Farmland Values Continue to Rise
November 22, 2011
Farmland values in Canada increased 7.4 per cent during the first six months of 2011, a report that tracks the prices of the rural properties has found.
Farm Credit Canada released its Farmland Value Report for the first six months of 2011 earlier this week. It states farmland values are continuing their upward rise of the last decade.
Saskatchewan saw the highest average increase of 11.6 per cent, followed by Ontario with a 6.6 per cent increase in farmland values. Quebec and Alberta experienced a 4.4 and 4.0 per cent average increase respectively, followed by Nova Scotia at 2.9 per cent and Manitoba at 2.4 per cent. Farmland values were unchanged in British Columbia, New Brunswick, Newfoundland and Labrador and Prince Edward Island.
FCC has been studying farmland values since 1990 through a network of 245 benchmark farm properties. The properties are appraised in January and July using recent comparable arm's-length sales. Sales are selected, reviewed, analyzed and adjusted to the benchmark properties.
Highlights are below and full details of the report, including findings for each province, are located at www.farmlandvalues.ca.
Saskatchewan farmland values' average increase of 11.6 per cent during the first half of 2011 was the highest in the country.
FCC states that strong commodity and cattle prices were the primary reasons for the increase. It's becoming more common for owners to accept rental agreements on their land instead of selling.
The largest increases occurred in the northwest and southeast areas of the province, which experienced good crops and strong commodity prices in the fall of 2010.
Rural municipalities in the southwest and northeast areas of the province were hit hardest with flooding in 2010, which caused potential land purchasers to be more cautious. Consequently, land values did not increase as much during this period.
Ontario farmland values followed Saskatchewan for highest increase, rising average of 6.6 per cent during the first half of 2011.
The most significant increases were in southwestern and northern Ontario. Modest changes were recorded across other areas of the province, with limited or no change in farmland values. Strong demand for land was fuelled by dairy farmers as they continued to purchase additional land instead of dairy quota, which has restrictions placed on it.
Profitability of specialty crops, such as ginseng and vegetables, continued to drive up the price of land in southern Ontario. Dairy operations and cash crop operations increased demand and prices for land in northern Ontario. Large intensive livestock operations continued to seek land for expansion and to satisfy nutrient management program requirements.
Rural residential demand increased in select areas throughout southwestern Ontario and on the outskirts of the Greater Toronto Area. As a result, smaller farms are sometimes purchased by non-traditional buyers. This contributes to increased competition for farmland.
Quebec farmland values increased an average of 4.4 per cent during the first half of 2011. Farmland values have remained stable or increased in the province since FCC began making these reports.
The western part of the province, Lanaudière and Centre-du-Québec, showed a significant increase. Demand exceeded supply, attracting a wide variety of buyers.
The farmland market in sectors located east of the Centre-du-Québec region remained stable, despite challenges facing the pork industry. The number of potential buyers was limited, due to a declining number of producers in areas where pork is the main industry.
In recent months, the Montérégie region was affected by flooding. As limited market information on properties affected by flooding was available at the time of reporting, the value impact on flooded lands was unknown.
Alberta farmland values showed an average increase of 4.0 per cent during the first half of 2011.
Strong demand for good cultivated farmland was observed in southern Alberta. Large producers competed for land, which pushed demand up. Irrigated land suitable for specialty crops continued to be in high demand, with associated significant increases in value. Marginal land suitable for hay and cattle production also saw an increase in demand. Farmland was generally considered to be a sound investment.
In Nova Scotia, farmland values increased an average of 2.9 per cent during the first half of 2011.
Land in the East Hants and Colchester counties experienced upward pressure, mainly from successful dairy farms and commuters in the Metro Halifax area competing for land. Some high prices were paid for good quality agricultural land and demand was steady from part-time farmers and horse operators.
Dominated by dairy operations, a few sales were recorded in the Antigonish area at existing or slightly higher prices for small parcels. Milk quota was unavailable for purchase, which indirectly slowed down land sales.
In the Kentville area, rising prices were observed due to competition within and among various sectors. Supply-managed sectors were confident, particularly the broiler industry and vineyards continued to expand.
Manitoba farmland values increased an average of 2.4 per cent during the first half of 2011.
The most significant farmland values increases were observed in areas where grain farming is the main enterprise. High commodity prices, low interest rates and viewing land as a safer investment all fuelled land prices, even with the late spring, wet conditions and cold summer in 2010.
Despite excessively wet conditions in the Interlake region and in the southwest part of the province last fall, land values remained unchanged in this area.
Acres of unused pasture land in the Interlake region, with open and well-fenced parcels, commanded premium prices as this land can be used for cash cropping, forages or improved pasture. In the Steinbach area, supply-managed dairy and poultry producers bought available land for spreading manure.
British Columbia farmland values remained unchanged during the first half of 2011. The last report showed an average increase of 0.4 per cent.
There was an increase in the value of the best quality land in the Dawson Creek area, primarily due to strong demand from producers hoping to expand with top quality land. In addition, income from the natural resource sector continued to drive demand for land closer to urban areas, which acted as competition for producers looking to expand.
In New Brunswick, farmland values were unchanged during the first half of 2011. This followed a 2.4 per cent increase in the second half of 2010, and no change in the first half of 2010. Values increased or remained static in New Brunswick since reaching a peak increase of 6.3 per cent in the last half of 2008.
In Madawaska and Victoria counties, land sales were for average to above-average quality potato production lands, sold by growers exiting the industry. There was strong competition between area contract growers, especially where land sales were tied to a processing contract volume. However, there was no change in value because the impact of strong competition was offset by reduced disposable income related to challenging input costs.
In the Sussex area, many large acreage properties or former farms were purchased, mostly by non-typical buyers for rural residential or part-time farming purposes.
Newfoundland and Labrador
Newfoundland and Labrador farmland values remained unchanged during the first half of 2011. Values showed no change in the second half of 2010 and an increase of 0.7 per cent in the first half of 2010. Farmland values have increased or remained static since 1993.
Dairy farms are the main agriculture industry in this area and most had adequate land holdings to support their activities. This resulted in little market activity.
Prince Edward Island
In Prince Edward Island, farmland values were unchanged during the first half of 2011. This followed a 3.2 per cent increase in the second half of 2010, and no change in the first half of 2010.
Competition for land in the Summerside area was primarily between contract potato growers, who invested in land and buildings for better product storage and refrigeration. Input costs remained a concern and potato growers continued to focus on improving margins through management practices. Meanwhile, the Charlottetown area showed a limited number of bare land sales during the first half of 2011. Competition for land was between various types of farm operations.
- Source: Allison Finnamore, FCC
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