Farmland values rise

Canadian farmland values have risen steadily during the last decade.

According to a new Farm Credit Canada (FCC) Farmland Values Report, the average value of farmland in British Columbia increased by 0.2 per cent during the second half of 2011.

Values were unchanged in the first half of 2011, following an increase of 0.4 per cent during the previous reporting period.

In comparison, the average value of Canadian farmland increased by 6.9 per cent during the last six months of 2011, following gains of 7.4 per cent and 2.1 per cent in the previous two semi-annual reporting periods.

Overall, farmland values increased in nine provinces and remained unchanged in Newfoundland and Labrador. Saskatchewan, which has 40 per cent of Canada’s arable land, experienced the highest average increase at 10.1 per cent.

“Low interest rates, in relation to inflation, and higher farm income levels have recently led to significant increases in farmland values in some provinces,” said Michael Hoffort, FCC senior vice-president of portfolio and credit risk.

“FCC’s analysis indicates that farmland value trends are sensitive to both interest rates and crop receipt trends.

“With interest rates expected to remain at historic lows until 2013, it will be especially important to monitor trends in crop and livestock receipts in the coming year.

“These factors combined with strong demand from expanding farm operations and increasing interest by non-traditional investors have all played a role in the continuing trends toward higher farmland prices.”

Canadian farmland values have risen steadily during the last decade. The highest semi-annual average national increase was 7.7 per cent in 2008. The average national price of farmland has increased by about 8 per cent annually since the general upswing in commodity prices began in 2006.

That’s about twice the rate observed in the first part of the decade.

Recent long-term projections from Agriculture and Agri-Food Canada provide a positive outlook for Canadian agricultural producers.