The latest Farm Credit Canada (FCC) Farmland Values Report, an annual examination of farmland values across the country, found that in 2015 the average value of Canadian farmland continued to increase.
The report shows that nationally and in many key agricultural regions, the average value of farmland increased at a slower pace last year when compared to 2014. They reported greater volatility, with a higher number of locales where values decreased.
Average farmland values in Canada showed a 10.1 per cent increase in 2015, compared to a 14.3 percent increase in 2014 and a 22.1 percent increase in 2013. All provinces saw their average farmland values increase, with Manitoba experiencing the highest increase at 12.4 per cent. Next was Alberta at 11.6 percent. Ontario was up 6.6 percent in 2015, however that rate was down from 12.4 percent in 2014. The rate of increase also slowed in five other provinces.
The last time the average value of Canadian farmland decreased was in 1992 when it slipped 2.1 percent.
FCC’s chief agricultural economist J.P. Gervais said strong commodity prices from 2010 to 2013 generated high profits for crop producers and contributed to record increases in the value of farmland. Profit margins and demand for agriculture commodities remain strong, mostly due to the low value of the Canadian dollar, he said.
The drivers behind the overall increase can be summarized by a very strong agricultural sector, with strong crop receipts and low interest rates, he said.
“The best-case scenario would be for the average value of farmland to reach a point of long-term stability, where any future increases or decreases are modest and incremental,” said Gervais.
According to the FCC, their average farm value calculations are only one of many factors that should be considered when purchasing agricultural land, including fluctuations in commodity prices and interest rates.
“The difference between the regions of each province varies a lot,” Gervais said. “About half of the areas monitored in Saskatchewan saw little or no increase, or a decrease in farmland values. In Ontario, in 40 percent of areas a similar situation occurred.”
He said he expects 2015 to likely “be a record year when it comes to crop receipts.”
“The weak loonie not only makes our exports more competitive, but gives producers a better price for their crops given that they are mainly priced in US dollars to begin with,” he said. “Profit margins and demand for agricultural commodities remain strong, mostly due to the low value of the Canadian dollar.”