Ontario's soaring land costs means fewer farmers and hurdles for new farmers: NFU

Monday, September 10, 2012

by SUSAN MANN

Farmland values in some parts of Ontario have shot up dramatically this year compared to last year, according to a real estate company’s national farm market trends report released Monday.

The RE/MAX Market Trends Report, Farm Edition 2012, highlighting trends and developments in 16 markets throughout Canada found that prices have increased almost across the board this year. In Ontario, several areas experienced “impressive gains over last’s year’s figures,” the report says, including Kitchener/Waterloo, Woodstock/Stratford, London/St.Thomas, and Bruce/Grey/Huron.

Al Mussell, senior research associate with the George Morris Centre, called the rate of increase in Ontario farmland values remarkable. And Mussell says he doesn’t expect any dramatic changes in the continuing upward trend of land values.

The report says population growth set to outpace increases in food production in years to come and ongoing urban sprawl will contribute to higher land prices in the future.

Ann Slater, Ontario coordinator for the National Farmers Union, says soaring land costs make it more difficult for new farmers to begin in the agricultural industry. “For anyone who wants to get started, it’s a huge debt load to take on even though interest rates are low.”

Slater also notes increasing land costs leads to a greater concentration of farmland in fewer hands and that means fewer farmers.

Per acre land costs in Kitchener/Waterloo jumped to $11,000/$15,000 this year from the $10,000/$11,000 range they were in during 2011. In the Woodstock/Stratford area, per acre land prices soared by $6,000 to $15,000 this year compared to last year’s $9,000.

For the London/St. Thomas area, land increased by $1,500 per acre this year compared to 2011. In Middlesex East, farmers are paying $10,500 an acre this year compared to $9,000 last year, while in Middlesex West the price jumped to $7,500 per acre this year compared to last year’s $6,000.

Land in Elgin County East sold for $8,500 an acre this year compared to $7,000 in 2011 while in Elgin County West it was $6,500 an acre this year and $5,000 last year.  

In Grey County, which was described in the report as a traditionally affordable area, the price per acre leapt to $3,000/$6,000 this year from $3,000/$4,000 last year. Land rents remain reasonable in that county priced between $75 and $100 an acre in the Owen Sound area and $200 an acre in the Kincardine region.

Land in the North Huron and Bruce County area rose to $5,000/$8,000 an acre this year compared to $4,500/$7,000 last year, while in mid Huron per acre prices jumped to $12,000/$15,000 this year over last year’s $8,000/$10,000. In South Huron and mid-Perth farmers paid $16,000/$18,000 an acre this year compared to $10,000/$14,000 last year.

But there are some parts of the province where per acre values remained unchanged this year over 2011, including Windsor/Essex County with land staying at the $5,000/$6,500 range, Bradford lingering at the $20,000 level, and Barrie/Tottenham/Innisfil remaining at $8,000/$10,000.

Farmers have yet to be deterred from expanding their operations despite rising values and a tight supply of land, the report says. Factors contributing to the trend of farmers expanding their land base include low interest rates, high commodity prices, Nutrient Management Act requirements, the limited ability of farmers in supply-managed commodities to expand their operations and switching to cash cropping as an alternative and increased advancement in farm equipment.

Ontario Federation of Agriculture president Mark Wales says the availability of large-sized equipment makes it easier to farm more acres. Wales, who was at the Outdoor Farm Show near Woodstock this morning, says some of the equipment he saw there “is common on the Prairies” where farms are 5,000 to 20,000 acres.

Wales says another factor driving land price increases is limited supply. “There’s really not a lot of land for sale.”

The report says locals are driving the bulk of sales across the country with investors only accounting for a small percentage of farmland buyers. But investors, ranging from individuals to large corporations and commercial interests, are a growing presence in the market.

Wales says in his area of Elgin County it’s mainly farmers expanding existing operations who are buying farmland.

The report also notes some farmers are expanding into less traditional markets and buying, then improving, inferior farmland while others enticed by value are migrating to more affordable markets, such as Grey County and New Liskeard in Ontario and Northern Alberta and Saskatchewan in the Prairies. In some markets, beef and hog operations have been impacted by high feed costs and that’s eased demand somewhat.

Nathan Stevens, Christian Farmers Federation of Ontario interim general manager and director of policy development, wasn’t available to comment. A spokesperson for RE/MAX couldn’t be reached for comment. BF