Led by particularly strong gains in Ontario, Canadian farmland values continued to push higher in 2021, overcoming pandemic-related supply chain disruptions and drought across the Prairies.
Released Monday, Farm Credit Canada’s annual Farmland Values Report showed an 8.3% national average increase this past year, topping the 5.4% and 5.2% advances observed in 2020 and 2019, respectively. In fact, it was the sharpest average increase in Canadian farmland values since an 8.4% gain in 2017.
The report describes changes in Canada’s farmland values from Jan.1 to Dec. 31, 2021 and covers an entire year of disruptions caused by the pandemic, as well as last summer’s drought that slashed Prairie yields.
The largest increases were recorded in Ontario and British Columbia, up 22.2% and 18.1%, followed by Prince Edward Island (15.2%), Nova Scotia (12.3%) and Quebec (10%). Other provinces showed more moderate average increases, ranging from Alberta at 3.6% to Manitoba at 9.9%. Saskatchewan recorded an average increase of 7.4%, while New Brunswick showed a 5.2% average increase.
Sustained demand for farmland buoyed by elevated commodity prices and historically low interest rates combined with tight supply of farmland available for sale led to growth in nationwide farmland values, FCC said. And while interest rates are pointed higher, borrowing costs remain relatively low on a historical basis.
In Ontario, stable to increasing demand and limited supply of available land were among the factors driving prices higher in many areas of the province, FCC said. Low interest rates and high commodity prices appear to be the main contributing factors in land buying decisions. Demand is coming from large intensive, supply-managed farm operations, cash crop producers and part-time farmers, it added.
Meanwhile, Ontario farmland on the outskirts of urban areas, or within close commuting distance to larger urban areas, has additional competition from various buyer types, such as hobby farmers and rural residential developers.
(A separate assessment of Ontario farmland values, released earlier this year by London-based land appraiser Valco Consultants, pegged the average 2021 increase for 11 counties in the province’s prime southwestern farming areas at 25.6%).
Land markets in Prairie provinces were somewhat tempered by adverse growing conditions, while farmland values in several regions of B.C. were bolstered by limited supplies of available land and proximity to urban areas, FCC said.
“Sharp increases are often a result of local market conditions coupled with relatively favourable economic conditions,” said FCC chief economist JP Gervais. “For areas that reported significant increases, strong demand for a limited supply of land played a key role in bumping up values.”
According to FCC, Producers in many regions were buying or selling land to gain operational efficiencies and to support family farm succession plans, which contributed to the strong farmland market in Canada. Relatively good growing conditions in Quebec, Nova Scotia and New Brunswick added to the upside in those provinces.
Farmland values in Manitoba were also buoyed by stable to increasing demand and limited supply, FCC said, with demand coming mainly from farmers looking to expand their operation. The largest overall increase was 17.6% in the Parkland region, which was well above the provincial average.
In Saskatchewan, the supply of available farmland “could not keep pace with an increase in demand, leading to higher market values,” FCC said. With the tight supply and listings selling quickly, there were fewer active properties on the market. Weather conditions had an influence on market values throughout the province, although the east side of the province generally saw higher increases since it was less impacted by the drought.
As for Alberta, FCC said extremely dry conditions had little effect on farmland values in 2021, since lower yields were partially offset by high commodity prices. However, the majority of land transactions also did take place prior to the full impact of the drought, it admitted.
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