Farmland Values Continue To Climb In Canada

Farm Credit Canada, the country’s largest agriculture and agribusiness lender, has published its semi-annual farmland values report. Canadian farmland prices continued their steady climb last year. Average value of Canadian farmland increased 5.4% in 2020, which closely duplicated the increase of 5.2 percent posted for 2019. J.P. Gervais, Chief Economist with Farm Credit Canada often faces questions about rising land prices. And he said, yes, cultivated land is expensive. But, for the size of Canada, we don’t have a lot of arable land, so it depends a lot on how you look at price versus value.

“And the question I get asked all the time ‘is land too expensive?’ To answer that question, you have to use benchmark it. Because land is paid over twenty years at five-year mortgage rates, and you look at that payment, capital and interest, relative to the income you gain out of the land, it becomes more affordable. But at the same time, it’s still at the second highest level in the last twenty years. Whether you look in the Prairies, central Canada, eastern Canada, land is expensive throughout the country.”

While a number of factors influence farmland price, JP Gervais said the two main drivers continue to be commodity prices and interest rates

“When you look at the drivers of farmland value, you can narrow it down to two things, mostly. Its farm income as well as interest rates. And the farm income for grains and oilseeds and pulses, you’re looking at 18 percent growth in farm income in 2020. Interest rates have been reaching an all-time low. So, all of that combined, 2020 was a pretty good year from a farm income standpoint.”

According to Farm Credit Canada’s latest report, British Columbia cultivated farmland ranges from 3 to $20,000 per acre, with pockets selling in excess of $25,000 per acre. In the Canadian Prairies of Alberta, Saskatchewan and much of Manitoba, cultivated land is selling in a $3,000 plus range, to as high as $12,000 per acre in the more southerly regions. But cultivated farmland in south-eastern Manitoba is selling from $8 to $15,000 per acre. Southern Ontario farmland continues to sell in the highest amounts - especially southwestern Ontario, from 6,000 to 25,000 with some specialty acreage commanding up to $50.000 per acre. Moving eastward into southern Quebec, land values range from 6,000 to a high of 20,000 in the southwestern Quebec area. Further east into New Brunswick and the Atlantic provinces productive farmland is found more in pockets and valleys, so land prices vary dramatically. Farmland on Prince Edward Island typically sells in the 12,000 or higher range due to scarcity of available properties.

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