Land values experiencing a five-year trend of softening growth, Farm Credit Canada finds
By Kate Ayers
Volatile commodity prices, challenging weather conditions and wavering global trade may be contributing to softer farmland values across Canada.
In 2019, the average value of Canadian farmland increased by 5.2 per cent, an April Farm Credit Canada (FCC) release said. That figure compares to increases of 8.4 and 6.6 per cent in 2017 and 2018, respectively.
While farmland values in Canada have steadily increased since 1993, the most pronounced surges in many regions occurred between 2011 and 2015, the release said.
In 2019, Prince Edward Island and New Brunswick experienced the highest increases in property values, reporting growths of 22.6 per cent and 17.2 per cent, respectively, the release said.
Agricultural land values in Ontario increased by 6.7 per cent – slightly above the national average, FCC’s Farmland Values Report showed. The province’s land values have trended upward since 1988.
2019 sales transactions in the province included real estate brokered, private, property auction, sales through tender, and inter-family transfer. Farmers made several sales because of retirement, the report said. Land sales through the tender process seem to be increasing in the province.
Some factors that contribute to increase farmland values in Ontario include strong demand by farmers in the supply-managed sectors, as well as crop producers and investors, the report said. In addition, low interest rates provide a favourable lending environment for progressive producers with large operations who look to expand.
Interest rates and borrowing costs may continue to decrease, J.P. Gervais, FCC’s vice-president and chief agricultural economist, said in a teleconference in mid-April.
Regionally, the northwestern area of Ontario saw the highest land value increase of 11.8 per cent. The south-central and north-central regions followed closely with increases of 7.9 and 7.8 per cent, respectively.
In north-central Ontario, the extension of Highway 407 has also created more pressure on land values.
While these values do not reflect the effects of COVID-19, since FCC staff drafted the report prior to the outbreak, “given the uncertainty, I expect farmers, ranchers and food processors to continue being careful with their investments,” Gervais said in the release.
Producers should maintain a comprehensive risk management plan that can provide some protection from potential economic shifts including changes in production plans, prices and trade, he said in the release.
FCC will examine any effects of the COVID-19 pandemic on farmland values in future reports.
The 2019 Farmland Values Report can be found here.
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