Fall 2007 Farmland Values Report
Welcome to Farm Credit Canada's fall 2007 Farmland Values Report.
This report covers the period from January 1 to June 30, 2007.
Introduction
Methodology
National trend
British Columbia
Alberta
Saskatchewan
Manitoba
Ontario
Quebec
New Brunswick
Prince Edward Island
Nova Scotia
Newfoundland and Labrador
Contact information
Introduction
Farm Credit Canada (FCC) is Canada's largest provider of business and financial services to farms and agribusiness. Operating out of 100 offices located primarily in rural Canada, FCC employees are passionate about the business of agriculture. A healthy portfolio of more than $13 billion and 14 consecutive years of portfolio growth are a reflection of our customers' success.
FCC understands the value of solid market knowledge when making management decisions. That's why twice a year, FCC compiles and releases the Farmland Values Report, which highlights changes in land values in each province and nationally.
Each year, a report is released in the spring, describing changes from July 1 until December 31. A second report, released in the fall, identifies changes from January 1 until June 30. Each report also contains 10 years of trend information.
Methodology
In 1985, FCC established a system of 245 benchmark farm properties to monitor variations in bareland values across Canada.
Since 1990, benchmark properties have been appraised semi-annually in January and July. These selected parcels represent the most prevalent classes of agricultural soil in each census district. The benchmark properties are zoned for agriculture and represent current land use. Weighting is assigned to each property and to each province, based on the improved farmland area recorded by the 1996 Census of Agriculture.
FCC appraisers estimate market value using recent comparable sales. These sales must be arm's-length transactions. Once sales are selected, they are reviewed, analyzed and adjusted to benchmark properties. Individual values are reconciled before accredited appraisers review the appraisal reports.
National trend
The average value of Canadian farmland increased 3.6 per cent during the first six months of 2007, Canada's highest increase since 2002. This is higher than the 2.5 per cent increase in the last six months of 2006.
Most provinces continue to see growth in farmland values. Increases are consistent with an upward trend since January 2000. None of the provinces showed a decrease.
The largest increase is in Alberta, where values grew by 6.4 per cent. British Columbia shows the second largest increase at 3.7 per cent.
Newfoundland and Labrador and Saskatchewan follow, with more moderate increases at 3.3 and 3.0 per cent respectively.
Ontario and New Brunswick follow with 2.7 per cent and 2.0 per cent increases respectively.
Manitoba and Quebec follow Ontario with 1.7 and 1.2 per cent increases in farmland values respectively.
Values remain the same in Prince Edward Island and Nova Scotia.
Canada
Semi-annual increase in farmland values
July 2004 - Jan. 2005 2.2%
Jan. 2005 - July 2005 1.6%
July 2005 - Jan. 2006 1.5%
Jan. 2006 - July 2006 2.1%
July 2006 - Jan. 2007 2.5%
Jan. 2007 - July 2007 3.6%
British Columbia
The agricultural land market in British Columbia remains strong, with an increase of 3.7 per cent in the last six months. This follows two semi-annual increases of 8.2 and 10.0 per cent.
The northern regions continue to have a strong resource sector. This creates strong demand for rural acreages as well as surplus cash for investment in agriculture. The recent positive outlook for some crops has also created some optimism in the farm sector.
Good demand for land continues in British Columbia's southern areas. In other parts of the province, sale volumes have slowed and prices have stabilized during the last six-month period.
Sales of land in the Fraser Valley have been particularly strong, as blueberry producers continue to acquire more land. Land in the Okanogan continues to be in demand as well, as grape growers expand their operations. Urban pressure for rural acreages continues to create demand for smaller holdings.
Areas of the British Columbia interior, which are mainly used for livestock production, continue to see low sales volumes, with the values holding steady. However, values continue to increase for land located within two or three hours of major urban centres where land is being bought for recreational use.
Farmland values on Vancouver Island also increased with a steady, though fairly low number of sales.
View graph of provincial Farmland Values trends for the past 10 years.
Alberta
In the last six months, farmland values in Alberta increased by 6.4 per cent, following 4.8 and 3.9 per cent in the previous two periods.
Optimism in the grain sector, along with a stabilized post-BSE beef sector, has resulted in a healthy demand for farmland.
Large producers are buying much of the better farmland that becomes available on the market. Good quality irrigated land suitable for specialty crop production continues to be most sought-after by agricultural producers.
Land value continues to rise near urban areas and along the central corridor from Lethbridge to Grande Prairie. Alberta's strong oil and gas industry and demand from purchasers with strong off-farm income is driving these land values up.
Generational farm transfers are also occurring, with a substantial amount of land transferring to younger producers.
View graph of provincial Farmland Values trends for the past 10 years.
Saskatchewan
After many years of modest increases in farmland values, the Saskatchewan market has increased 3.0 per cent in the last six-month period. This follows a 1.3 per cent increase between July and December 2006.
Higher grain prices, expanding farms, competition between local farmers, and demand from out-of-province investors all are fuelling land value increases.
Saskatchewan farmland prices are considered to be low relative to other parts of the country. Investors from Saskatchewan and other provinces are paying premium prices for high-quality land, most often near the major centres. As a result, there are pockets of higher values as well as areas where prices remain stable. Farmland sales, along with all other types of property in Saskatchewan, continue to be brisk.
View graph of provincial Farmland Values trends for the past 10 years.
Manitoba
Manitoba farmland values continue to show moderate advances as reflected by a 1.7 per cent increase over the last six months, following increases of 2.8 and 2.9 per cent during the first and second half of 2006.
Higher prices for specialty crops and grain in west-central Manitoba are helping to drive the price of land up.
Manure management demands are responsible for the increase in values of less fertile land located in the intensive livestock areas.
Manitoba is again the Prairie province least affected by oil and gas revenue, but value remains strong thanks to diversified grain and livestock industries.
View graph of provincial Farmland Values trends for the past 10 years.
Ontario
Ontario farmland values increased 2.7 per cent over the last six months, up from 1.7 per cent in the last half of 2006.
The rise in values is partly influenced by higher commodity prices in late 2006. There was greater optimism from cash crop operators until the early part of 2007. In addition, nutrient management has contributed to increased prices in Bruce, Huron and Wellington counties.
Urban buyers relocating to rural areas continue to have a significant impact on land values. This was especially apparent in Waterloo County, the Niagara region and Simcoe County outside the provincial greenbelt.
Values are still holding steady in the counties of Oxford, Middlesex, Perth, Lambton and Kent.
The first half of 2007 has seen some limited upward pressure on land prices in eastern Ontario, including Ottawa region, Prescott, Renfrew, Glengarry and Russell, with general demand being the indicated driver.
Northern Ontario experienced no significant changes as demand is limited.
View graph of provincial Farmland Values trends for the past 10 years.
Quebec
Quebec's farmland values rose by 1.2 per cent in the first half of 2007, according to market indicators. This is slightly higher than the increase of 0.9 per cent for the last six months of 2006.
Last year's sharp hike in grain prices resulted in an increase in corn acreage. According to Statistics Canada, Quebec's corn acreage is up 17.1 per cent from 2006. The price increase and strong demand fuelled by ethanol production have been motivating to field crop producers.
In contrast, the price increase has had a negative impact on hog and poultry producers. Their cost of production is strongly influenced by these inputs and, as a result, fewer transactions have been recorded in these two sectors.
The combination of a low number of properties available and a larger number of purchasers has resulted in continued pressure on the sectors located on the fringe of urban centres.
View graph of provincial Farmland Values trends for the past 10 years.
Prince Edward Island
P.E.I. farmland values have remained stable since 2003, with no marked increases within the last six months.
Good quality farmland in the Summerside area continues to sell at the same price level as six months ago. The number of land transactions in the first six months of 2007 is comparable to the last six-month period. Potato farmers typically purchase and sell parcels between themselves, either for expanding operations or downsizing. An adequate land base is required to meet crop rotation regulations.
The Charlottetown area has seen a wider range in farmland values during the past six months. While some land parcels outside the primary growing belts are selling for lower prices, parcels located within a 20-kilometre radius of Charlottetown have been selling for higher prices. There are signs of urban pressure on farmland in this region.
View graph of provincial Farmland Values trends for the past 10 years.
Nova Scotia
Nova Scotia's farmland values between January and July 2007 remain consistent with previous periods. Fewer farmland transactions were reported in eastern Nova Scotia over the past six months.
Livestock producers continue to be the primary purchasers of farmland, although demand for blueberry land is also very strong. The Truro and Shubenacadie areas are home to most of Nova Scotia's dairy production. Good quality land for growing forage crops is essential to the dairy producers. Prices have remained constant over the past six months, with no change in values.
The value of farmland in the Kentville area remained unchanged from January to July 2007. The demand for land comes mainly from vegetable and grain crop growers. In general, there were fewer land sales reported for this area compared to the last six months in 2006.
View graph of provincial Farmland Values trends for the past 10 years.
New Brunswick
Farmland values in New Brunswick's Potato Belt, dairy and beef regions have increased by 2.0 per cent, compared to a 1.8 per cent increase over the last half of 2006.
Uncertainty in the beef regions has lifted as farmers have rebounded from the BSE crisis that impacted the industry in recent years.
Average potato prices and potato quality, offset by high yield crops, has prompted some potato producers to buy more land. This has created a higher demand for bareland, leading to a slight increase in unit price. Most of the sales have occurred between potato processors.
Dairy producers in the Sussex area are seeing a slight increase in land investments. Most are still held back, however, by the high cost of other farm inputs such as quota, petroleum and fertilizer. Very few sales were transacted between January and July 2007.
In the Woodstock area, some potato producers purchased land near their homes to enhance their processing production operations. These transactions accounted for most of the activity during the past six-month period. Higher prices for potato processing, combined with better quality crops, have had a positive impact on land values.
Higher land values in the Grand Falls region may be attributed to higher potato processing costs. Costly land-clearing operations are underway in this area as farmers prepare to increase their potato growing operations.
View graph of provincial Farmland Values trends for the past 10 years.
Newfoundland and Labrador
A 3.3 per cent increase in farmland values is reported for the past six months in Newfoundland and Labrador. This is up from the previous period, when values rose by 2.8 per cent. Livestock operations seeking forage land is the main cause of the increase.
Some retiring farmers sold smaller parcels to larger, existing operations, although very few land transactions occurred throughout the province between January and July 2007.
There is no longer any value differentiation between eastern and western Newfoundland and Labrador. If a producer acquires additional cleared and productive land base in Newfoundland or Labrador, he or she must develop land through land-clearing practices, which means a greater cost than simply acquiring additional land. This cost to clear land is now in the range of $4,000 to $5,000 per acre.
View graph of provincial Farmland Values trends for the past 10 years.
Contact information
For more information about Farmland Values trends in your area, please contact:
Atlantic Canada
Patrick Doohan (bilingual)
902-432-6523
Quebec
Hugues Laverdure (bilingual)
450-771-7080
Michel Rousseau (bilingual)
418-648-7613
Ontario and Manitoba
Robert Wilson (English)
519-681-3313
Jean Lacroix (bilingual)
613-271-7193
Saskatchewan
Roy Hjelte (English)
306-780-3489
Renate Maslany (bilingual)
306-780-8583
British Columbia & Alberta
Bill Wiebe (English)
604-870-2719
Renate Maslany (bilingual)
306-780-8583
