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Average听farmland听value in Canada continued its steady climb in 2018, driven by fewer, but more strategic investments by producers.
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鈥淲ith the steady rise in听farmland听values, producers are making more strategic investments,鈥� according to J.P. Gervais, chief agricultural economist for听听(FCC). 鈥淲hether it means paying a higher price for land that has potential to be more productive or buying in blocks to improve the efficiency of their operations, producers are sharpening their pencils with an eye on variable commodity prices.鈥�
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The average value of Canadian听farmland听increased 6.6 per cent in 2018, following gains of 8.4 per cent in 2017 and 7.9 per cent in 2016, according to听.
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In Saskatchewan,听average听farmland听values increased by 7.4 per cent in 2018, following gains of 10.2 per cent in 2017 and 7.5 per cent in 2016.
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In all provinces, except for Nova Scotia and Newfoundland and Labrador, average听farmland听values increased.听Quebec experienced the highest average increase at 8.3 per cent, followed by Saskatchewan and Alberta, both at 7.4 per cent, and British Columbia at 6.7 per cent. The rest of the provinces were below the national average with听Prince Edward Island鈥檚 average increase at 4.2 per cent,听Manitoba at 3.7 per cent, Ontario at 3.6 per cent and听New Brunswick at 1.8 per cent.
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Nova Scotia recorded a decrease of 4.9 per cent in average听farmland听values, while Newfoundland and Labrador did not have听enough publicly reported transactions to fully assess听farmland听values.
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Although average听farmland听values have increased every year since 1993, recent increases are less pronounced than the 2011-2015 period that recorded significant average听farmland听value increases in many different regions.
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Gervais said fewer land transactions in 2018 is consistent with a tight supply of land available for sale and a softening in demand, which is a reflection of farm income levelling off, variable commodity prices and rising borrowing costs.
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Farm operators need to exercise caution, especially in regions where the growth rate of听farmland听values significantly exceeded that of farm income in recent years. At the same time, there is still a strong business case for buying more land, but not without carefully weighing the risks and rewards, he said.
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鈥淭here was a strong demand from producers for lower-valued land, which explains part of the average value increase recorded in some regions,鈥� Gervais said. 鈥淚t鈥檚 a strategic investment that can pay off if the operation is able to extract more from that land and improve its overall efficiency.鈥�
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FCC鈥檚听Farmland听Values Report highlights average changes in听farmland听values 鈥� regionally, provincially and nationally. This year鈥檚 report describes changes from January 1 to December 31, 2018 and provides a value range in terms of price per acre.
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Gervais will present the data and what it means in a Facebook video on May 3. To sign up for the video or view听the 2018 FCC听Farmland听Values Report and historical data, visit听.
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By sharing agriculture economic knowledge and forecasts, FCC provides solid insights and expertise to help those in the business of agriculture achieve their goals.听To follow and participate in the discussion on听farmland, visit the FCC Ag Economist blog post at听.
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FCC is Canada鈥檚 leading agriculture lender, with a healthy loan portfolio of more than $36鈥痓illion. Our employees are dedicated to the future of Canadian agriculture and its role in feeding an ever-growing world. We provide flexible, competitively priced financing, management听software, information and knowledge specifically designed for the agriculture and agri-food industry.听As a self-sustaining Crown corporation,听our听profits听are reinvested听back into the agriculture and food industry we serve and the communities where our customers and employees live and work while providing an appropriate return to our shareholder.听Visit听听or follow us on听,听,听, and on Twitter听.听
