A report by Farm Credit Canada says that the average price of farmland across Canada rose by 10.1 per cent in 2015. The report indicates that there is a continued interest in purchasing farm lands that are available for sale. Charles Dubé, a senior appraiser with Farm Credit Canada, says that the amount of people looking to either get into agriculture or to expand their operations is a barometer for the health of the industry.
“We have a strong agricultural sector,” says Dubé. “2015 has been supported by healthy crop receipts and low interest rates, which have contributed to a sustained increase in farm values. And the loonie is weak as compared to the U.S. dollar. That makes our crops and products easier to buy from export sources. Since its being bought in U.S. dollars, it gives our farmers a great income to counteract the cost of doing business.”
The FCC’s research drew no distinction between large and small farms, they simply looked at all sales that occurred on the market. Dubé says that it’s a melting pot of everyone who’s looking to buy farmland, from people looking to get into the industry to people who are looking to expand current operations of all sizes.
Dubé says that deciding to buy farmland is influenced by a variety of factors, which could be very different from region to region.
“You’ll be looking at supply and demand, what’s available for sale, who is looking to buy, what are the weather conditions within the regions where the land is being bought and sold,” says Dubé. “If you have a year when the weather conditions aren’t going to be conductive to good crops and good income, that will affect the money the farmer will have available to buy farmland. Your commodity and live stock prices will also come into play. In a year of good prices, you have more income left over and could look at buying more land. If prices tank, that creates the reverse effect where people won’t have the extra cash.”
The variability of interest rates and land values are also significant considerations to take into account. Dubé warns those interested in purchasing farm lands that while the land sales indicate a strengthening industry, all of these factors must be considered.
“I always caution producers about using the news in the past few years of profitability as a basis for purchasing land. You have to look at your profit margins. It affects their purchasing power. That’s the major decider in buying land, whether you’re a smaller farmer or a large farmer.”
- Matt Jones