Farmland prices are racing up across the country, but prairie farmers shouldn’t expect the same kind of wild increases in the next couple of years, says a Farm Credit Corporation analyst.
Between January and July 1996, farmland prices nationally increased by an average of 6.2 percent. On the Prairies, Manitoba farmland increased by 6.6 percent, Saskatchewan land by 6.3 percent, Alberta land by 5.8 percent, and British Columbia land by five percent.
Analyst Richard Fournier said Canadian farmland has been getting more expensive for more than three-and-a-half years.
“There’s a tremendous pressure on the price of land. It’s phenomenal,” said Fournier, who works for FCC in Regina.
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Fournier said three factors are driving up land prices: grain prices are higher than they have been for the past decade, yields per acre of many crops are increasing, and most farmers have received thousands of dollars as compensation for the end of the Crow Benefit freight subsidy.
He said those factors can’t be counted on to keep prairie farmland prices rising.
“Should there be a bad crop, I think we would see a significant change in the price of land,” he said.
While the 1997-98 crop yield is a wildcard, it’s safe to bet that grain prices won’t rise next year the way they have in the past three years, he said.
And the Crow windfall is definitely not going to re-occur.
A further factor that could harm farmland prices is the increase in freight rates, which will boost each acre’s cost of production, Fournier said.
Since farmland prices tend to reflect the productive value of the land, any boost in the cost of production will put the brakes on value increases, Fournier said.
The prairie land price jump has been impressive, but the surge in Eastern and Atlantic Canada in the first half of 1996 is even more dramatic.
New Brunswick land prices soared by 10.5 percent, with Quebec land selling for 11.2 percent more than six months before.
Fournier said big increases in the yield of both corn and soybeans have pushed up the value of each productive acre, a trend complemented by better commodity prices.
As well, large hog barns are forced by tough environmental regulations to buy large amounts of land to spread manure.
Fournier said the increase in farmland values is not part of a larger trend of all land prices increasing.
He said urban house prices in Quebec have been weak for five years. In some areas urban land prices have dropped by 30 percent at the same time that farmland has vaulted ahead.
