Farm land, Ontario Canada

Canada’s Farmland Values Lost Steam In 2016

on April 29 | in Ag News | by | with No Comments

From a news release

Average farmland values in Canada continued to climb in 2016, but lost steam in most provinces, according to Farm Credit Canada’s (FCC) latest Farmland Values Report.

Canada’s farmland values showed an average increase of 7.9 per cent in 2016, compared to a 10.1 per cent increase in 2015 and a 14.3 per cent increase in 2014. Canadian farmland values have increased at various rates for the past 25 years.

In six provinces, the average increase in farmland values slowed from the previous year. And despite the overall national increase, seven of the 51 regions assessed across Canada showed no increase in farmland values in 2016.

“The impact of some of the key farmland value drivers appear to be fairly consistent across Canada,” said J.P. Gervais, FCC chief agricultural economist. “Levelling out of commodity prices and some challenging weather conditions may have taken some of the steam out of farmland values and hopefully this moderating effect will turn into a trend.”

Prince Edward Island experienced the highest increase among the provinces and saw the only double-digit increase at 13.4 per cent.

Ontario

The average value of Ontario farmland increased 4.4 per cent in 2016, following gains of 6.6 per cent in 2015 and 12.4 per cent in 2014. Values in the province have continued to rise since 1988.

According to the report, Ontario’s overall farmland values increase was fuelled by high demand for a limited amount of available land, expansion of supply-managed farm operations and strong demand for farmland to grow cash crops throughout the province.

Softer demand was seen in areas where expansion had already taken place or areas affected by lower commodity prices.

Southern and northern Ontario led the province with the most significant increases at 6.9 and 6.2 per cent, respectively. Within some regions of the province, land values appeared to have levelled off. The demand for land still remains, but only at a realistic price level that can be supported by crop production.

There was an increase in the demand for land in eastern Ontario, which reported a 5.1 per cent increase in farmland values. This was due to local farmers wanting to expand their operations, as well as more farmers coming from other regions of Ontario and Quebec, where land prices are higher. These factors, combined with a strong and diverse farm economy, helped strengthen the demand for land in the region, said FCC officials in the report.

There was strong demand for farmland in some areas within southern and south central Ontario, as the favourable soil types allow for a variety of specialty crops to be grown, thus creating potentially higher returns for producers in that area.

Southeastern and southwestern Ontario reported the most modest farmland value increases at 1.5 per cent and 1.6 per cent, respectively. There are various pockets throughout southwestern Ontario that continued to show signs of extended vibrancy, with some areas having experienced record values in 2016.

“Demand for Canadian agricultural products remains strong at home and abroad,” Gervais said. “A healthy agriculture sector – supported by a low Canadian dollar and low interest rates – helped sustain increases in farmland values in 2016.”

“I would, however, caution producers not to become overly confident,” he said, noting crop receipts have increased at a slower rate than farmland values over the past few years. “Although we have just come off of several years of record farm receipts, agriculture is a cyclical business and producers should always plan for different market conditions.”

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