Report shows slower pace for rising farmland values

While lower-valued farmland more often showed a higher rate of increase, and price hikes varied from region to region, Canada’s farmland values on average have booked their slowest year-over-year rate of increase in almost a decade.

That’s according to the annual Farmland Values Report from Farm Credit Canada (FCC), in which the federal ag lending agency on Monday pegged the national average rate of increase for 2018 at 6.6 per cent, down from 8.4 per cent in 2017 and 7.9 per cent in 2016.

J.P. Gervais, FCC’s chief agricultural economist, described the activity in farmland purchases as farmers making more “strategic” investments.

Buying lower-valued land, he said, “can pay off if the operation is able to extract more from that land and improve its overall efficiency.”

Quebec saw the highest average increase in 2018 at 8.3 per cent, with Saskatchewan and Alberta both at 7.4 per cent and British Columbia at 6.7 per cent, FCC said.

Prince Edward Island booked an average increase of 4.2 per cent, Manitoba 3.7 per cent, Ontario 3.6 per cent and New Brunswick 1.8 per cent, FCC said. Nova Scotia saw average farmland values drop 4.9 per cent and Newfoundland and Labrador didn’t show enough publicly-reported land transactions to “fully assess” values.

Of the 51 regions on which the FCC study reported, eight saw an average annual farmland value increase of more than 10 per cent, while eight showed “little or no” annual change and four regions in Nova Scotia and New Brunswick recorded declines.

Fewer land transactions in 2018 track with a tight supply of land available for sale and a softening in demand, Gervais said, reflecting a “levelling off” in farm income, along with “variable” commodity prices and climbing interest rates.

Such factors usually weaken the demand for land “more than what we saw last year,” FCC said, and the relative strength in demand “may have been prompted by the need for efficiency gains made possible by adding acres, especially of less expensive farmland.”

Given the continuing climb in values, FCC said, “now is a good time for producers to review and adjust their business plans to reflect possible pressures on farm income and higher borrowing costs, assess their overall financial position and focus on increasing productivity.” — Glacier FarmMedia Network