WESTERN PRODUCER — The value of Canadian farmland continues to rise, despite interest rates that are supposed to control inflation.
From July 2022 to June 2023, farmland prices in Canada jumped by 12.2 percent, says an FCC report released Oct. 4.
In Saskatchewan, farmland values increased 17 percent during the period, the largest gain of any province.
“Even if higher interest rates are slowly eroding buyers’ purchasing power, limited availability of farmland for sale is generally still pushing prices higher,” FCC said in its report on farmland values at the mid-point of 2023.
“Higher borrowing costs and pressures on the Canadian and global economies have made farm operations cautious regarding capital expenditures and investment. On the other hand, a limited supply of farmland available for sale and robust farm income have contributed to higher land values in the first six months of 2023.”
As an example of the demand, even with rising borrowing costs, the value of Saskatchewan farmland increased 11.4 percent in the first six months of this year, FCC said.
The national and provincial boom in farmland prices is directly correlated to producers having money in their pockets.
FCC predicts that farm cash receipts will increase by 6.6 percent in 2023 with national farm receipts topping $95 billion.
Nonetheless, there are some geographies where interest rates could be dragging down farmland sales and prices. The Bank of Canada overnight rate now sits at five percent, which means mortgage rates on farmland could be six to seven percent.
In Alberta, farmland prices increased by six percent from July 2022 to June of 2023 and only three percent in the first six months of this year.
In Manitoba, FCC noted that buyers have become reluctant to purchase the most valuable farmland — priced at $5,000 to 6,000 per acre.
“The Eastman and Central Plains-Pembina Valley regions have the highest average prices and the lowest growth recorded in the last six months and the last 12 months.”
J.P. Gervais, FCC’s chief economist, added that farmers are “being cautious with their investments and capital expenditures,” given higher interest rates and dramatic increases in farm input costs.
Buyers may be focusing on regions where farmland is underpriced, relative to crop yields. Saskatchewan Crop Insurance Corp. data shows that canola and spring wheat yields in northern Saskatchewan are significantly higher than southern regions of the province.
“(But) the northeast region stood out with the strongest demand, leading to above-average.
“Low precipitation has led lately to an increased demand in heavy clay soils, where moisture retention has been rewarded with higher prices.”
Contact robert.arnason@producer.com
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