High Land Prices Hurt New Farmers (hurt)

2015-02-25     
Price increases may be slowing, but it’s a tough time for farmers to buy land
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Western Canadian farmland has never been more expensive. According to J.P. Gervais, the chief economist for Farm Credit Canada (FCC), which provides data at the national level for Statistics Canada, farmland values continued to increase throughout 2014.

“In a few months the report will be released, but we know that farmland values have continued to increase throughout 2014. The extent of the increase is unsure, but I would suggest that we’ll see something lower than what we saw last year, because last year was a record year,” says Gervais.

Gervais says local factors have an impact on farmland prices, and at the provincial or national level, two things matter: crop prices and interest rates. “With grains and oilseeds coming down, especially in the last six months, we expect farmland values to go up at a lower pace than we saw last year. That would be a good thing,” he says. “The worst case scenario would be to see the drop in grains and oilseeds that we’ve seen as well as interest rates going up.”

Last year, values went up across Western Canada, but the increase was greatest in Saskatchewan, which was still catching up to the increase in Alberta. Manitoba, he says, is partly influenced by trends in Ontario as well as those in Alberta and Saskatchewan, and as a result has shown rapid increase in the last couple of years.

By historical standards, farmland is priced at the highest level it has ever been. Gervais says that farmland values on average are not unreasonable if you look at crop receipts and low interest rates over the last couple of years.

zoomlion high land price picture

Potato farming 
gets expensive

According to Gord Visser, a potato grower near Edmonton, Alta., prices of good potato farmland have skyrocketed over the last several years, to the point where farming is becoming unsustainable for farmers and prohibitive for young farmers hoping to get into the business.

“When I started in 1987 I bought some land for $900 per acre. My best land, where my farm is situated, was $820 per acre. That land is now worth over $25,000 per acre,” he says.

“I can only speak for land in the greater Edmonton area, where there’s a large potato-growing area,” he says. “A lot of the really good agricultural land, especially for potatoes, happens to be located around civic centres like Edmonton, and so with that land there’s a lot of pressure just from growth.”

Visser, a third-generation farmer, says he’s accumulated acres over the years, all of which are paid for, but if his operation were to buy another quarter section, they wouldn’t be able to make that land work for him with regard to capital costs.

“The farms that have old generational equity, because they’ve gained that equity over two generations, they can pool enough money and expand and buy more land,” he says. “I think it’s just about impossible for new farmers to get into the business now.”


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