Farmland values across Canada increased by an average of 6.6 per cent in 2018, according to a recently published report by Farm Credit Canada (FCC).
Average farmland values increased across all Prairie provinces. Saskatchewan and Alberta saw the highest average increase, both at 7.4 per cent, while Manitoba was below the national average at 3.7 per cent. Manitoba land increased by five per cent in 2017, and 8.1 per cent in 2016.
In every province except British Columbia, land values increased less in 2018 than in 2017. Farmland values gained 8.4 per cent in 2017 and 7.9 per cent in 2016, according to previous reports from FCC. Land values across Canada increased significantly in the period from 2011 to 2015, but have flattened in recent years.
In 2018, the value of less expensive land increased at a higher rate than land priced at a premium, indicating that producers are purchasing land based on proximity, in order to expand currently farmed acres.
“There was a strong demand from producers for lower-valued land, which explains part of the average value increase recorded in some regions,” said J.P. Gervais, FCC chief agricultural economist.
“It’s a strategic investment that can pay off, if the operation is able to extract more from that land and improve its overall efficiency.”
While the short-term outlook is mired with global trade uncertainties, land values are expected to increase slightly for years to come, thanks to continued demand and tightening supply.
“Demand for land will likely remain where it is. If supply remains tight, which I think it will, the long-term outlook remains positive,” said Gervais.
The Bank of Canada’s announcement on April 24, which held off raising interest rates until further notice, indicated that Canada’s economy may contract slightly. Because of this, Gervais stressed the importance of a risk management strategy when considering farm expansion.
“Production risk, marketing risk, and financial risk all should be finalized closely to ensure farming operations aren’t exposed to undue risk,” he said.