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Canadian farmland values rising, says FCC


November 16, 2011
By Farm Credit Canada

Topics

November 14, 2011, Guelph,
Ont – According to a new Farm Credit Canada (FCC) Farmland Values Report, the
average value of farmland in Ontario increased by 6.6 per cent during the first
half of 2011.

November 14, 2011, Guelph,
Ont – According to a new Farm Credit Canada (FCC) Farmland Values Report, the
average value of farmland in Ontario increased by 6.6 per cent during the first
half of 2011.

In the previous two
six-month periods, farmland values increased by 2.4 and 4.3 per cent
respectively. Farmland values have been rising since 1993 in this province.
The FCC report
provides
important information about
changes in land values across Canada and is available at www.farmlandvalues.ca.

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Comparatively, the average value of
Canadian farmland increased by 7.4 per cent during the first six months of
2011, following gains of 2.1 and 3.0 per cent in the previous two six-month
periods.
Farmland values remained
stable or increased in all provinces. Saskatchewan experienced t
he highest average
increase at 11.6 per cent. The Saskatchewan results
appear to mirror the U.S. situation, where
double-digit increases in farmland values have been reported in several corn
and soybean states. Two contributing factors to the current value increase are
the ongoing strength of commodity prices, combined with land values that
previously increased at a slower rate than in other areas of the country.

“Farmland is more than a production resource – it’s
a source of wealth for farmland owners,” says Michael Hoffort, FCC senior
vice-president of portfolio and credit risk. “So it’s not surprising that
changes in the price of farmland generate interest from producers and others in
the industry. The upward trend in farmland values appears to have accelerated.
Canadian farmland values have risen steadily during the last decade.”

Previously, the highest semi-annual average
national increase was 7.7 per cent in 2008. The last time the average value
decreased was in 2000, when it dropped by 0.6 per cent.

The average national price of farmland has
increased by about 8 per cent annually since the commodity price increase began
in 2006. That’s about twice the rate observed in the first part of the decade.
Near-historic highs in crop prices and lows in interest rates are other factors
supporting higher land prices.

“Low interest rates,
good crop prices in recent years, along with low returns in financial markets
mean farmers are buying more land,” says
Jean-Philippe
Gervais, FCC senior agriculture economist. “
These three factors combine to
increase demand for land and push prices up.
As long as crop prices continue to be strong, farmland values should
remain high.”

“Agriculture matters to
Canadians and the positive overall health of the industry is definitely being
reflected in recent land value trends,” says Hoffort. “It is an indicator of
the industry’s strength, and it is good news for producers who hold land as an
asset. At the same time, it can be a challenge for those who want to buy
farmland to expand their operation.
That’s why we offer loan products that can help
young farmers buy land.”

To view the FCC Farmland
Values Report video
, visit www.fcc.ca/farmlandvaluesvideo.

The FCC Farmland Values
Report
has been published since 1984. To view previous reports, visit www.farmlandvalues.ca.