Farmland value increases slow down

Farmland values across Canada are still rising but at a lower rate than recent years.

Farm Credit Canada reviewed the first six months of 2019 and found a national average increase of three percent, compared to 6.6 percent for the entire year of 2018.

However, FCC chief economist J.P. Gervais said he expects little change as the year concludes.

“If we look at our 2018 results, most of the increase that we reported at the end of the year actually was driven by the first six months,” he said. “If things actually evolve like they have in 2018 we believe that at the end of the year in 2019 the numbers will be different but they’re not going to be very different.”

For the past five years, growth in farmland value has softened and Gervais said the days of double-digit growth are likely over. Values have gone up every year since 1993 but have slowed to single digits since hitting a national average of 10 percent in 2015.

Gervais said the overall farming industry has since slowed.

“We have higher borrowing costs, pressure on income and just the fact that those days of where we were at in double-digit growth, that’s not the reality anymore,” he said.

By province, the six-month review showed increases of 2.7 percent in British Columbia, 1.6 percent in Alberta, 2.9 percent in Saskatchewan and 6.2 percent in Manitoba.

Ontario values rose 3.3 percent and Quebec’s went up 2.8 percent. Atlantic Canada figures had not yet been reviewed.

Gervais said producers are being more cautious as the price of land relative to income is more expensive.

“If you look at the price of land on average compared to what you can get out of your land we’re at the top of the cycle,” he said.

Gervais added that demand for Canadian agricultural products is still strong so the long-term outlook appears positive.

FCC says the overall farm debt-to-asset ratio is lower than the 15-year average and most farms are in good financial positions if owners decide to buy land.

FCC urges farmers to have a risk management plan that protects them as much as possible for unpredictable circumstances.

Contact karen.briere@producer.com

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