Farmland Market Expected to Remain Tight 


A relatively tight supply is one factor helping to keep Canadian farmland values well supported, and Farm Credit Canada chief economist JP Gervais does not expect much appreciable change in that ongoing scenario. 

Speaking as part of an FCC farmland values webinar earlier this week, Gervais said as long as the outlook for agriculture remains positive, demand for farmland in Canada will likely continue to outstrip the available supply.  

“With all the food security challenges in the world, and the position Canada has in the global stage (as a producer and exporter of agricultural commodities) . . . I do think the outlook is very positive.” 

FCC’s annual farmland values report on Monday showed the average value of cultivated Canadian farmland increased by 12.8% in 2022, up from advances of 8.3% and 5.4% the previous two years, and the largest gain since 2014, when values jumped an average of 14.3%. Strong commodity prices helped to fuel that gain, but the FCC report said continued tightness in the farmland market remains a factor as well. 

And not only is farmland slow in coming to market, there also appears to be less of it. Statistics Canada's Census of Agriculture has confirmed a general decline in the amount of farmland over the last decade, with the drop in Atlantic Canada particularly sharp. Indeed, Prince Edward Island, New Brunswick and Nova Scotia have recorded declines of 15%, 27% and 29%, respectively, in farmland areas over the last 10 years. The decline in total farm area is smaller in other provinces but still noticeable everywhere.  

“When there’s land available, it doesn’t take many buyers to create this competition for land which results in the prices we’re seeing today.” 

Rising interest rates may make some other investment vehicles increasingly attractive, but even then, Gervais said farmland more than holds its own – also giving owners less incentive to sell. 

“If you look at farmland returns over the last 10 years, it’s been positive,” he said. “And I would argue it’s been less volatile than all the other assets you can think of.” 

Source: DePutter Publishing Ltd.

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