Southwestern Ontario's land prices continue their climb upward: report
Thursday, February 18, 2016
by JIM ALGIE
The median price for farmland in 10 counties of southwestern Ontario during 2015 rose almost four per cent despite softening markets for most cash crop commodities, says a report by London, Ont. land appraiser Ryan Parker.
The 30-page report analyzes farmland sales completed during 2015. The report is slated to be published online by Valco Consultants Inc., where Parker is a partner.
It includes analysis of farmland sales in each of the 10 counties studied, including regional trends within each county. Demand by livestock farmers including those holding quota for Canada’s supply-managed commodities continues “to have a large impact in certain areas in Huron, Perth and Oxford counties,” the report says.
Parker identifies wide variability in land values locally. He also predicts continued upward pressure on prices for high quality farmland because of expected low interest rates. As well, he cites Canada’s relatively low currency value as a buffer for Canadian farmers from weakening international commodity markets.
“If our dollar was par right now (with the U.S. dollar), and we had to get $3.50 for corn like the U.S. guys are and our interest rates had risen a bit, we’d be in a totally different world, there’s no doubt about it,” Parker said in an interview, Thursday.
The 2015 report is Parker’s fifth in an annual series and documents a period of unusually strong growth in farmland values in southwestern Ontario. The 2012 report identified 29.3 per cent increases between 2011 and 2012 in the median price for all 10 counties with some regions at even higher levels. (The median is the mid-point of a data set; the mean is the average.)
In 2012, for example, the median price increase for Lambton County was 69.19 per cent while the price in Huron rose by 36.88 per cent and the price in Grey County rose by 29.30 per cent. Increases began to moderate during the 2013/14 crop year with a decrease identified in Huron, Lambton and Bruce counties, the report shows.
Parker’s data for 2015 shows the only drop in median value occurred in Kent County, down 5.7 per cent. While the 2015 regional median rose 3.83 per cent, southern Grey County led growth with a 12.5 per cent increase while all other areas showed more moderate increases of between 1.54 per cent in Huron and 6.12 per cent in Oxford counties.
Oxford County now has the region’s highest land prices, Parker’s data show. Among Ontario’s most intensive areas of livestock production, Oxford includes more than 11 per cent of the province’s supply-managed dairy industry with 2013 farm cash receipts estimated at $213.2 million.
Oxford hog farmers also manage a 13.38 per cent share of the province’s pork industry and just over eight per cent of Ontario’s corn business. Parker estimates the 2015 median value of land sales in Oxford at just over $18,000 per acre, more than double the number for 2010.
Although commodity price weakness led to more moderate land price increases in 2015, Parker also said he can see some psychological barriers among buyers faced with the huge increases in land costs in recent years. In some ways, the expansion of individual farms into ever-larger units, limits the number of interested buyers.
“For the first part of this the land values were jumping so fast that once you get up to a really high number and cash flows are slightly less, buyers tend to get a little more choosey,” Parker said.
“It has grown so fast and so far in a few years that, even if commodity prices had stayed the same . . . our rate of increase would have had to slow at some point,” he said. “Once you’re at $25,000 you have to be able to imagine” bidding even more, Parker said of potential buyers.
While Oxford led median land prices in 2015, Perth County came second at just under $18,000.
Remaining counties range from about $13,000 per acre in Huron County to the Bruce County low of $7,900.
Median prices in 2015 for other areas are calculated as follows:
- Middlesex, $12,500
- Kent, $11,500
- Elgin, $11,000
- Lambton, $10,500
- Grey, $9,000
- Essex, $8,000.
Parker’s analysis confirms a trend which has appeared lately in U.S. land price analysis. Iowa State University’s annual farmland value survey published late last year showed a 3.9 per cent decrease. It was the second year in a row for decreasing farmland value and the first time in 15 years for back-to-back declines. Iowa State analysts blame decreasing corn and soybean prices and dropping farm net income.
A September report of the Illinois Society of Professional Farm Managers and Rural Appraisers showed a drop in prices of between two and seven per cent based on land quality. The softening trend in farmland values is “following prices being paid for commodities,” the report said.
Farm Credit Canada’s national benchmark Farmland Values Report is expected to be published in mid-April. The most recent FCC report for 2014 showed a 12.4 per cent increase in Ontario farmland values that year, the 26th year of consecutive, annual increases in the province. BF