By Tom Collins
Eastern Ontario farmland prices jumped 8.5 per cent in 2017, according to Farm Credit Canada’s annual farmland values report.
The report says the price of Eastern Ontario farm land last year was $9,624 per acre. Farm Credit Canada calculated the average price on a sale price range from $2,300 to $14,500 per acre after excluding the top 5 per cent and bottom 5 per cent of total sales in 2017.
The report also said farmland prices in North Central Ontario were up 24 per cent, the highest of eight Ontario regions. Farmland value in North Central Ontario was $7,002 an acre, the second-lowest in Ontario. That was calculated from a price ranger from $3,700 to $14,900. Northern Ontario farmland prices were lowest at $3,621 per acre on average.
Ontario farmland prices increased everywhere. Overall, Ontario farmland prices were up 9.4 per cent. That’s the third highest percentage price increase in Canada, trailing only Saskatchewan’s 10.2 per cent and Nova Scotia’s 9.5 per cent. Ontario was up 4.4 per cent in 2016.
“For the most part, Ontario’s farmland value increases continued to be fuelled by a strong demand from supply-managed farm operations, as well as cash crop producers competing for a limited amount of land available for sale,” said Scott Sahulka, Farm Credit Canada’s senior director of valuations.
Farmland values soared from 2011 to 2014, with double-digit percentage increases each year, including a whopping 30.1 per cent in 2012.
J.P. Gervais, FCC’s chief agricultural economist, does not believe 2017’s large increase is the start of a new trend. He noted that the majority of transactions were in the first six months of 2017, when interest rates were at a record low. When rates went up in the second half of the year, sales slowed down. He expects interest rates to increase at least once in 2018.
“I do think that is going to cool off the market,” he said. “To what extent is a big question mark. I do expect to have a positive number in 2018. I don’t think any increase in interest rates would be enough to completely cool off the farmland market.”
Gervais said whether a farmer believes increased land prices is a good thing depends on how much land a farmer owns.
“If you’re looking at it from the perspective of somebody that owns land and is seeing the value of the assets go up, I think that’s a good thing,” he said. “It solidifies the balance sheet, and perhaps sets the business up for success over the long term. History has proven that it’s always been good thing to work towards building equity into your farm. On the flip side, for producers that are looking to expand their land base, it makes it a little more difficult.”
He added that farmers that don’t have enough land and can’t afford to buy more need to look at leasing land.