Most farm press is all abuzz about the huge gains in farmland prices — especially in Saskatchewan. Now, everyone seems to know that Saskatchewan land prices are much below most provinces, so outside money is scrambling to get in on the ground floor and make a killing.
I was raised in a rural municipality where much of the land is level, stone free Regina heavy clay soil — some of the best land there is. I have not searched actual titles but some folks tell me that some sales of flat heavy clay land are at $2,000 per acre.
I see no way that our agriculture system can make that a paying proposition in the future. There is a fundamental fact that folks are missing.
Take a look at the soil zone map of the Canadian Prairies. A big chunk of Saskatchewan’s arable land is in the brown and dark brown soil zones, also known as the Palliser Triangle — the arid zone described by Captain John Palliser around 1860.
Regina heavy clay is very good land. It holds a lot of water to keep a crop growing a few weeks without rain. But, when it has little moisture from past rain and a drought comes along, it is no better than a pile of sand. And, some years it rains and some years it does not. We have had a very good string of high rainfall years.
But, the other side of the average will come. The land bought at $2,000 per acre will be back on the block for very much less.
“Henry is crazy,” you say. But, just take a peak at the chart showing land prices.
This chart is a few years old — when the final stats are in for 2011 and 2012 I will update the graph The message is clear. We are in a huge bubble similar to the 1980s and it will pop like a birthday balloon.
The other fact outsiders do not realize is that our youthful glacial landscape is fundamentally different from geologically older land that has a developed natural drainage system. Even much of Alberta, where the glaciers did a “once over lightly,” has a much better drainage system than our pothole country. In years when there is a lot of snowmelt and/or rain there are dozens of potholes to dodge on some Saskatchewan quarters. Many quarter sections deliver little or no water beyond their boundaries.
The bright spot is a once in lifetime financial opportunity for older farmers with no young generation ready to take over. Many have been hanging on waiting for this. They are selling out and laughing all the way to the bank. Have a happy retirement — well deserved.
For those buying side: “caveat emptor” — buyer beware. †