Ontario sees smaller gain in farmland values than most other provinces

Monday, April 27, 2009

© AgMedia Inc.

by SUSAN MANN

The average value of farmland in Ontario increased by 1.9 per cent during the last half of 2008 but it was the smallest increase across Canada, according to Farm Credit Canada’s Farmland Values report released Monday.

Saskatchewan posted the biggest gain with average farmland values going up by 8.8 per cent during the second half of last year, it says in the semi-annual report. The only province that didn’t post a gain was Prince Edward Island where rates were steady in the second half of 2008.

Overall, the average value of Canadian farmland increased by 5.6 per cent for the last half of 2008. The increase in Ontario farmland values was smaller than in the rest of Canada mainly because of supply and demand factors affecting provincial markets. The 1.9 per cent increase in Ontario is down 4.6 per cent from the first half of 2008.

Alfons Weersink, acting chair of the University of Guelph’s department of food, agriculture and resource economics, says when there’s an increase in returns to agriculture generally, there’ll be a bigger impact on Saskatchewan’s land values than on Ontario’s. That’s because the land values in Saskatchewan “reflect primarily agricultural returns whereas Ontario’s reflects some non-farm returns and the impact of supply management.” He adds that supply management tends to stabilize the demand for farmland.

Dale Litt, FCC senior appraiser, says Ontario’s increase was smaller than the average in Canada because there are different supply and demand factors that influence and interact with the market. “It’s all got to do with the different markets within those provinces.” But “I think as long as we’re still heading upwards it’s a good thing.”

Farmland values in Ontario rose all over the province, increases in the east and north were smaller compared to the southern and southwestern regions where the biggest increases occurred, Litt says.

Varied factors contributed to land value increases in Ontario, including one FCC hasn’t seen before. People were paying a premium for land bordering Lake Huron to be used for wind turbines. “In most cases there are already contracts in place so they’re paying a premium for those contracts,” he says, adding it’s not necessarily farmers buying that land. But this wasn’t one of the main factors affecting the increases.

The main factors include:

•    cash crops continued to show profitability due to demand for corn to supply local ethanol plants;
•    urban buyers relocating to rural areas and driving up demand;
•    large, intensive livestock farms continuing their strong demand for land to satisfy nutrient management program requirements; and
•    farmers expanding their operations.

Bette Jean Crews, president of the Ontario Federation of Agriculture, says “we had good commodity prices last summer so farmers are paying more for rent and more for the land because the commodity values would sustain that.”

She says another factor that influenced values in Ontario is the Greenbelt with land prices around it going up. Created in 2005, the Greenbelt is 1.8 million acres of land wrapped around the Golden Horseshoe in southern Ontario that’s permanently protected from urban development and sprawl.

Litt says Ontario farmer buyers “were basically looking for good, productive land. If it’s not tiled, they’ll spend the money to tile it and bring it into production.”

In southwestern and northwestern Saskatchewan farmland values were influenced by the oil and gas industry. “That was a main driver there,” Litt says. BF