Farmland values rose more in the last half of 2007 than in any six-month period since Farm Credit Canada started tracking data in 1990.
The national average shot up 7.7 percent during that period, and two prairie provinces surpassed that number. By contrast, Quebec and Ontario’s farmland prices went up a modest 3.6 and 1.2 percent respectively.
“High land prices in Western Canada are being driven by factors including strong grain and oilseed sectors while challenges in the hog and beef sectors in central and Atlantic Canada are resulting in smaller increases,” said Remi Lemoine, FCC’s senior vice-president for portfolio and credit risk.
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British Columbia led all provinces with a 14.5 percent increase. Alberta came in second and led the prairie region with a 10.3 percent increase, up from 6.4 percent during the first half of the year.
As with all the prairie provinces, Alberta benefited from higher grain and oilseed prices and a growing interest in biofuel production. But there was another factor at work.
“Due to urban and industrial pressure for more land, many Alberta farms are being sold at high prices,” the FCC said in a report.
“Producers who are being bought out are relocating to other areas within the province, which is further increasing the demand for land in outlying areas.”
Saskatchewan was next in line with a 7.8 percent increase in values, up from three percent during the first half of 2007. The increase was reminiscent of what happened to farmland in the province in the late 1970s.
Farmland in Saskatchewan is still attractively priced compared to farmland in other provinces. Demand is stemming from investors, local farmers and out-of-province buyers.
“Much of the out-of-province interest is coming from Alberta, which has experienced significant land value increases over the last 10 years,” the report said.
Manitoba saw the fourth largest increase in land values with a 7.3 percent surge, up from 1.7 percent during the first half of the year.
Most of the increases were seen in the predominant cash crop and specialty crop areas of the province, including the Red River Valley, southwestern Manitoba between Manitou and Killarney and the area around Portage la Prairie.
“Pasture land and land of lower productivity showed little increase during this period,” the report said.
“It is believed that the current economics of the red meat industry have impacted demand for these properties.”
Glenn Blakley, president of the Agricultural Producers Association of Saskatchewan, said the numbers come as no surprise.
“With better returns producers are paying more for (land), so it is consistent with what we are hearing.”
He said a backlog of land that was either put on the block and didn’t sell or was held back in hopes of better times will now be up for grabs at today’s prices.
“We’re going to see quite a flush of it move. I think in most of the cases (the owners) are actually getting out of the industry.”
He said the problem with that scenario is much of the land will go toward making big producers even bigger, exacerbating the gap between small farms that subsidize their existence with off-farm income and the large, corporate operations.
