Canadian Farmers Optimistic as Land Values Rise

September 27, 2011

Would you recommend a career in agriculture to a friend or family member? If you're a farmer, 80 per cent of you would say yes. If you're not, 21 per cent of you would consider a career in agriculture, and 27 per cent would encourage someone else to pursue it, according to a survey by Farm Credit Canada (FCC).

Consumers who were asked to choose five words from a list associated with the agriculture industry picked "weather-dependent", "struggling", "essential", "under-recognized" and "underpaid" most frequently.

"It's obvious that both farmers and consumers recognize that there are challenges associated with agriculture," says FCC president and CEO Greg Stewart. "It's surprising that the words chosen did not focus on opportunities. There are so many success stories in agriculture and related industries that counter this perception."

Across Canada, FCC reports that farmland values have risen steadily during the last 10 years. In 2010, "Strong demand with limited supply made farmland a hot commodity due to its historic performance as a stable investment and its current income generating potential," says FCC. Values increased by an average of 2.1 per cent in 2010, with Prince Edward Island recording the highest gains, followed by Saskatchewan, Ontario and New Brunswick.

In Ontario, a new report by Re/Max Ontario-Atlantic Canada says that rising commodity values and low inventory is creating a "significant" increase in land values.

"On a national scale, the average farm has tripled in size over the past 50 years," says Michael Polzler, executive vice-president of Re/Max Ontario-Atlantic Canada. "Much of the current expansion is attributed to the booming cash crop business. The shortage of quality farmland has sparked serious competition and exerted upward pressure on prices – a trend that is expected to continue."

The most expensive farmland in Ontario is in the Holland Marsh/Bradford area, just north of Toronto, where prices are as much as $20,000 per acre, says Re/Max. New Liskeard in Northern Ontario was the least expensive in the survey, at $1,300 to $2,500 per acre of tilled farmland.

With the trend to larger farms, the number of farms in Ontario shrank from 85,015 in 2001 to 82,410 by 2006, the most recent figures available, says Re/Max. Farmers are acquiring land by purchasing or renting from adjacent farmers. Retiring farmers are holding onto their land and leasing it to their neighbours, says Re/Max. This "has proven profitable in recent years and less volatile than other forms of investment such as the stock market."

Although end users account for about 95 per cent of Ontario farm ownership, Polzler says investors are "a small, but growing segment of buyers. Until recently, investment activity – common in Western Canadian farmland markets – was a rare phenomenon in Ontario." Another sign that the market is "quite heated at present" is a "trend toward door-knocking and private sales" says Polzler.

FCC says that cash crop producers are leading buyer activity. In parts of Newfoundland and Nova Scotia, dairy and poultry operations are the main driver of farmland demand, with a trend to larger dairy herds producing a need for more forage land. In Ontario, however, dairy quotas are pushing producers to grow cash crops.

Diversification into non-agricultural areas is also becoming a factor in some areas. In Kings County in New Brunswick, last year purchasers were attracted to the area because of employment at the potash mine, and they bought farmland for "lifestyle reasons", says FCC. Re/Max reports that "a growing number of farmers are entering into contracts to host wind or solar power projects, while others opt to permit the extraction of gas and natural resources as seen in markets like Chatham-Kent and Windsor and Essex County. These arrangements have provided an alternate source of income and underscored the budding possibilities that exist for land owners."

Back on the farm, the FCC's Stewart says, "Agriculture matters. It's a major Canadian industry and a noble career option. It's amazing to know you're part of something big. Right here in Canada, producers positively affect people on the other side of the world. We hear that from customers every day. We need to share this information with consumers and young people who are making important career choices."

- Source: Jim Adair, FCC

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