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Farmland values increase not as steep in 2014

Published on 04 May 2015

Average farmland values in Canada continued to rise in 2014, but the climb wasn’t as steep as the previous year, both nationally and in many key agriculture regions, according to the latest Farm Credit Canada (FCC) Farmland Values Report.

Average farmland values in Canada showed a 14.3-percent increase in 2014, compared to a 22.1-percent increase in 2013. The rate of increase also slowed in many key agriculture regions, including Saskatchewan, Alberta, Manitoba, Quebec and Ontario.

Manitoba and Saskatchewan showed the most significant change from 2013 to 2014, slowing from an increase of 25.6 to 12.2 percent and from 28.5 to 18.7 percent, respectively. In these provinces, location and soil quality continued to play a significant role in creating differences in land values from one region to another.

“While the increases are still significant in many parts of the country, they do suggest we are moving toward more moderate increases for farmland values,” says Corinna Mitchell-Beaudin, the company’s executive vice president and chief risk officer. “This is good news for producers since gradual change in the value of this key asset is always better for those entering or leaving the industry.”

Other provinces, including British Columbia, Nova Scotia, New Brunswick and Prince Edward Island, continued to see single-digit increases, while the value of farmland in Newfoundland and Labrador remained unchanged from 2013.

J.P. Gervais, the company’s chief agricultural economist, has been predicting a “soft landing” for farmland values since crop prices began moving closer to the long-term average following abnormally high prices due to the 2012 U.S. drought.

While lower interest rates make it tempting to buy land, Gervais emphasizes that producers need to exercise caution.

“Interest rates will eventually increase, even if this is not on the 2015 horizon,” he says. “Expanding world stocks of grains and oilseeds could bring prices down further, creating tighter margins.”

Tighter profit margins may also affect the land rental market. Rental rates usually take a little time to adjust downward following lower grain and oilseed prices. Multi-year leases are also gaining in popularity.

“Producers should be encouraged that a weak Canadian dollar, expanding trade agreements and growing world food demand are helping to enhance the demand side of the market for Canadian commodities, creating a positive long-term outlook for agriculture,” Gervais adds.

“Land is a valuable asset, and there really isn’t a one-size-fits-all formula for determining when to buy or sell,” Mitchell-Beaudin says. “Producers really need to take a close look at their operations and ensure they can manage through a number of scenarios when it comes to revenues and expenses.”

To view the farmland values report, video and historical data, visit the FCC website.  PD

—From Farm Credit Canada news release

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