Updated: Canadian farmland grows 22.1% in 2013

*updated to include comment from Stephen Johnston, founder of Agcapita.

The average value of farmland in Canada increased by 22.1 percent in 2013 according to Farm Credit Canada (FCC), the agriculture lender. This is the highest yearly increase since the agriculture lender started monitoring land values in 1985.

The year 2012 posted the second highest gains at 19.5 percent over the year.

Saskatchewan was the biggest winner after land values increased 28.5 percent over the 12 month period followed by Manitoba and Quebec at 25.6 percent and 24.7 percent respectively, according to the  FCC report released yesterday.

Saskatchewan is a popular investment destination among the agri investing community in Canada. CPPIB’s second-ever agriculture investment was the purchase of a farmland portfolio in the province from Assiniboia Capital Corp, a Canadian agriculture investment company, for C$128 million ($115 million; €84 million).

Agcapita, the Canadian retail farmland fund house, focuses its entire range of funds on the Saskatchewan province. Agcapita’s founder Stephen Johnson was not surprised by FCC’s data.

“It’s clear that prices in Saskatchewan are deeply discounted to the world averages per tonne of productive capacity; by our calculations they are discounted by as much as 50 percent,” he told Agri Investor. “Part of our investment premise is that this gap will close and with the attention that Canadian farmland is receiving from investors, it can obviously happen quite quickly.  The large increases that were seen in Canada, and Saskatchewan in particular, in 2013 are a reflection of this gap closing.  It is this ‘margin of safety’ return-driver that attracted us to Canada and Saskatchewan in the first place.”

Ontario and Alberta came in third and fourth on the list with farmland values rising 15.9 percent and 12 percent respectively.

All 10 provinces increased in value or remained stable over the course of the year; the first half of the year saw the greatest increases.

Canadian farmland has been on the up since 1992, the last year it declined in value falling on average 2.1 percent over the 12 month period.

Farm Credit Canada is one of the country’s major providers of business and financial services to farms and agribusiness. The firm manages more than C$26 billion ($23.6 billion; €17 billion) in assets.

Additional reporting from Louisa Burwood-Taylor.