The drop in prices for ethanol and sugar in the last two months have precipitated a decline in Brazilian land prices in sugarcane areas for the first time in 12 years.

Many sugar mills and crushing plants are facing financial hardships in the wake of the global economic crisis and the drop in commodity prices. Four major mills have gone into bankruptcy and there has been a 45% reduction in the price of land, according to Carlos Aguiar Neto of Brasil-Agro. “We are seeing a drop of 45-50% in the price of crop land in some sugarcane areas, where the owners are facing financial difficulties,” he says.

The result is that billions of investment dollars are flowing into Brazil from large American players; Louis Dreyfus announced on Friday a US$1 billion investment planned for the Brazilian sugar industry.

Brazil boasts more than 400 sugarcane ethanol mills in the country, with around 8.5 million hectares of land devoted to the production of sugarcane. Other farmland devoted to wheat, soy and beef, however, are remaining very stable in price.

The Brazilian government has injected US$164 billion into the economy in the last two months, mostly to banks and corporations in order to lift the economy during this delicate financial period.