It' a seller's market for agricultural property says FCC

Wednesday, October 10, 2012

by SUSAN MANN

Ontario’s booming farmland market, up by an average of 16.3 per cent during the first half of this year, can have either a positive or negative impact on farmers depending on the maturity of a producer’s business, says Farm Credit Canada.

Assistant professor Richard Vyn of the University of Guelph’s Ridgetown Campus agrees, noting for farmers looking to get into agriculture or expand their operations “all of a sudden the cost of expanding is that much higher.”

Ontario had the highest average increase in its farmland value across Canada for the first half of 2012, FCC says in its Fall 2012 Farmland Values Report released Tuesday. In comparison, the average value of Canadian farmland increased by 8.6 per cent during the first half of this year.

Has Ontario farmland reached the point where it’s unaffordable for new farmers? Vyn says it depends on how “you define affordable. The people paying those prices, it must be affordable to them.”

But Vyn says it’s easier for farmers who have been in the business for a while to pay the current land costs because they have equity in other land they own. “That way it will definitely be easier for those who have been around for a while to pay those higher prices than for those who are just trying to get into the business just because they don’t have the equity to help support paying such high prices.”

FCC says factors contributing to the trend toward higher farmland values are low interest rates, higher crop receipts driven by worldwide prices for soybeans and corn, and good yields. Interest rates will increase at some point but the key interest rate of the Bank of Canada is forecast to remain low into 2013 due to the uncertainty around the world economy, FCC says.

This latest increase in farmland values is the highest since 1996. FCC says that in some parts of the country sellers are getting multiple bids for the same property, “which sets the stage for a seller’s market.” BF