Farmland prices are on a roll

Wednesday, November 16, 2011

by SUSAN MANN

It may be a long wait for farmers who are delaying land purchases until farmland values drop. During the first six months of this year prices in Ontario rose almost seven per cent.

In fact, farmland values in Ontario have been going up for the past 18 years,
since 1993, according to Farm Credit Canada’s recently released Farmland Values report.

During the first half of this year, the average value of farmland in Ontario increased by 6.6 per cent. In the previous two six-month periods, farmland values in the province increased by 2.4 per cent and 4.3 per cent respectively.

Dale Litt, a senior appraiser with Farm Credit, says most of the land price increases were in southwestern and northern Ontario, while in eastern and southern parts of the province land prices increased minimally or stayed stable.

Across Canada, the average value of farmland increased by 7.4 per cent during the first six months of this year. That’s up from increases of 2.1 per cent and three per cent in the previous two six-month periods. Farmland prices remained stable or increased in all provinces with Saskatchewan having the highest average increase at 11.6 per cent.

Factors contributing to increased land demand among farmers that push prices up are: low interest rates, good crop prices in recent years and low returns in financial markets.

As for where prices are headed, Litt says all of their information is based on historical data. Farm Credit officials can’t predict where prices are going.

But as long a long as interest rates stay low, crop prices remain high and financial markets continue generating low returns, there’s nothing that says farmland prices won’t keep increasing, Litt says. “That’s basically gazing into a magic ball. It’s pretty hard to nail down whether it’s going to increase or decrease.”

Farmers often ask Farm Credit officials if they should buy land now or wait until prices decline. Litt says producers need to weigh the benefits of both renting and buying. “It’s a personal preference for them and the situation they’re in now.” BF