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Producers making strategic investments as land values increase, FCC report indicates

J.P. Gervais for Progressive Dairy Published on 28 June 2019

Average farmland value in Canada continued its steady climb in 2018, driven by fewer but more strategic investments by producers.

Whether it means paying a higher price for land that has potential to be more productive or buying in blocks to improve the efficiency of their operations, producers are sharpening their pencils with an eye on variable commodity prices.

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The average value of Canadian farmland increased 6.6 percent in 2018, following gains of 8.4 percent in 2017 and 7.9 percent in 2016, according to the FCC 2018 Farmland Values Report.

In all provinces, except for Nova Scotia and Newfoundland and Labrador, average farmland values increased.

Quebec experienced the highest average increase at 8.3 percent, followed by Saskatchewan and Alberta, both at 7.4 percent, and British Columbia at 6.7 percent.

The rest of the provinces were below the national average, with Prince Edward Island’s average increase at 4.2 percent, Manitoba at 3.7 percent, Ontario at 3.6 percent and New Brunswick at 1.8 percent.

Nova Scotia recorded a decrease of 4.9 percent in average farmland values, while Newfoundland and Labrador did not have enough publicly reported transactions to fully assess farmland values (Figure 1).

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FCC farmland values report – change by province – January 1 - December 31, 2018

Although average farmland values have increased every year since 1993, recent increases are less pronounced than the 2011-to-2015 period that recorded significant average farmland value increases in many different regions (Figure 2).

Canada – Annual percentage change in farmland values

Fewer land transactions in 2018 are consistent with a tight supply of land available for sale and a softening in demand, which reflects farm income leveling off, variable commodity prices and rising borrowing costs.

Farm operators need to exercise caution, especially in regions where the growth rate of farmland values significantly exceeded that of farm income in recent years.

At the same time, there is still a strong business case for buying more land, but not without carefully weighing the risks and rewards.

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There was a strong demand from producers for lower-valued land, which explains part of the average value increase recorded in some regions. It’s a strategic investment that can pay off if the operation is able to extract more from that land and improve its overall efficiency.

The Farmland Values Report highlights average changes in farmland values – regionally, provincially and nationally. This year’s report describes changes from Jan. 1 to Dec. 31, 2018, and provides a value range in terms of price per acre.  end mark

View the 2018 FCC Farmland Values Report and historical data.

J.P. Gervais
  • J.P. Gervais

  • Vice-President and Chief Agricultural Economist
  • Farm Credit Canada

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