Farmland Values Hold Up in Spite of Weather Challenges

Mar 14, 2022

When it comes to buying farmland, it does not appear that Canadian producers are put off by natural disasters such as floods or droughts.

As part of its annual Farmland Values Report on Monday, Farm Credit Canada did a quick look back in history to try and determine whether farmland values actually suffered in the aftermath of a such a disaster. The short answer is no, with farmers more likely to consider the longer-term revenue stream attached to a parcel of land, rather than the negative impact of any shorter-term weather problems.

“While it’s difficult to isolate the impact of a natural disaster on land values from all the other farmland supply and demand drivers, it seems large floods or extremely dry conditions have had no large detectable impacts on land values,” the farm lender said.

Much of Western Canada baked under unrelenting dryness and heat this past summer, which slashed yields of most crops by at least one-third. And while FCC said the drought may have tempered the upside in 2021 Prairie land values, its report showed average values still increased by 9.9% in Manitoba, 7.4% in Saskatchewan and 3.6% in Alberta.

FCC also found that Manitoba farmland values continued to advance in the wake of previous severe flooding. In 1997, the southern part of the province experienced one of its worst floods, the Red River flood. The same area was also affected by flooding along with the Assiniboine River area in 2009 and 2011. However, average farmland values in the affected areas all went up in the following years. FCC reported higher Manitoba values for 1997 and 1998 (11.7% and 3.4%, respectively). For 2009 and the next few years, FCC reported increases of 11.7%, 4.7%, 4.4% and 25.6%.

As for Saskatchewan, significant dry weather conditions hit certain areas of the province from 2001 to 2003, and then again in 2009. FCC reported a small decline in average farmland values for the province in 2001 (-1.5%). But that was followed by a 3.9% increase in 2002, a 3.1% increase in 2003 and a 1.9% increase in 2004. In 2009, FCC estimated a gain of 6.9%, followed by a 5.7% increase in 2010 and a 22.9% increase in 2011.

The same dry weather conditions experienced in areas of Saskatchewan in 2001-2003 and 2009, were also present in areas of Alberta. Despite those adverse weather conditions, values continued to rise in the affected areas (mostly in the Central region). FCC reported average increases of 4.8%, 4.4% and 8.7% in 2009 to 2011, respectively for the province.

FCC cautioned that higher commodity prices can also sometimes offset yield declines and mitigate the revenue impact from challenging weather. But that does not imply however that revenue expectations aren’t or won’t be affected by changing weather patterns, it said.

“More research is needed to understand the influence of climate change on farmland values,” FCC concluded.

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