FCC report shows farmland rental rates are keeping pace with farmland values.

Apr 30, 2024

Farm Credit Canada has been studying farmland rental rates as compared to farmland values.

Data shows the national rent-to-price ratio in 2023 was 2.52%, reflecting a negligible decline from the previous year.

FCC Senior Economist Justin Shepherd says in 2023 we saw some fairly strong farmland value growth across the prairies, especially in Saskatchewan as well as Manitoba,
while Alberta had a little bit slower growth, but it was still positive.

"What we see in the actual rental rate data is that Saskatchewan and Manitoba, their rental rate or their rent to price ratio that we talked about in the article has maintained. So that means that if Saskatchewan farmland values were up 10 per cent, it means that the rental rates were up about 10% as well to keep that ratio unchanged. In Alberta, we actually saw a slight decline in that ratio. So that means that farmland values increased at a slightly quicker pace than did the actual rental rate in that province."

He points out the rent-to-price ratio on cultivated land in Manitoba and Alberta is 2.4 per cent, while Saskatchewan is a little higher at 3.1per cent

"I think that's partially because the actual price of farmland is worth a little bit less than Saskatchewan. So the rental rate and then there's a bit more demand for rental properties there. So we see a little bit higher percentage."

The farmland rental rate analysis leverages insights from data sets on cash rental rates and the Farmland Values Report.

Rent to Price ratio analysis

Rent to Price (RP) ratio (measured in %) = Cash rental rate per acre / Value of cultivated farmland per acre

With FCC's ratio, trending lower suggests cash rental rates are appreciating at a slower pace than land values, while an increase indicates that rental rates are increasing faster than land values.

Overall, the price of farmland whether to buy or lease depends on the region, the soil type, if it is irrigated and the potential for the type of crop being grown.

Shepherd says there are a number of factors to consider when looking at making any land deal but it all starts with knowing your cost of production and evaluating the risk potential to see if it fits into your operation.

"Is it nearby existing land, or it allows them to diversify? Then there's also demand for rental agreements, where producers are able to expand their land base without taking on too much debt. Also as we show in the analysis there could be a potential cash flow advantage by choosing to rent over land purchases, at least in the short term."

J.P. Gervais, FCC’s chief economist says renting land can serve as a strategic way for new entrants to get established or grow their operations without being burdened with all the upfront costs that come with land purchases.

To hear Glenda-Lee's conversation with FCC's Justin Shepherd click on the link below.

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Video: The FCDC and AgSmart Bring Plant Breeding to a Wider Audience

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One such avenue that aligns with their mission is AgSmart, an event dedicated to showcasing cutting-edge agricultural technologies. The coming together of the FCDC’s annual Field Day and Ag Smart has proved to be a natural fit, fostering a synergy that benefits both parties and propels the agriculture industry forward. The FCDC Field Day took part in conjunction with AgSmart for the first time this week on Aug. 1-2 in Olds, Alta. FCDC Program Director Kofi Agblor and Olds College VP of Development Todd Ormann sat down for an interview with Marc Zienkiewicz to discuss the significance of the two events taking part together and what the future holds.

The Intersection of Research and Technology The essence of the FCDC lies in its dedication to plant breeding and new seed varieties, particularly barley and triticale. While conducting research is essential, it becomes meaningful when its benefits are shared with the wider community. This is where AgSmart steps in, providing a key venue for the FCDC to showcase their research. This union between research and technology creates a holistic and enriching experience for farmers, ranchers, and industry professionals, the pair said.

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The Birth of a Powerful Alliance The idea of joining forces emerged when staff realized the potential synergy between AgSmart and the FCDC Field Day. With just a few days separating the two events, a proposal was put forward to merge them. The marketing and communications teams from both sides worked seamlessly to ensure the essence of both events remained intact, creating a powerful alliance that leverages the strengths of each, Agblor said.

Driving Advancements in Breeding For Agblor, the partnership with AgSmart has tremendous potential to drive advancements in breeding and other technology. With technologies like drones and imaging becoming integral to phenotyping, breeding is no longer confined to vast fields to assess thousands of plants manually. Instead, it benefits from the data-rich insights brought about by smart technologies. These advancements make breeding more efficient, precise, and instrumental in shaping the future of agriculture.

Overcoming Challenges Together While the partnership between Olds College and Ag Smart has been a resounding success, there are challenges on the horizon. Securing stable funding for long-term breeding initiatives is crucial to sustain progress. The college is committed to navigating these challenges and investing in agriculture’s future sustainably, Agblor said.