15 Follow us on Twitter: @PrairieFarming Better Farming | May/June 2024 Farmland Values During 2023, many farmers encountered a variety of economic hardships: Drought in Western Canada created pressure on commodity prices, input costs were high, and so were interest rates. But through it all, farmland values remained resilient across Canada. A recent report from Farm Credit Canada (FCC) indicates that farmland values continued to rise to an average increase of 11.5 per cent across the country in 2023. Saskatchewan had the highest reported increase, coming in at 15.7 per cent. Quebec followed at 13.3 per cent, and Manitoba had an 11.1 per cent increase. Ontario fell below the national average at 10.7 per cent, as did Nova Scotia at 7.8 per cent, P.E.I. at 7.4 per cent, Alberta at 6.5 per cent, and New Brunswick at 5.6 per cent. British Columbia was the only province to report a decrease (3.1 per cent), but they were the province with the highest per-acre land value. What keeps our farmland valuable despite economic pressures, and what can we expect in 2024? Better Farming spoke with some farm real estate experts to answer those questions. Lack of inventory Limited farmland inventory has kept the value of available farmland strong. With fewer properties hitting the market, what is available is valuable. “In 2023, we had extremely low inventory, a very low number of farms for sale on the MLS system,” says Ted Cawkwell, a realtor based in Saskatoon, Sask. “2022 and 2023 were record lows. About half of what’s average and a third of the peak. “There were more buyers than sellers, and that was a factor driving the increase: The competition. When I started, you had 10 buyers and 10 sellers. Now, you have two sellers and 10 buyers.” “I had and continue to have many ready buyers looking to buy, but there was not a great deal of inventory available to purchase, which of course, brings up the price for those few properties that did hit the open market,” says Adam DeGroote, a real estate broker from Brantford, Ont. Cawkwell also notes that some farms are being sold by exclusive listings and may not be factored in when we discuss farmland inventory. “The only way to track it is with MLS. Some realtors have started listing their properties exclusively and don’t advertise. We have record lows, but it’s probably not as low as it looks. Inventory is low, but we don’t really know how low.” Farmland quality “The biggest factor that drives farmland values is the profitability of the farm. It’s a big gap ahead of the other reasons,” Cawkwell explains. “It’s regional, for the most part. It’s weatherdriven, commodity-price-driven, interest-driven. “If farmers are profitable in a region, the farmland values go up.” As per the report from FCC, Saskatchewan and Manitoba were the only two provinces to report an increase in farm cash year-over-year in 2023. Saskatchewan reported a rise of 6.1 per cent, and Manitoba reported an increase of 4.4 per cent. They were also two of the three provinces with the highest farmland value increase. “In the regions where the drought was, it was harder to sell things. Profitability drives the liquidity of farmland. If nobody’s making money, nobody’s buying,” Cawkwell says. Farmland for farmers While fears of foreign investors have fed the rumour-mill, Cawkwell reports that the majority of the farmland he sells is being bought by farmers who will be actively working the land. Those buyers are sensitive to the quality of the land and are more likely to pay for it, and not be deterred by high interest rates. “Investors are the most sensitive to land values,” Cawkwell explains. “They’re not going to overbid for it. The farmer would if it was in a block, or on their home quarter, but investors are in and out of the market. They’re not attached to the land like the farmers are, and if the market turns against them, they just exit. “The investors were borrowing their money at three to four per cent a year ago, and now it’s around six to eight per cent. Land was appreciating so quickly, but now that they’re borrowing at eight per cent and getting a negative ROI, they don’t want to take the risk that it’s going to continue to appreciate. “When the interest rates went up, the rise took a lot of non-farmers out of the market. “An estimated 80 per cent of the ones I talk to are gone until the rates drop again.” Returning to ‘normal’ As we recover from the last few pandemic years, our economy is beginning to shift back to where it was before the global event hit. After a huge rush for land, Canada’s real estate market also appears to be returning to ‘normal.’ “We saw a huge lull coming off of COVID,” says Jackie Pepper, a broker with Farm Match in Chatham, Ont. “Those couple years were crazy. But before that, it sometimes took six months to a year to sell a large property, or a farm, and it looks like that’s where we’re going back to,” adds Rachel Powell, Pepper’s colleague at Farm Match. Adam DeGroote Ted Cawkwell Jackie Pepper
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