BRITISH COLUMBIA – The average value of Canadian farmland increased by 12.8 per cent in 2022, amid strong farm income, elevated input prices and rising interest rates. The demand for farmland remained robust and the supply of farmland available for sale continues to be limited, according to the latest FCC Farmland Values Report.
Farmland values saw the highest increase since 2014 and follow gains of 8.3 per cent in 2021 and 5.4 per cent in 2020.
In British Columbia, average farmland values increased by 8.0 per cent in 2022, following gains of 18.1 per cent in 2021 and 8.0 per cent in 2020.
“Challenging economic conditions could have been expected to slow the demand for farmland and the resulting price buyers paid for land in 2022,” said J.P. Gervais, FCC’s chief economist. “But the underlying fundamental factors in the farmland market tell another story.”
FCC estimates that receipts of grains, oilseeds and pulses in Canada have increased 18.3 per cent in 2022, and are projected to grow 9.4 per cent in 2023.
“Higher farm revenues are driving the demand for farmland, but higher borrowing costs and increased input prices are expected to lead to declines in the number of sales in 2023,” according to Gervais.
The highest average provincial increases in farmland values were observed in Ontario, Prince Edward Island and New Brunswick, with increases of 19.4, 18.7 and 17.1 per cent, respectively. Saskatchewan followed with a 14.2 per cent increase. Five provinces had average increases below the national average at 11.6 per cent in Nova Scotia, 11.2 per cent in Manitoba, 11.0 per cent in Quebec and 10.0 per cent in Alberta.
There was an insufficient number of publicly reported sales in Newfoundland and Labrador, Northwest Territories, Nunavut and Yukon to fully assess farmland values in those regions.
“It’s good practice to have and maintain a risk management plan that takes into account possible economic changes,” said Gervais. “When producers ensure their budgets have room to flex if commodity prices, yields or interest rates shift, they’re better off in the long run.” FCC also suggests producers to exercise caution, especially in regions where the growth rate of farmland values exceeded that of farm income in recent years, which was the case in most provinces.
Gervais acknowledges that higher farmland values pose a challenge for young producers, new entrants and other operations that are looking to expand.
“Land is more expensive now relative to income than it’s ever been. The ability to service debt and overall equity in the operation are critical factors of success going forward,” he said. “The good news is that farmland value increases reflect a positive outlook for the demand of agriculture commodities and the quality food we produce in Canada.”
“Producers have a long track record of making strategic investments in land, even before agriculture and food was identified as one of six sectors with the highest potential for growth by the Advisory Council on Economic Growth in 2016,” Gervais said. “These long-term investments in food production have spurred growth and create a bright future for Canada’s agriculture and food industry.”
FCC is Canada’s leading agriculture and food lender, with a healthy loan portfolio of more than $47 billion.