To The Haldimand Press
Average farmland values continued to increase in most parts of Canada, despite higher interest rates in the first half of 2022, according to a mid-year review by Farm Credit Canada (FCC).
“Strong farm cash receipts, buoyed by robust commodity prices, have managed to quell some of the profitability challenges from higher interest rates and farm input costs,” said JP Gervais, FCC’s Chief Economist. “Producers are still making strategic investments in their operations and buying farmland, which is in short supply and high demand. This healthy farmland market is a good indication there is confidence and optimism in the future of the industry.”
The highest average farmland value increases were reported in Ontario (15.6%), Prince Edward Island (14.8%) and Quebec (10.3%), followed by Saskatchewan (8.4%), closest to the national average of 8.1%. There was insufficient data in Yukon, Nunavut, Newfoundland and Labrador to assess.
Most land transactions were agreed to prior to the most significant interest rate increases. However, Gervais believes the more recent increases will not completely deter some producers from making land purchases that make sense for their operations.
“There’s little doubt that higher borrowing costs will slow the demand for farmland,” he said. “But the fact that the supply of farmland available is limited and farm incomes are trending in the right direction could offset the impact of interest rate increases.”
Provinces with a higher percentage of arable land, such as Saskatchewan and Alberta, seem to experience a slower pace of increase in land values. Ontario’s average increase was bolstered by the central regions of the province, where competition for arable land is strong but supply is limited.
Farm cash receipts climbed 14.6% year-over-year for the first half of 2022, although grain, oilseed, and pulse receipts were slightly lower in the first six months, as expected due to the drought in the Prairie provinces in 2021. Receipts are projected to increase 18% for the full 2022, relative to 2021.
Despite inflationary pressures and geopolitical tensions, new crop prices continue to be elevated and should generate positive profit margins, given the latest production and yield estimates.
Gervais recommends operators maintain a risk management plan to protect their businesses against unforeseen circumstances. For more information, visit fcc.ca.
