Manitoba Farmland Values Continue Hot

The American humorist could have been referring to Manitoba, judging by the latest report on farmland values by Farm Credit Canada.

Manitoba farmland values increased by an average of 5.9 per cent during the second half of 2009, following gains of 5.5 per cent and 4.2 per cent in the two previous reporting periods, FCC reported April 12.

Manitoba had the highest average increase in farmland values in Canada during the last six months of 2009. The closest province to Manitoba was Alberta with a 3.8 per cent increase, followed by Saskatchewan at 3.4 per cent and Ontario at 3.3 per cent. Overall national values increased 3.6 per cent.

Manitoba’s soaring farmland values are a bit surprising, considering difficulties in the agricultural sector last year.

DESPITE DIFFICULTIES

A late spring, wet conditions and a cold summer delayed crops, although a late fall brought about a successful harvest.

Flooding in the Interlake and drought in the southwest affected forage and crop yields.

Systemic economic problems in the hog and beef sectors are causing producers to leave the industry.

Commodity prices, which remained fairly strong during most of 2009, began to soften late in the year.

But the “serious spike” in commodity prices two years ago has created a momentum in the price of farmland that so far shows no sign of slowing, said Jared Carlberg, a University of Manitoba agricultural economist.

This momentum has created competition for land. That, plus the dwindling number of farmers, drives producers who remain to expand their land base, said Carlberg.

“There is competition for land that has an effect on price that completely lies outside what commodity markets would dictate and where land prices should be,” he said.

“The economies of scale are such that farmers have incentives to become larger. That helps create conditions of demand pressures for farmland even in the face of falling commodity prices.”

LOCAL PREMIUM

Rob Brunel, who himself bought nearly three quarters of a section of cropland near his home at Ste. Rose du Lac last year, said psychology can play a role in deciding to buy land.

“You really have one shot at buying that land when it comes up,” said Brunel, Keystone Agricultural Producers vice-president. “So if it’s in-the-neighbourhood-across-the-road kind of thing, some people are willing to pay a little bit more just because it’s so close.”

Carlberg said FCC’s methodology in calculating farmland values could be flawed because it is based on benchmark property appraisals, not actual land sales.

But the value of land is based on expected discounted future cash sales. So it’s possible that Manitoba farmers foresee future profits and are willing to bid up land prices, Carlberg said.

In its report, FCC said a shrinking hog population in southeastern Manitoba has decreased the demand for land there.

But dairy land in the region is up in value because tougher soil nutrient management regulations require a greater land area for farmers to spread livestock [email protected]

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