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Prairie farmland values soar as growers expand

Western Canadian farmland is soaring in value, as farmers expand their lands and look to cash in on high crop prices, a report by real estate organization Re/Max said Monday.

The price of high-end grain-producing land in southern Saskatchewan has jumped 20 per cent on average from last year to a range of $1,200 to $1,800 per acre, while the average price in central Alberta is up 20-25 per cent to between $2,000 and $4,500 per acre of non-irrigated land.

"(With) the strong pricing in cereal grains and beef, a lot of Alberta farmers are looking to expand and (are) buying
Saskatchewan farmland – that has really increased the price," said Elton Ash, regional executive vice-president of Re/Max in Western Canada, from Kelowna, B.C.

"And in the rest of Alberta, Saskatchewan, Manitoba, the largest demand is from local farmers wanting to expand their own operation."

Canada is the world’s biggest producer of canola and the sixth-largest wheat grower. The average Canadian farm grew to a record size in 2011, and the number of farms shrank to a record low, according to Canada’s census. Improving machinery has made it possible to farm larger areas, and size also gives farmers negotiating power for selling their crops.

Grain prices have touched historic highs in recent years on growing demand for food in developing countries like China and India, as well as the usage of corn, wheat and oilseeds in production of biofuels.

This year, severe drought in the U.S. Midwest has raised concerns about supplies falling well short of demand.

As in Western Canada, farmland values in the U.S. have risen sharply over the past several years, and not even this year’s drought could keep prices from climbing in the second quarter.

Along with farmers scooping up more land, funds are steadily amassing large areas of the Western Canadian crop belt, then leasing fields back to farmers to work.

"Certainly we don’t influence the price because we’re not big enough to do that," said Doug Emsley, president of Saskatchewan-based Assiniboia Capital Corp., which owns 120,000 acres of farmland in the province. "But what does start to move the dial is when farmers start to buy land on the basis of farmer economics."

In the past two years, farmers in Saskatchewan, which produces more wheat and canola than any other province, have
seen significant buying interest from out-of-province Canadian residents.

The Saskatchewan government requests identification from out-of-province buyers to verify the land will remain in Canadian hands, said Mark Folk, general manager of the Saskatchewan Farmland Security Board.

But it’s possible that some Canadians may be buying land to hold for foreign investors, he said.

All three Prairie provinces have restrictions severely limiting how much farmland foreign investors can own, Folk said.

Land in Ontario is generally more valuable than land in the west, due in part to greenhouses and the supply-managed dairy and poultry sectors.

Given strong demand and limited inventory of available land, values for Ontario acres grew more rapidly in some areas than on western farms, but prices in other regions were flat, according to Re/Max.

"An inability to buy quota or returns on existing quota have many livestock farmers looking to bare land for cash cropping, while others expand to satisfy supply management requirements," Re/Max said of the Woodstock and Stratford areas in its report.

In another of Re/Max’s sample markets, Ontario’s "traditionally affordable" Grey County, "a serious uptick in demand for ‘working land’ has had a significant impact on values" in 2012, the company said.

In Nova Scotia’s Annapolis Valley, meanwhile, values remain "consistent with last year." The valley microclimate is conducive to growing vegetables and fruit crops, Re/Max said, and while dairy farms have been a land consumer in the region for years, "limited quotas have restricted expansion."

The highest-value farmland in the 16 Canadian markets studied by Re/Max is found in British Columbia’s Fraser Valley, where land that produces fruit and vegetables fetches on average $40,000 to $60,000 per acre.

— Rod Nickel writes from Winnipeg for Reuters. Includes files from AGCanada.com Network staff.

Table: Excerpts from Re/Max’s review of Canadian farmland market trends, in Canadian dollars per acre by market.

Market 2010 2011 2012
Peace River North (BC) n/a $1,150 $1,250
Fraser Valley (BC) n/a $40,000 – $60,000 $40,000 – $60,000
Central Alberta n/a $1,600 – $3,800 $2,000 – $4,500
Southern Alberta n/a n/a $800 – $6,500
Northern Saskatchewan n/a $650 – $1,200 $800 – $1,500
Southern Saskatchewan n/a $700 – $1,650 $800 – $2,000
Southwestern Manitoba n/a n/a $1,200 – $1,500
Windsor/Essex County (ON) $5,000 – $6,500 $5,000 – $6,500 $5,000 – $6,500
-Leamington $7,000 – $7,800 $7,000 – $7,800 $7,000 – $10,000
-Lower Essex County $4,800 – $5,200 $4,800 – $5,200 $5,000 – $5,500
Chatham-Kent (ON) $4,000 – $12,000 $5,000 – $15,000 $5,000 – $15,000
Woodstock/Stratford (ON) $8,400 – $8,600 $9,000 $15,000
South Huron/Mid-Perth (ON) $7,000 – $11,000 $10,000 – $14,000 $16,000 – $18,000
Mid-Huron (ON) $6,000 – $8,000 $8,000 – $10,000 $12,000 – $15,000
North Huron/Bruce County (ON) $3,000 – $5,000 $4,500 – $7,000 $5,000 – $8,000
Grey County (ON) $2,500 – $3,000 $3,000 – $4,000 $3,000 – $6,000
Annapolis Valley (NS) n/a $1,000 – $2,000 $1,000 – $2,000

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