The balance sheet of the agricultural sector, released today, gives the total value of all farm equity, assets and liabilities as of Dec. 31, 2023.

The farm sector’s equity reached $784.7 billion in 2023, up $55.1 billion. This builds on two years of double-digit gains, StatCan said.

Every province posted gains in farm equity except British Columbia, which saw a 2.1 per cent decline. Saskatchewan saw the largest increase at 11.5 per cent.

The value of total farm assets reached $923.5 billion, up $62.3 billion from the previous year. Almost all of the increase came from gains in farm real estate value.

Again, only B.C. saw a loss in this category of 2.1 per cent. Ontario posted the largest gain of $19.3 billion or 9.4 per cent.

The value of poultry and market livestock inventories rose nearly 19 per cent, up $2.1 billion to $13.0 billion. The increase is due to higher prices as inventories across most categories were down, StatCan said.

The largest provincial gain was in Alberta, where values were up $1.3 billion.

The value of crop inventories fell 21.6 per cent to $24.1 billion at the end of the year—the first decline in four years. StatCan attributed the decline to lower crop prices and increased crop marketings that led to lower end-of-year stock.

The value of farms’ total liabilities hit $138.8 billion, up 5.5 per cent or $7.2 billion. An $8.3 billion increase in long-term liabilities offset a $1.2 billion decrease in current liabilities.

Total liabilities rose across all provinces.

The interest coverage ratio, which measures farmers’ ability to make interest payments, fell to 3.063 from 5.375 in 2022, indicating a decline in farms’ ability to repay debts. This was the result of lower total net income. However, the ratio is still higher than it was from 2018 to 2021.

Earlier this year, analysts called farmers’ financial position very strong—at least on paper.

At the end of 2023, farms’ solvency ratio (ratio of total liabilities to total assets) was 0.150 and the ratio of liabilities to equity (leverage) was 0.177.

At the end of 2022, the ratio of farmer liabilities to equity (leverage) was 0.180, and the ratio of liabilities to assets was 0.153. Eric Micheels, a professor of agricultural and resource economics at the University of Saskatchewan, called this “a very strong balance sheet.”

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This spring, there is an increase of sales in certain sectors, driven by land stress and owners’ inability to weather another financial or literal storm. Many of these properties are monocultures or singularly focused production units and highly dependent on one source of income from one crop.

Monocultures are great for scaling up and for having one specialized line of equipment, data base, parts inventory, market, husbandry system and storage facilities. These farmers tend to be very good at what they do, are technically advanced and keenly focused on their chosen sector.

However, a monoculture is known to be tough on natural land regeneration if not handled properly and there is no safety net, other than hedging or government intervention through insurance, payout or subsidy.

Risk mitigation has always been important for farmers. Regardless of how nice a day it was when the farm was bought, there will be tough spells before it is sold or transferred.

There is no claim that mixed farms are under less tension from weather events, but something is usually harvestable and saleable. This mitigates crop and financial risk and can also be a labour advantage.

Bringing in several hundred people to harvest cherries and then sending them home is expensive, tough on the employee and does not spread the risk of labour acquisition. A farming operation with a variety of crops can distribute fewer staff over a longer season and, in some cases, create permanent homes for employee families with year-round engagement, especially if any value adding, such as packaging or product creation, occurs on the farm.

Debates around monoculture often focus on loss or lack of biodiversity. There is mounting scientific evidence that highlights the intergenerational advantage of bio-diverse systems. Farmers who like the open fields of a monoculture know the importance of this and practice such actions as no-till to ensure moisture retention.

Those buying land this spring are making a serious investment. The average increase in value of cultivated Canadian farmland was 11.5 per cent in 2023, and there is clear evidence that the cost of owning land in some areas now outstrips its income generation ability.

Regardless of farm size, the operation that uses a model of diversity and maintains and integrates natural landscapes may be more resilient in times of weather and financial stress, as the risk is spread over several enterprises. The big advantages in complimentary biodiverse systems are that water is captured and retained, land is renewed, carbon is sequestered, beneficial insects, birds and wildlife live in a harmonious ecology and there is cash flow in intervals.

Although the system might be stressed, it is not often destroyed when exposed to a series of extreme weather events. It’s something to think about when restructuring the farm for the future.

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The climb hasn’t stopped. The figure rose steadily since crossing the $100-billion threshold. As of 2022, the most recent year on Statistics Canada’s published record, it had reached $138.9 billion.

Interest rate increases since early 2022 also led to larger farmer payments on that enormous principal.

Added to that, analysts are expecting tighter margins this year. Farm Credit Canada predicts a 4.8 per cent decline in farm cash receipts on the heels of softening crop prices and expensive inputs. Does it mean farmers are in a tough spot financially?

Experts say no, at least not on paper.

Why it matters: Seed and fertilizer are expensive. Farmland values have been rising in double-digit percentages for years. With bearish market signs ahead, farmers may be contemplating their financial futures.

On aggregate, experts maintain that farmers are in a solid financial position. Farm debts have reached an eye-watering sum, but farm economists note that total asset values have also been climbing steadily.

According to Statistics Canada’s agricultural balance sheet, that $138.9 billion of debt in 2022 was matched by $861.4 billion in assets at the end of that year. Farm equity was $729.9 billion. Of that total asset value, most was tied up in land.

Between 2014 and 2023, average farmland values across the country grew an average 9.1 per cent each year, FCC wrote in a March 27 article. The last few years have pressured that number upward.

The most recent FCC farmland values report, released in March, said Canadian farmland values in 2023 had risen 11.5 per cent. The year before, they jumped 12.8 per cent.

In Manitoba, recent land value increases were 11.1 per cent in 2023 and 11.2 per cent the previous year, up from 9.9 per cent in 2021 and significantly higher than 2017-20, when farmland value increases peaked at five per cent.

That makes for a very comfortable debt to equity ratio, said Eric Micheels, a professor of agricultural and resource economics at the University of Saskatchewan.

“Debt has room to go up,” he said.

At the end of 2022, the ratio of farmer liabilities to equity (leverage) was 0.180, and the ratio of liabilities to assets was 0.153.

“That’s a very strong balance sheet,” Micheels said.

Some extension publications say that up to a 0.4 leverage ratio would be good, Micheels added. In other words, double the debt farmers had in 2022 with the same sum of equity.

However, those numbers don’t tell the whole story. The bigger question is how all that math translates into reality when it comes time for farmers to pay their bills, manage operating costs and make business decisions.

Micheels looks at current liquidity ratio. It takes a farm’s current assets — such as cash on hand, stored grain or other inventory and accounts receivable — and divides it by all its current liabilities — land mortgage payments, operating loans and other accounts payable.

At the end of 2022, that ratio was more than 3.4. So, if farmers liquidated all current assets, they could pay for their current liabilities more than three times over, Micheels noted.

“That’s the best since 1997,” said Krishen Rangasamy, principal economist with FCC, adding that strong crop prices have contributed to that excellent ratio.

Crop prices softened slightly in 2023, but it’s likely the solvency ratio for farms at the end of 2023 was still strong, analysts have said. Farm cash receipts last year were up 3.6 per cent year over year to $98.6 billion. That compares to $95.2 billion in 2022, a sum that smashed the prior year’s cash receipt total by more than $12 billion.

At the same time, however, there were greater drags on profitability. Input costs were through the roof, with particular concerns around high fertilizer prices in 2022 and general volatility in the fertilizer market lasting into 2023.

Casting doubt

Other financial commentators disagree with that rosy view.

In 2018, with farm debt past the $100-billion threshold, author and data analyst Darrin Qualman sounded a cautious note. Qualman, who is also a director with the National Farmers Union, observed that producers at that time were paying about $3 billion per year in interest.

After paying all expenses, they collectively took home $1.6 billion in net income on an average year while borrowing an additional $2.7 billion per year on average, he wrote.

Qualman suggested that Canadian farmers would have difficulty making ends meet without annual government transfers of $3.1 billion, delivered through various farm supports and subsidies.

Government transfers shot up to $5.94 billion in 2021, Statistics Canada’s farm income reports indicated. It hit $7.35 billion in 2022 and $6.36 billion in 2023, StatCan data shows.

The same rising farmland values that boosted asset values have also boosted debt and made land increasingly unaffordable for younger farmers or those looking to expand, some analysts argue.

“Farmland affordability deteriorated to its worst level in 30 years at the end of 2023 as farmland values and mortgage rates increased,” FCC wrote in a March 27 article.

Farmland values are outpacing the revenue producers can generate from it, FCC added.

Farmland affordability is expected to deteriorate further in 2024 as land values continue to rise, interest rates remain high, and farm cash receipts are projected to drop. 

Feeling vulnerable 

Despite an enviable balance sheet as far as the accountants are concerned, farm group leaders suggest members are feeling less secure about their finances. Last year’s crop was touted by some as the most expensive ever planted, said Keystone Agricultural Producers president Jill Verwey. 

“Combined with the pressure on grain prices right now, it’s probably putting farmers in a tight position going into spring because of the large number of bushels still in the bin,” she said. 

• RELATED: Country Guide: Watch your grain inventory adjustment

“From a cash standpoint, you know, the longer you hold that grain over, it’s costing you more because it’s lost value.”

After soaring to new heights in 2022, prices have steadily softened. Western red spring wheat was worth a little over $307 per tonne on March 27, according to Manitoba Agriculture statistics, down from $411.17 per tonne a year prior. Canola was selling at just over $609 per tonne, compared to almost $766 at the same time last year. 

Input prices have also softened somewhat, but not at the same pace. 

“I think it’s going to be a tighter year this year,” Verwey said. 

On StatCan’s balance sheet, ratios like the acid test (the ratio of quick assets like cash and marketable securities to current liabilities) suggest most of farmers’ liquidity comes from stored grain or inventory rather than cash, Micheels said. 

“When we store grain, we are also incurring a cost of waiting to convert that grain to cash,” he noted. 

And until that grain becomes cash in the bank, uncertainty remains. If prices go up after harvest, the return from storing grain covers that opportunity cost. But if prices fall, the farmer incurs the cost with- out the benefit, eroding profitability of the previous year’s crop. 

“That can lead to a double whammy of pessimism and maybe a determination to continue to wait for higher prices to rationalize the decision to store the grain,” Micheels said. 

There are other costs facing farmers, and they haven’t been static. Property taxes may have gone up, along with hydro costs, said Keith Currie, president of the Canadian Federation of Agriculture. 

In recent years, farmers have also had to deal with the impact of weather events like hurricanes in the east, drought in the west, and various wildfires, last year being one of Canada’s worst wildfire years on record. 

“There’s all these factors that you can’t put on a spreadsheet that come into play,” Currie said.

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Farm Credit Canada put average national farmland value growth in 2023 at 11.5 per cent, down from 12.8 per cent in 2022.

“We had three consecutive years of . . . land values climbing. And so we’re seeing a little bit of a pullback,” FCC chief economist J.P. Gervais said. “It’s still double-digit, still a very significant increase.”

Given global geopolitical events, which have led to significant market volatility in the last few years, Gervais was expecting even more of a pullback.

There was significant variability. Land value growth in some provinces remained above 10 per cent, while British Columbia’s pace actually dipped into the red by 3.1 per cent (although that province also had the highest average land value on a per-acre basis).

The highest average provincial increases in farmland values were found in Saskatchewan, Quebec and Manitoba, with increases of 15.7 per cent, 13.3 per cent and 11.1 per cent, respectively. That’s up from 14.2, 11 and 11.2 per cent, respectively, in 2022.

Rates from other provinces included 10.7 per cent in Ontario (down from 19.4 per cent in 2022), 7.8 per cent in Nova Scotia (down from 11.6), 7.4 per cent in Prince Edward Island (down from 18.7), 6.5 per cent in Alberta (down from 10 per cent) and 5.6 per cent (17.1 per cent in 2022) in New Brunswick.

That’s a change up from 2022, when Ontario, Prince Edward Island and New Brunswick topped the list for the quickest growing farmland values.

The newest report also marked the second year FCC reported on pastureland values. Due to insufficient sales in Ontario, Quebec and the Atlantic provinces, it focused on data from pastureland sales in Western Canada.

The most significant of those were in Manitoba, which saw an average growth of 19 per cent. Saskatchewan recorded a hike of 12.7 per cent, followed by Alberta at 9.6 per cent and B.C. at 7.4 per cent.

It was a generally unaffordable year to buy land, Gervais noted, pointing to the double hit of high interest rates and flagging commodity prices. Actual farmland sales declined slightly from 2022 as producers exercised more caution around investment decisions.

He expects that caution to extend well into 2024 due to continued high interest rates, high input costs and lower grain prices.

In fact, he said, farmland in many parts of the country is less affordable right now than it’s ever been. Fiscal circumstances have also opened up operations to more financial risk.

“It makes it more difficult for young farmers and young operations that have a desire to expand into the industry,” he said.

In the short term, farm receipts of grains, oilseeds and pulses are projected to decline by 13.2 per cent in 2024, in comparison to a 0.4 per cent increase in 2023. Gervais predicted a 4.8 per cent decline in 2024 earlier this year.

He urged producers to action to manage these losses.

“An important part of preparing for inevitable, yet unpredictable, economic changes is not only creating a risk management plan, but also updating it as those shifts in the economy unfold,” he said.

For detailed coverage and regional breakdowns of the latest farmland values report from FCC, see future editions of the Manitoba Co-operator, Alberta Farmer Express, Western Producer and Farmtario.

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The demonstration was organized by the NFU Youth Caucus and Farm Workers’ Working Group. The goal was to demand protection of food sovereignty and help farmers, especially young ones, gain more access to farmland.

Why it matters: Investor ownership represents a major barrier for Canadians to enter a shrinking agriculture industry.

NFU Youth president Jessie MacInnis said young farmers in particular have been feeling the strain of a lack of access to affordable farmland.

“As young people, this is a really critical issue,” MacInnis said. “There are already so many barriers for young people to get into agriculture, and the fact that land prices have risen so much due to the speculative nature of farmland now… that’s a barrier that’s hard for all of us to overcome.”

The demonstration was part of the NFU’s “Lobby Day” ahead of its annual convention, running Nov. 23-25 in Ottawa.

“We’re here today, as one of our lobby asks, to ask the federal government to have discussions with provincial lawmakers to talk about ways that we can actually ban all farmland investment,” she said.

“Essentially, we just want to keep the farmland in the hands of farmers and keep it accessible for young people.”

Ontario farmer Rav Singh said she has had trouble finding land since she began farming two years ago.

“I cannot afford to buy my own land because, again, land prices are increasing.

“We are the next generation of farmers and we are facing a lot of land speculation, the cost of land is rising, which means it is harder for us to start our farms and operate and have job security,” Singh said.

“It’s really important for me to support causes like this, because I would like to continue growing food for as long as I can.”

Singh did not come from a farming background, and lived in the city her whole life before she began farming.

“Up until recently, a lot of people who were farmers were intergenerational farmers. But now, it’s a new wave of people coming in.”

Singh said she thought the wave of young people getting into farming was a way of taking action to build a better future amid concerns about climate change.

Regional board member and Fraser Valley, B.C. organic vegetable farmer Ari Westhaver
said the Agricultural Land Reserve, a provincial designation in B.C. which designates agriculture as the primary use of 4.6 million hectares of land has not done enough to prevent the loss of farmland.

“It’s not preventing investors from buying up farmland,” Westhaver said. “So, while physically it protects farmland from being lost, it does not prevent loss of farmland from farmers into the hands of investors.

“The reason I’m here today as a young farmer is that we’re currently in the midst of a transition crisis, we’re seeing a generational shift where 40 per cent of farmers in … Canada are planning to retire in the next few years, but nobody has a transition plan,” he said.

“The only plan that they have, as deeply indebted farmers is to sell their land for a profit, and the reason they’re able to do so is farmland has been kind of divorced from its productive value, and it’s now something people speculate on.”

The NFU published an open letter ahead of the demonstration outlining its concerns.

“Farmers have the right to determine how their food is produced and need equitable access to productive resources,” the letter read. “Young farmers are up for the challenge. But land speculators and multinational investors are snatching up Canada’s farmland, and with it, our future.”

— Jonah Grignon reports for Glacier FarmMedia from Ottawa.

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Farm groups and lawmakers are concerned that land buys by investors and foreign countries are driving up farmland prices and threatening national security.

Booker’s Farmland for Farmers Act, introduced on Thursday, would ban most corporations, pension funds and investment funds from buying or leasing farmland.

“We must protect farmland from becoming an investment strategy for huge corporations,” Booker said in a statement.

Institutional investors – including Nuveen Natural Capital, a subsidiary of TIAA, and UBS Farmland Investors – own $15.9 billion of farmland, according to the National Council of Real Estate Investment Fiduciaries’ Farmland Index.

Several U.S. senators, including Iowa Republican Joni Ernst and Montana Democrat Jon Tester, have introduced bills in recent months to limit foreign ownership of farmland, citing concerns that adversaries might buy U.S. land to gain influence.

The Senate on Tuesday passed an amendment to the National Defense Authorization Act that would boost federal review of foreign farmland purchases and limit some by China, Russia, Iran and North Korea.

China holds less than 1% of U.S. foreign-owned farmland, according to the Department of Agriculture (USDA). Canada holds 31%.

Jordan Treakle, national program coordinator for the National Family Farm Coalition, said corporate ownership is the more pressing concern for rural communities because of its impact on land prices.

“Most farmers cannot outbid a multinational corporation,” he said.

The average price of an acre of farmland was $3,800 in 2022, a record high and up 75% from 2008, according to USDA data.

Booker hopes to pin his bill to this year’s farm bill, an omnibus package passed every five years that funds farm and nutrition programs, said a staffer.

–Reporting for Reuters by Leah Douglas in Washington.

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Farm Credit Canada’s latest analysis of farmland rental prices says they’re roughly maintaining their traditional linkage, says J.P Gervais, the organization’s chief economist.

“We were curious to see whether that would bring up land rental rates faster,” Gervais said. “Not yet, it appears. Land rental rates seem to be moving roughly at the same speed as land values.”

Why it matters: Understanding the rent-to-price ratio for farmland can help farmers decide whether renting land is a more viable option to free up capital for other needs.

However, there could be a lag in the effect that interest rates are having on the market. “I think we’re going to find out,” Gervais said, but pointed out it could take the better part of this year before it becomes apparent.

Incidentally, he said, while financial markets are predicting a rate decrease as soon as October, he sees that as overly optimistic. “We’ve had a pretty strong labour market, which is sustaining consumer spending,” he said.

“Yes, inflation is coming down, but the economy is still moving forward right now, and a lot of us thought that we would have seen a slowdown already, but we haven’t; the economy is more resilient than everybody expected. I think it’s a bit premature to say that we’re going to get a rate cut as soon as October. I’m starting to doubt even that’s going to happen in December.”

But interest rates are just part of a collection of market pressures affecting rental rates, he said. “There are several economic conditions that impact the cost of renting land in Canada. Land values, the availability of land and its quality can all drive rental prices.”

In mid-April, FCC released its annual analysis of the rent-to-price ratio for cultivated farmland in Canada. Across the country, the rent-to-price (RP) ratio in 2022 was 2.55 per cent, compared to 2.5 per cent in 2021. In Saskatchewan and Alberta, there were slight year-over-year increases. The RP ratio increased to 3.1 per cent and 2.6 per cent respectively, while all other provinces saw decreases.

FCC calculates the ratio by dividing the rental cost per acre by the land value per acre. A ratio trending lower suggests that cash rental rates are appreciating at a slower pace than land values.

Around 40 per cent of Canadian farmland is rented. Typically, renting is less expensive than purchasing, and the lower the ratio, the better the renting option becomes. For young farmers and new entrants, renting is seen as a viable option to free up capital that would otherwise be tied up in purchasing and instead can be put toward financing options for other needs, such as machinery or inputs.

Ultimately, the reason FCC began tracking the RP ratio three years ago was so that it could become a tool to help farmers decide whether renting is the right option for them.

Another important consideration when deciding whether to buy or rent is understanding the relationship between rental rates and cropland revenues. Rental rates as a proportion of crop gross revenues have declined since 2020, but crop input costs have increased significantly, putting pressure on profitability.

“We know that we have lower prices than we had last year,” Gervais said. “So, margins are likely to be lower.” Input costs increased significantly last year but have come down a bit this year.

“I don’t think that the decline is that significant, since, if you look at fertilizer prices, they’ve been trending down, but some of it has already been purchased. The bottom line is, those margins are tighter,” he said.

That said, Gervais warns against making snap decisions based on only a small part of the picture. The decision to purchase or rent land can have long-term implications.

“Do you have your strategic plan in mind? Where do you want to take your farm five years from now? What are the targets you have in mind?” Gervais said. Farmers will sometimes just look at the price differential and interest rates and pull the trigger if their costs per acre can be reduced a little.

While that’s an important factor, he says it shouldn’t be the determining factor. Gervais recommended that farmers stick to their five-year plan and only make decisions if they fit within that plan.

“If you start out looking beyond year one and have that five-year perspective, I think that opens up a bit of a different discussion and maybe different decisions, even facing the same set of numbers,” he said.

The Ontario Agricultural College at the University of Guelph, which surveys and analyzes farmland rents, prices and ratios in that province each year, cautions that rental rates and land values can vary considerably on a given parcel’s specific characteristics, limiting the RP ratio’s use as a guideline.

Also, OAC notes in its most recent survey report, such a ratio doesn’t account for “a host of important factors” such as property taxes and the rate of land appreciation over time — but is nonetheless useful for farmers wanting to compare and assess the returns on a land asset.

“Deciding whether to buy or rent is a strategic decision unique to each producer,” Gervais said. “There is a lot to consider, including interest rates, yields, commodity prices and input costs. Open communication and collaboration between landowners and renters creates a quality, long-term relationship. Matched with a risk management plan and business strategy, producers have the building blocks for success.”

— Don Norman reports for the Manitoba Co-operator from Winnipeg. Includes files from Glacier FarmMedia Network staff.

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Most Canadians are acutely aware of how home prices and rents have skyrocketed in the last 15 years or so. In large cities, investor ownership of condos and houses has attracted enough attention that the federal government was prompted to crack down on foreign buyers.

Since 2014, we’ve been studying changing land tenure patterns in the Prairies, home to 70 per cent of Canada’s agricultural land. Our research reveals three major trends: ongoing farm consolidation, increasing land concentration and expanding investor ownership of farmland, all leading to growing land inequality.

Like the transformation of urban real estate, there is highly contested debate on who benefits from these changes.

Worldwide, investor purchases of farmland increased significantly during the global land grab that was spurred by food price spikes in 2007-08. High food prices, a growing global demand for food and environmental pressures convinced many investors that farmland was a safe bet in an increasingly volatile world.

As hedge funds, pension funds and wealthy individuals poured billions of dollars into farmland, researchers began to write about the financialization of agriculture — that is, the growing influence of financial players and motives over farming and food production.

Our research found that investor ownership of farmland in Saskatchewan was negligible in 2002, but had climbed to nearly one million acres by 2018 — almost 18 times the size of Saskatoon. While Saskatchewan sought to tighten rules on farmland ownership in 2016, this seems to have done little to slow the pace of investor acquisitions.

Robert Andjelic, an investor from Alberta, is now Canada’s largest landowner, with 225,435 acres in 92 Saskatchewan rural municipalities. His company leases farmland to dozens of farmers and undertakes “land improvements,” such as clearing trees, brush and other natural habitat, as well as filling in wetlands in order to farm from corner to corner of every parcel.

Another major investor is Avenue Living, which has a foot in both urban real estate and farmland. It has a portfolio of some 83,000 acres.

As investors gobble up more land, there is growing unease among farmers. Investors argue they are helping farmers by relieving them of their assets and providing young farmers with access to land through rental agreements. Given that, on average, investors pay more for land compared to other buyers, these deep-pocketed buyers have undoubtedly contributed to the rapid increase of farmland prices.

In a survey of 400 Prairie farmers, 76 per cent under 35 indicated that non-farmer investor activity has had a negative or very negative effect on the local farmland market. Among older farmers, 83.2 per cent indicated that investor activity has had negative or very negative impact on the local community.

Farmers also expressed unease about the growing economic clout of large farmers (those with more than 10,000 acres) and mega-farms (more than 30,000 acres).

Some of Saskatchewan’s largest grain farms now own and control tens of thousands of acres. According to our research, Monette Farms owned some 63,000 acres of land in 2018, and farms much more than that with production sites in Montana, Arizona and Saskatchewan.

One Organic Farms reportedly operates on a land base of 40,000 acres, with the large majority rented from Andjelic Land Inc.

In-depth interviews with more than 100 farmers in Alberta, Saskatchewan and Manitoba revealed many are deeply concerned about the environmental degradation wrought by big agriculture. Others argued these players out-compete locals for farmland and contribute little to local communities.

Land inequality has significant implications for the vibrancy of democracy, the viability of rural communities and the sustainability of agriculture.

Accessing land is currently the biggest barrier for young and new farmers who want to get into farming and land prices continue to soar above what is justified by the fields’ productive value. At the same time, farm debt is the highest it’s ever been and the Prairies are experiencing an emptying out of the countryside.

Canadians should also be concerned about the logic promoted by investors and mega-farmers, which seeks to extract monetary value from every square inch of farmland.

Given that agriculture is a significant contributor to Canada’s greenhouse gas emissions, doubling-down on this hyper-productive, fossil-fuel dependent model will only make it harder for Canada to meet its climate change commitment.

Progressive agrarian and food movements propose a different future — one based on food sovereignty. This would entail equitable access to land for farmers, sustainable livelihoods and valuing farmland for its social and ecological worth, as well as its productive value.

As the climate crisis intensifies, there has never been a better time for urban and rural Canadians to work together to transform food systems.

Annette Desmarais is the Canada Research Chair in Human Rights, Social Justice and Food Sovereignty at the University of Manitoba. André Magnan is an associate professor of sociology and social studies at the University of Regina. This article first appeared in The Conversation and is reprinted under Creative Commons.

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The data was released in a Farm Credit Canada report March 13 and represents the largest increase the province has seen since 2015, when prices rose 12.4 per cent. This year’s increase follows jumps of 9.9 per cent in 2021 and 3.6 per cent in 2020.

Why it matters: Manitoba’s increase in farmland values was below the national average, but compared to what was seen in the last few years, that’s not saying much.

The highest increase in farmland values was in the Central Plains-Pembina Valley region at 16.1 per cent. The Eastman region’s values increased by 11.2 per cent, consistent with the provincial average. The Interlake (9.3 per cent), Westman (9.2 per cent) and Parkland (7.5 per cent) regions all fell below the average.

The report noted that stable-to-increasing demand for land, along with limited supply, was largely responsible for the rising numbers in the province. The demand was mainly from farmers looking to expand, including supply managed farm operations and cash crop producers.

“There are many factors that impact the value of land, such as commodity prices, interest rates, access to markets and other investment opportunities,” said Keystone Agricultural Producers president Jill Verwey in a written statement. “The value of land and any accompanying changes must be viewed with this in mind.”

But Verwey noted that land values are also a signal of the investment climate for agriculture in Manitoba.

“Manitoba producers want to see an environment where investment is attracted to rural Manitoba, for both primary agriculture and value-added processing,” she said. “This requires investments in rural infrastructure, like roads and internet, as well as community resources, like child care and health care facilities.”

Verwey said she was pleased to see these types of investments included in the 2023 provincial budget, released March 8.

“This is sending signals that are positive for producers and the investment climate for agriculture in Manitoba,” she said.

Nationally, the 12.8 per cent increase was the largest seen since 2014, and it follows gains of 8.3 per cent in 2021 and 5.4 per cent in 2020. J.P. Gervais, FCC’s chief economist, said the numbers were a bit of a surprise.

“At this exact same time a year ago, I said that I expected the rate of increase to be smaller than the 2021 rate of increase,” he said. “That was my expectation. Up until very recently, I did not think that we were going to get 12.8 per cent.”

Gervais said he had thought challenging economic conditions would likely slow the demand for farmland, but the picture became clearer in recent months.

“It’s all about supply and demand,” he said. “On the demand side, we might find it a little surprising that demand remains as strong as it has, given high interest rates and high input costs. But the flip side of that is that we’ve had strong receipts as well.”

Gervais pointed out that receipts for grains, oilseeds and pulses increased 18.3 per cent in 2022. “And on the supply side, all the data that we collected weighed out to a very tight supply of farmland available for sale.”

The highest average provincial increases in farmland values were observed in Ontario, Prince Edward Island and New Brunswick (19.4, 18.7 and 17.1 per cent, respectively). Saskatchewan followed with 14.2 per cent.

Five provinces had average increases below the national average: 11.6 per cent in Nova Scotia, 11.2 per cent in Manitoba, 11 per cent in Quebec, 10 per cent in Alberta and eight per cent in British Columbia. There was insufficient data to analyze other regions of the country.

Gervais said there are a few things to note about the data in the report.

Because the report is based on the calendar year, the effect of the drought on the Prairies in 2021 is still dragging land prices and may explain the difference in increases when compared to Ontario, which didn’t suffer through the drought. But Gervais warned not to draw too much from those geographic differences.

“It’s getting harder to generalize about what’s going on in the marketplace, even within a province,” he said.

The second thing to note is that interest rate increases haven’t yet worked their way through the system, since people may have locked in their rates when interest was lower.

Land values relative to farm income are also as high as they’ve ever been, Gervais noted.

“In most, if not all, provinces, we’re getting very near the top of the market ever in terms of the value of land relative to farm income.”

Gervais acknowledged that higher farmland values pose a challenge for young producers, new entrants and operations looking to expand. It means a strong risk management plan is critical, especially if people are looking to buy land.

“You need to have an elaborate strategic plan for your operation over the next five years and a strong risk management plan that goes with it,” he said.

“Land is more expensive now, relative to income, than it’s ever been. The ability to service debt and overall equity in the operation are critical factors of success going forward.

“The good news is that farmland value increases reflect a positive outlook for the demand for agriculture commodities and the quality food we produce in Canada.”

The post Manitoba farmland values up 11.2 per cent appeared first on Manitoba Co-operator.

Average farmland prices were up 12.8 per cent in Canada in 2022, the largest increase seen since 2014 when the increase was 14.3 per cent. The increase follows gains of 8.3 per cent in 2021 and 5.4 per cent in 2020.

J.P. Gervais, FCC’s chief economist, said the numbers were a little bit of a surprise.

“At this exact same time a year ago, I said that I expected the rate of increase to be smaller than the 2021 rate of increase,” said Gervais. “That was my expectation. Up until very recently, I did not think that we were going to get 12.8 per cent.”

Gervais explained that he had thought that challenging economic conditions would have been expected to slow the demand for farmland, but the picture became clearer in recent months.

“It’s all about supply and demand,” Gervais explained. “On the demand side, we might find it a little surprising that demand remains as strong as it has given high interest rates and high input costs. But the flip side of that is that we’ve had strong receipts as well,” he said, noting that receipts for grains, oilseeds and pulses increased 18.3 per cent in 2022.” And on the supply side, all the data that we collected weighed out to a very tight supply of farmland available for sale.”

The highest average provincial increases in farmland values were observed in Ontario, Prince Edward Island and New Brunswick, with increases of 19.4, 18.7 and 17.1 per cent, respectively. Saskatchewan followed with a 14.2 per cent increase. Five provinces had average increases below the national average: 11.6 per cent in Nova Scotia, 11.2 per cent in Manitoba, 11 per cent in Quebec, 10 per cent in Alberta and eight per cent in British Columbia.  There was insufficient data to fully assess farmland values in other regions of the country.

“We have not yet seen the full impact of higher interest rates on the demand for farmland.” J.P. Gervais. Graphic: Farm Credit Canada

Gervais says there are a few things to note about the data in the report.

Firstly, because the report is based on the calendar year, the effect of the drought on the prairies in 2021 is still acting as a drag on land prices and may explain the difference in increases when compared to Ontario, which didn’t suffer through the drought. But Gervais says not to draw too much from those differences across provinces.  “It’s getting harder to generalize about what’s going on in the marketplace, even within a province,” he said.

The second thing to note is that interest rate increases haven’t yet worked their way through the system. “We have not yet seen the full impact of higher interest rates on the demand for farmland,” said Gervais, noting that the reason for the lag is that people locked in when rates were lower.

Another point Gervais says is worth noting is that land values relative to farm income are as high as they’ve ever been.  “In most, if not all, provinces, we’re getting very near the top of the market ever in terms of the value of land relative to farm income,” he said.

Gervais acknowledges that higher farmland values pose a challenge for young producers, new entrants, and other operations that are looking to expand. What this means for farmers is that a strong risk management plan is critical, especially if they are looking to buy land. “You need to have an elaborate strategic plan for your operation over the next five years and a strong risk management plan that goes with it,” he said.

“Land is more expensive now, relative to income, than it’s ever been,” said Gervais. “The ability to service debt and overall equity in the operation are critical factors of success going forward,” he said. “The good news is that farmland value increases reflect a positive outlook for the demand for agriculture commodities and the quality food we produce in Canada.”

The post Farmland values exceed expectations appeared first on Manitoba Co-operator.