Increased valuations in all but one of Canada’s provinces produced an average growth rate of 6.6 percent across the country’s farmland markets last year, according to Farm Credit Canada.
In its annual farmland values report, released earlier this week, the Canadian agricultural lender highlighted that the 2018 reading marked a slower overall rate of growth than the 7.9 percent average reported in 2016 and the 8.4 percent recorded last year.
Drawn from an analysis of benchmark properties in representative areas of the country, comparable farmland sales and supplemental data excluding highest and lowest sales, the report found Quebec, Saskatchewan and Alberta to be the best-performing regions last year. The only province-level decline was the 4.9 percent contraction reported for Nova Scotia. Prince Edward Island, Manitoba, Ontario and New Brunswick all registered growth below the national average.
Multiple times throughout the report’s summaries of activity within each of the 10 regions for which sufficient data had been collected, FCC wrote that large producers wanting to expand their land holdings were a key element of market activity last year.
In its summary, FCC highlighted that “fewer, but more strategic” investments by producers had been the driving force behind the markets’ “steady climb” in 2018.
“Whether it means paying a higher price for land that has the potential to be more productive or buying in blocks to improve efficiency of their operations, producers are sharpening their pencils with an eye on variable commodity prices,” the report’s authors wrote.
In British Columbia, for example, FCC reported that farmland values had increased by an average of 6.7 percent last year, an acceleration from the 2.7 percent reported the previous year but behind the 8.2 percent recorded in 2016. The province contains the fastest-growing sub-region among Canada’s farmland markets in Vancouver Island: here, FCC reported a “relatively low, but stable” volume of transactions, resulting in 21.7 percent annual growth to an average value of C$50,000 ($37,250; €33,130) per acre.
“Farm expansion continued to be the main driver of the province’s farmland market, while urban and investor demand was less of an influence than in previous years,” the report’s authors wrote. “The innovative and intensive nature of agriculture in British Columbia continued to translate into a higher demand and prices for the best quality farmland.”
FCC vice-president and chief agricultural economist J.P. Gervais told Agri Investor that although the lender has relatively little direct visibility on private investor activity, investor types known to be active in Canada’s farmland markets include private equity and pension funds, insurance companies and high-net-worth individuals.
The largest drop in values was reported in Nova Scotia, for which FCC reported a 14.4 percent decline from the 9.5 percent growth in 2017. The report attributed the province’s 4.9 percent contraction in 2018 to reduced dairy quota volumes, a decline in prices for wild blueberries and an overall softening in demand for vacant cultivated land in the eastern province, which borders the Atlantic Ocean.