Poorer Harvests Weighing on Some Prairie Land Values

Poor harvests are beginning to be reflected in Canadian farmland values, especially in parts of Western Canada.

A mid-year review of farmland values released by Farm Credit Canada on Tuesday showed the average value of Canadian farmland increased by 3.8% in the January-June 2021 period, little changed from the 3.7% gain seen during the same six months last year. For the 12-months between July 2020 and June 2021, national farmland values were up 6.1%.

However, the rate of gain in some provinces was below the national average. For example, the average increase of 1.8% for the first six months of 2021 and the 3.5% gain on a 12-month basis represented the smallest increase in Saskatchewan farmland values in the last 15 years. Indeed, the last time a 12-month increase of less than 5% was observed in Saskatchewan was in 2006.

It is notable that Statistics Canada’s latest farm income report, released last month, showed April to June 2021 total farm cash receipts for Saskatchewan at $3.42 billion, down 10.2% from the same period a year earlier. In fact, Saskatchewan was the only province where April-June cash receipts declined from the previous year.

According to FCC, Saskatchewan farmland values are showing what it described as a mixed trend, with the eastern regions seeing increases in values while the western regional values remain stable. Western areas have been experiencing drier conditions for some time, hurting production levels, it added.

Similarly, Alberta farmland values gained a modest 3.7% in the January-June period, “partly because some areas have experienced several poor harvest years in a row,” FCC said. The highest increases in the province were primarily on the lower-priced land, while the higher-priced land was mostly stable.

Manitoba farmland values increased by 3.5% in the first half of 2021, comparable to the gains of recent years within the province. But with crops currently being affected by drought conditions, it will be important to watch how this impacts land demand in the second half of the year, FCC said.

In contrast, Ontario saw the largest gain in farmland values for the first six months of 2021, with an 11.5% increase (15.4% over 12 months). The midwestern and southeast regions of the province saw the largest increases, FCC said, noting buyers from different sectors, and a migration of producers from higher-priced to lower- priced areas, are competing for the limited amount of land on the market. Demand for Ontario farmland on the outskirts of urban centers is also very strong.