Prairie land prices have risen by an average annual rate of three percent since the turn of the century and economists say farmers can expect the average to hold true in the near future.
“Historically, land prices are reflected in the expectation of future income,” said Len Bauer, an agricultural economist retired from the University of Alberta.
“We have seen Alberta land prices in the brown soil zone, in an area not directly affected by industrial or urban pressures, rise a year or two after improved grain prices and fall again as farm incomes drop. That is a pattern that repeats itself across the Prairies.”
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There are several factors that determine farmland prices, the most unlikely being the rural coffee shop.
“Coffee shop talk is a factor of farmland pricing. Economists recognize its influence,” said Bill Brown, an assistant professor of agricultural economics at the University of Saskatchewan.
Land price increases over the past two years have been as much as 12 percent annually, but economists warn the market is shallow, with little land changing hands.
Strong returns from the grain industry are causing the price to rise, but if the market becomes more liquid, the recent wild price increases will likely even out.
Aging population has impact
Demographics might become a larger factor as more land is put up for sale due to retirement and death over the next two decades.
One time cash infusions into the prairie agricultural sector, including the Crow Benefit payout and sale of Saskatchewan Wheat Pool member equity, have provided hundreds of millions of dollars, causing upward regional pressures on land prices, said Ken Rosaasen of the University of Saskatchewan.
“That money won’t be around in 1998 to help sustain prices,” he said.
Location and rail-line abandonment will also be negative influences on land that does not have ready access to inexpensive transportation or industrial use.
Bauer said the farther land is from industrial and urban influences, the more farmland prices fall into line with farmgate returns. For that reason, he feels Alberta prices have been exceeding Saskatchewan prices and Saskatchewan prices are slightly ahead of those in Manitoba.
Barry Hok, from Cereal, Alta., is one farmer who has reacted to the pressure of strong Alberta prices.
“I’ve sold my place here (Alberta) and I’m looking for a place in Manitoba. Land prices here are out of line with the reality of farm returns. Even in Saskatchewan they are too high. So I’m looking to Manitoba. The price based on returns there seems to be more in line.”
