Weather has taken some of the steam out of land prices here.
Farm Credit Canada, the biggest agricultural lender in the country, says Ontario, British Columbia, Alberta, Saskatchewan and Quebec are showing lower increases in farmland values for the first half of 2018.
FCC says the national average for farmland values fell from a 6.6 per cent increase in 2018 to a three per cent increase in the first half this year.
Now, that’s still an increase, much better than a free fall that would take the buoyant market into the tank.
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But no one thinks that’s going to happen.
“There might be some minor market adjustments along the way, but the days of sharp increases in farmland values have been replaced by more modest growth,” said J.P. Gervais, FCC’s chief agricultural economist. “Demand for Canadian agricultural products is projected to remain strong at home and abroad in 2019-20, so there is a long-term positive future in agriculture.”
Indeed, the short term does not have industry observers feeling warm and fuzzy about land prices. Don Kabbe, general manager of Great Lakes Grain in Chatham, says weather took some of the steam out of land prices there.
“Ontario has been hit with a challenging growing season with delayed planting and less heat this summer, resulting in lower than expected crop yields,” Kabbe says. “It’s slowed from the high of 2011-2015.”
University of Guelph research Prof. Brady Deaton Jr. says prices came in about where farmers expected them. Deaton, who holds the McCain Family Chair in Food Security, polled Ontario farmers about their perceptions regarding changing farmland prices in 2019.
Almost half of the respondents thought prices would stay the same, while nearly 30 per cent thought they would increase.
Across the country, one might think a drop in average farmland values would cause at least some grief for an ag realtor like Saskatchewan’s Tim Hammond.
But that’s not the case. In fact, it’s not even close.
At Biggar-based Hammond Realty, one of the country’s biggest farm real estate companies, Hammond and his eight sales agents have realized a flurry of buying activity since the price calming.
They’ve charted $150 million in sales this year, with a full quarter still to go. That beats the previous record of $140 million, and represents a significant increase over 2018, when sales reached $100 million.
“Buyers are entering the market now that sellers have stopped testing the waters with prices,” Hammond says. “Sellers are motivated and, as a result, buyers feel like they have more negotiating power than they did a couple of years ago when there was very little land for sale.
Back then, he says, his firm had 10 buyers for every farm. So, there wasn’t much negotiating going on.
“Now the number of buyers and sellers is more balanced, and they’re asking us to help broker a fair deal,” he says.
Land values sometimes reflect the mood of the agricultural community. If it’s dour, then no one is likely to sell or buy land at anything but a discount. And while it seems like there may be some deals to be had, don’t expect a wholesale sell-off. Despite a gloomy horizon with trade with China and the USA being coloured by their respective leaders, there are still a lot of countries that would welcome the chance to take Canadian far products.