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By Alice McFarlane

Farmland Values

Farmland values rise but at a slower pace

Apr 6, 2020 | 12:05 PM

Saskatchewan farmland values followed the national trend and recorded a third straight year of decline in 2019.

Farm Credit Canada (FCC) Farmland Values Report showed an increase in our province of 6.2 per cent last year. The national numbers were a little lower at 5.2 per cent.

The largest increase in the province was in the east-central region with an increase of 9.2 per cent. Even with a large amount of unharvested acres there were a number of land sales.

FCC Chief Economist JP Gervais said demand for farmland continues to exceed the available supply in eastern Saskatchewan.

“I think that’s the one thing that would have to change for land to start declining instead of continuing on the pace that they’re at now,” he said. “You’re seeing more land become available for sale, perhaps that would put some pressure on the marketplace.”

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Gervais said some investors that bought land previously sold their properties. However, demand continued to outpace supply.

The northeast recorded an increase of 7.1 per cent followed by the northwest and southeast at six per cent. The west-central region, which includes Saskatoon, was 5.9 per cent.

The report indicated there was land available in west-central areas, but the demand was not as strong. Larger producers in the southwest appeared less aggressive in purchasing land than in previous years.

Gervais said the sale of superior quality land in Saskatchewan is beginning to level out and sales of small parcels or lower quality farmland increased in 2019.

“We’ve seen land values being pushed up at the top end of the market. With operations looking at what is available and what they’re willing to pay, they realize the most profitable option is to look at the lower end of the market.”

Gervais said some producers sold land further from their main operations and purchased land closer to be more efficient.

“A little bit more cautious given margins have been so tight lately, maybe that makes more sense to be looking at the bottom half which has seen less of an increase prior to last year,” he said. “It was 2018 when we started reporting on that and I do think that makes sense to me to be a little bit more cautious there.”

The highest provincial increases in 2019 were in Prince Edward Island at 22.6 per cent and New Brunswick at 17.2 per cent. Saskatchewan had the fifth highest annual farmland value increase among the provinces but the highest in Western Canada. Manitoba was up four per cent last year, Alberta was at 3.3 per cent while British Columbia saw a jump of 5.4 per cent.

Gervais does not expect to see lower farmland values in 2020. But in a new world of COVID-19, he won’t say it’s not a possibility.

“You could see a decline at one point, especially given that current valuations of land relative to farm income is at the highest point it’s ever been. But I think that I can’t rule out the possibility that at one point we may see a decline in land values,” he said.

Gervais said he expects more wariness in 2020.

“I expect more caution from sellers. I expect more caution from buyers. But interest rates and farm income might not be too different than what we’ve seen in recent years. If you look at crops, we got some production issues, we have to deal with lower prices, trade issues, and so forth. I would expect a similar pattern in land values for 2020,” he said.

More details can be found at the FCC Farmland Values Report.

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alice.mcfarlane@jpbg.ca

On Twitter: @AliceMcF