SASKATOON – For the first time in a long while, prairie farmland was a good investment last year.
Statistics released by the Farm Credit Corp. show the value of farmland jumped sharply in all three prairie provinces during 1994, following several years of marginal increases or declining prices.
The corporation says last year’s good crop and stronger commodity prices gave buyers confidence to bid higher on land and suggests the same could hold true in the coming year.
“If the higher anticipated returns are achieved, the upward trend in land prices may continue in 1995,” the agency said. “However it is uncertain how the marketplace will respond to the elimination of the Western Grain Transportation Act.”
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The elimination of the Crow Benefit rail subsidy, which fell under the Western Grain Transportation Act, is expected to depress the price of farmland, as higher freight costs reduce the value of grains and oilseeds grown on that land.
However analysts say other factors, like good prices, may offset that downward pressure.
The survey indicated Saskatchewan values increased by 10 percent during the year, with an acre of land worth an average of $264 in January 1995.
In Alberta, the increase was 7.5 percent to $385 an acre, while in Manitoba the increase was 6.8 percent to $441 an acre.
But British Columbia posted the largest increase as estimated land values rose by 16.7 percent to an average of $1,314 an acre.
The FCC’s numbers are based on a survey of 245 benchmark farm properties across the country, chosen to represent the most prevalent classes of agricultural soil in each census district. FCC analysts estimate the value of the property twice a year by comparing the value of recently sold land with the benchmark property.
Here’s what the FCC survey had to say:
- Manitoba – The increase is attributed to an excellent crop in 1994 and growing confidence on the part of land buyers in the future of grain and oilseed prices. Cash land rentals have also increased in many areas of the province.
- Saskatchewan – The 5.2 percent rise in land values in the last six months of 1994 was the largest semi-annual increase in 10 years. In fact, land prices actually declined during every six-month survey period from January 1990 to July 1993. FCC says the above-average, excellent quality 1994 crop, combined with stronger cereal and oilseed prices and increased diversification, have increased buyer confidence.
- Alberta – In the north, a good crop and high canola prices were the main factors driving up prices. Land close to forested areas also benefited from the expanding forestry industry. Increases were more modest in central and southern Alberta, due to the improved grain market.
- B.C. – The market continued its steady rise, although at a slightly slower pace than in recent years. The value of raspberry acres increased substantially. Farmland prices in the lower mainland continued to be driven by pressures from urban development rather than farm profitability.
- Ontario – Land values increased 5.1 percent during 1994 to an average of $974 an acre. The market was strong in southwestern Ontario, due to a good performance in the corn and soybean sectors.
- Quebec – Farm income stability is cited as the main factor accounting for a 6.5 percent increase in land values. The average was $656 an acre.
- Maritimes – A strong potato industry supported land prices in Prince Edward Island (up 20 percent to $1,696 an acre) and New Brunswick (up 17 percent to $1,143). Nova Scotia was stable at $724 an acre.
