Sask. leads rise in Canadian farmland values

The federal farm lending agency’s latest six-month checkup on the peaks and valleys of Canadian farmland values finds demand for Saskatchewan’s acres, in particular, continuing to catch up with the supply.

While Saskatchewan, home to about 40 per cent of Canada’s arable land, has seen its farmland values rising since 2002, its land market until recently "had historically increased at a slower rate than in other areas of the country," Farm Credit Canada said in its latest Farmland Values report, released Monday.

Ongoing strong commodity prices, and that relatively slow climb in values until now, have led the province to a 10.1 per cent increase in farmland values in the second half of 2011 (July 1 to Dec. 31), compared to increased of 11.6 and 2.7 per cent in the previous two six-month periods.

FCC said its latest study results in Saskatchewan "appear to mirror what’s occurring in the United States, where double-digit increases in farmland values have been reported in several corn and soybean states" such as Nebraska, Kansas and Iowa.

Most areas of the province, FCC said, saw "strong demand from local farmers wanting to expand their farms or purchase the land they were renting. New entrants from other provinces and countries were also bidding on land."

Parts of the province with good-quality acres had fewer market listings, FCC noted, adding that renters were "approaching landlords directly to prevent other parties from bidding and to maintain control of the land." Also, areas with oil and gas revenue have seen "limited sales but strong demand."

"Monitor trends"

"Low interest rates, in relation to inflation, and higher farm income levels have recently led to significant increases in farmland values in some provinces," Michael Hoffort, FCC’s senior vice-president of portfolio and credit risk, said in the lender’s release.

"With interest rates expected to remain at historic lows until 2013, it will be especially important to monitor trends in crop and livestock receipts in the coming year."

In Ontario, where farmland prices overall have been rising since 1993, values rose 7.2 per cent in the second half of 2011, compared to gains of 6.6 and 2.4 per cent in the previous two periods.

The most notable gains there were in southwestern and eastern Ontario as livestock, crop and vegetable producers all want land; also, in the Greater Toronto Area (GTA), commuters are buying small farms for rural residential purposes, as the city’s GO Transit system expands into those areas.

Farmland values in Alberta, having risen since 1993, rose an average of 4.5 per cent during the second half of 2011, following gains of four and 1.5 per cent in the previous two periods.

"Strong agricultural commodity prices, along with increased oilfield activity, appeared to spur confidence in the economy, with land prices either holding their value or increasing," FCC wrote.

Quebec farmland values, which have either held steady or increased since FCC began reporting them in 1984, rose an average of 4.3 per cent in the second half of last year, after gains of 4.4 and 0.9 per cent in the previous two periods, the agency said.

Increases were seen in values on surveyed properties across the province, FCC said, where increases in previous reports were concentrated more in Quebec’s southwest.

The next largest gain in the second half of 2011 was seen in Nova Scotia (up 3.2 per cent from the previous period), where a "limited quantity" of farmland was available to buy.

That gain was followed by Manitoba (up 1.9 per cent, more significantly in grain-growing areas), Prince Edward Island (up 1.5 per cent, largely on demand for potato acres), New Brunswick (up 1.3 per cent) and British Columbia (up 0.2 per cent). Average farmland values in Newfoundland and Labrador were flat during the reporting period.

"Possible variations"

The average national price of farmland has risen by about eight per cent per year since the "general upswing" in commodity prices began in 2006, FCC said — about twice the rate observed in the first part of the decade.

"A more affluent population in emerging economies like China and India is driving the global demand for food which results in crop and livestock prices that have remained above historical averages," Jean-Philippe Gervais, FCC’s senior agriculture economist, said in Monday’s release.

"This helped propel the value of farmland to record highs in North America. It will be important for producers who want to sell or buy farmland to keep an eye on possible variations in Canadian farm income in the coming years."

FCC set up its Farmland Values survey in 1985 with a system of 245 benchmark farm properties across Canada to monitor variations in bareland values. Since land prices vary "significantly" between regions and provinces, value trends are measured on a percentage basis for "a more consistent national approach."

Related story:
Rise in Canadian farmland value accelerates, Nov. 17, 2011

About the author

Glacier FarmMedia Feed

GFM Network News

Glacier FarmMedia, a division of Glacier Media, is Canada's largest publisher of agricultural news in print and online.


Stories from our other publications