Average farmland values in Canada continue to rise according to Canada's lead agricultural lender.

 Farm Credit Canada’s (FCC) 2018 Farmland Values Report shows the average value of Canadian farmland increased 6.6 per cent in 2018, following gains of 8.4 per cent in 2017 and 7.9 per cent in 2016.

Alberta saw a 7.4 per cent increase in the value of its farm acres, which FCC says is a relativity stable trend considering the 7.3 per cent increase in 2017.

However, Southern Alberta saw the highest increase in value compared to other regions of the Province with a 12.7 per cent jump.

FCC says there was strong demand for irrigated land in the Southern region to grow more potatoes in preparation for the new Cavendish Farms processing plant in Lethbridge.

“With the steady rise in farmland values, producers are making more strategic investments,” said J.P. Gervais, Chief Agricultural Economist for Farm Credit Canada. “Whether it means paying a higher price for land that has potential to be more productive or buying in blocks to improve the efficiency of their operations, producers are sharpening their pencils with an eye on variable commodity prices.”

Although average farmland values have increased every year since 1993, recent increases are less pronounced than the 2011-2015 period that recorded significant average farmland value increases in many different regions.

Gervais said fewer land transactions in 2018 is consistent with a tight supply of land available for sale and a softening in demand, which is a reflection of farm income levelling off, variable commodity prices and rising borrowing costs.

He notes farm operators need to exercise caution, especially in regions where the growth rate of farmland values significantly exceeded that of farm income in recent years.

There is still a strong business case for buying more land, but not without carefully weighing the risks and rewards.

“There was a strong demand from producers for lower-valued land, which explains part of the average value increase recorded in some regions,” Gervais added. “It’s a strategic investment that can pay off if the operation is able to extract more from that land and improve its overall efficiency.”

Read the full report: FCC Farmland Values Report

Chart screenshot from FCC's Farmland Value Report.

 

Send your news tips, story ideas and comments to jgiles@goldenwestradio.com