliged to put these prices in order to follow and buy. It’s a bit like a snake biting its own tail,” says Renaud Grégoire.

“It would be too simple to blame them,” replies Anne-Catherine Dalcq (MR), Minister of Agriculture and a member of the inner circle. The increase in prices can be explained by a multitude of factors. First, because it is a finite resource and there is therefore a kind of competition. Then, with inflation, margins decrease in the sector and more hectares must be acquired to increase profitability. Finally, we see that this competition is further reinforced by companies not linked to agriculture which pay even more.”

Promote farm lease

If the agricultural world farms more and more under ownership (+3,263 hectares in 2023), it is undoubtedly in rental and farm leasing that the solution is found to help young farmers. “There is a real challenge in this regard,” confirms the minister, who intends to take the bull by the horns. “The lease has the advantage of allowing farmers to maintain investment capacity, in equipment, for example. Then, the rent is regulated by law, which puts everyone on an equal footing.”
The minister’s desire is to make farm leasing more attractive, via incentive measures. “There is sometimes a fear among owners to lease their agricultural land,” recognizes the minister. First of all, this involves the official launch of the Walloon Agricultural Land Agency in terms of rental and its dedicated website. It must make the creation of a farm lease understandable and applicable by everyone. “Contracting a farm lease should become as simple as a lease for a rental apartment.”

Another aspect concerns public owners. The agency will be able to put them in touch with farmers, free of charge. These include, for example, CPAS which have agricultural land. We are still talking about a potential of 60,000 hectares which can be returned in the form of rentals. Young people are particularly targeted since age will be the most important selection criterion (along with distance, area and quantity).

Also, in the event of the sale of public agricultural land, the Walloon Region has had a preferential right since June 2024. This has not yet been activated, but on paper, it therefore allows the Region to acquire land as a priority, just after farmers. Currently, the Walloon Region has 950 hectares, but the goal is to have an impact on 60,000 hectares.

Finally, the minister adds “installation assistance, outside the family context”. This aid should enable self-employed people who have a passion for agriculture to get started. All these policies must contribute to maintaining agriculture on a human scale in Wallonia, in a context of significant retirements of farmers. “This is my mandate for the next five years,” concludes the liberal.