Stable rent price boosts profits while land values grow
Farm Credit Canada (FCC) has been tracking farmland rental rates and values over the past five years. In 2024, average farmland values rose 9.3%, a slower yet significant increase. Despite this, rental rate trends were more moderate, with Canada’s national rent-to-price (RP) ratio at 2.50%—down from 2.70% in 2020.
The RP ratio is calculated by dividing the rental cost per acre by the farmland value per acre. Most provinces maintained steady RP ratios, but Saskatchewan and New Brunswick showed no change, even with high land value increases. Rental agreements tend to lag behind changes in land value.
Renting land has proven to improve annual cash flow compared to buying. Using a model based on a 25% downpayment and 25-year amortization, renting was more profitable per acre across all provinces, except Prince Edward Island (PEI) in 2020.
From 2020 to 2024, rental profits rose in Alberta by $77/acre, in Saskatchewan by $58/acre, and in Manitoba by $95/acre. Ontario and Quebec showed even larger gains, with rent profits increasing by $620/acre and $368/acre respectively. Atlantic provinces also experienced improved cash flow, especially PEI, where rent now gives a $147/acre advantage.
However, owning land brings long-term benefits. Between 2020 and 2024, land values increased by $1,200–$1,500 in the Prairies, and by $6,000–$9,200 in Central Canada. Though renting helped cash flow, owning land led to strong asset growth.
In summary, producers must weigh short-term profitability from renting against long-term gains from owning, based on financial goals and local market conditions.
Photo Credit: istock-alenamozhjer