WESTERN ONTARIO: Farmland prices continue to rise

By Tom Collins
LONDON — Supply and demand will ease up this year but farmland prices should continue to rise in 2020, says the author of an annual farmland sales report.

The median land price in 11 southwestern counties was up 5.68 per cent to $14,458 an acre in 2019 compared to 2018, according to Ryan Parker, of Valco Real Estate Appraisers and Consultants, in London.

Parker’s Southwestern Ontario Land Values report looked at median prices per tillable acre of 450 farmland sales last year. There were 540 sales in 2018.

Parker predicts that after years with plenty of farmland for sale, not as much land is going to be available going forward. Demand is also going to decrease. In the past, “it didn’t matter what farm it was, how good it was, how poor it was, it was selling immediately,” Parker said. “You (now) have guys who, instead of buying any piece that comes up, they’re buying pieces that are strategically positioned for their business. That’s a much better place to be in.”

Even with profitability taking a step back in the past 18 months with trade issues, rail issues, lower crop prices and the impact Coronavirus might have on markets, there will still be farmers looking to buy in 2020, Parker said. As long as interest rates remain low (there’s been some estimates by experts that we might even see more interest rate cuts in 2020) “and commodities stay relatively the same, we’re still going to have opportunistic buyers out there,” Parker said.

Here are some takeaways from the report:
• For the first time since 2012, Oxford County is not home to the highest-priced median land. Instead, it’s Perth County at just under $20,000. The median price of farmland in Oxford last year was just over $19,000.
• Perth County is the most consistent county for soil type, Parker said. “There are no sandy soils to bring (prices) down,” he said.

Parker says Perth and Oxford will continue to have the highest-priced sales this year because of enthusiastic farmers that like to buy land; high livestock density; and a stretch of excellent soil that runs from Woodstock to Stratford where prices are highest.
• Oxford was one of only two counties to see a drop in median prices, down 4.22 per cent in 2018. This comes after a drop of 1.44 per cent the previous year.

Parker says the decrease is due to the sandy soils in the south part of Oxford. He said that the ginseng industry wasn’t as profitable in 2019 as it has been in the past. There are not a lot of livestock farmers interested in the sandy soil, so if there aren’t vegetable or specialty crop farmers interested, prices drop, he said.

“The strange part about Oxford is we have new highs in the expensive part of the county,” he said. “The difference is the lowest-valued land in that county really dropped off a cliff in the past year.”
• Kent County saw the largest increase in farmland prices last year at 19.96 per cent. The heavier ground in the south end of the county jumped up by a couple of thousand dollars per acre, Parker said. He also said the county was overdue for a big increase.

Wellington County prices were up 14.49 per cent due to large demand, Parker said.
• The top sales in the counties of Huron, Perth, Oxford, Middlesex, Lambton, Kent and Wellington were all above $20,000 an acre, while Perth and Oxford both saw top sale prices at $30,000 or more an acre.