2023-11-05 10:35:02
Ontario’s farmland is on track to reach unprecedented values. By 2024, they might reach an average price twice as high as around ten years ago. Analysts point to the lack of available land, the high price of agricultural raw materials driven by global instability and historically low interest rates to explain this situation.
Already considered the most expensive in Canada, provincial agricultural land continues to increase in value. Ryan Parker, an associate in the agricultural department at land appraisal firm Valco Consultants in London, conducts an annual analysis of land prices in 11 townships on southern Georgian Bay in the southwest of the province.
25% increase in one year, according to an analyst
Last year, in those 11 counties, our median price was regarding $23,000 per farmable acre, he says. He estimates that values will increase significantly once more in 2023, by around 25% for the third year in a row.
We are getting terribly close to an average value of $30,000 per exploitable acre (more than $70,000 per hectare, editor’s note). The demand for agricultural land over the past 10 to 15 years has been significant.
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The rise in farmland values over the past decade has come mainly from farmers themselves, who represent the vast majority of buyers, according to Mr. Parker.
They are local farmers. They may be from the township, the county or the next one, but on the whole it is Ontario farmers who buy this land, almost all of it. They are not new: they are existing operations, and they are buying more land and expanding.
You don’t have much choice. Your neighbor only sells once in your life, notes farmer Michel Dignard. For him, the limited inventory of land on the market is what is driving up prices. Towns and villages were built around the best land. all the lands are all cultivated, there is no other. That’s what makes for big competition.
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Investors represent a growing but relatively small share of farmland owners in Ontario.
Photo : CBC/Colin Butler
This upward trend is not unique to Ontario, according to Justin Shepherd, senior economist at Farm Credit Canada.
All regions of Canada have seen the value of agricultural land increase, he points out. Ontario leads the country in farmland value growth in 2022, at 19.4% for the calendar year.
The most expensive farmland in Canada is now in the southwest of the province, says Shepherd. Farms between the Windsor and London areas that averaged $15,000 per acre ten years ago have reached an average value of $28,900 in 2022.
We have not seen a large amount of land put up for sale, which increases competition between potential buyers, he adds. He points out that the region’s climate, soil quality and scarcity of available land also contribute to strengthening land values, despite recent increases in interest rates from the Bank of Canada.
An investment over several generations
However, current prices do not seem to put off farmers, continues Mr. Parker. Among farmers, the investment strategy is multi-generational, summarizes the specialist.
Mr. Dignard assures that this purchasing plan is worth it, particularly because opportunities are rare.
If you have children, you have succession. You won’t make much money, but your children will have land that will be theirs.
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Farmer Michel Dignard in front of his farm.
Photo : Radio-Canada / Michel Aspirot
For him, the high price of land proves that agriculture is here for the long term. This proves that the farmer is confident that in the long term, it will pay off. It’s a safe bet.
The president of the National Farmers Union, Jenn Pfenning, believes on the contrary that buying at such a price poses a significant risk.
Many farmers have no savings other than the value of their farmland. So, when they are regarding to retire, they must ensure they generate sufficient returns, she says.
Harder to buy for small farmers
Furthermore, Ms. Pfenning and Mr. Dignard are keen to know more regarding the owners, for example by having a land register in the agricultural sector. Not knowing who owns which land represents a key problem, according to the union leader. She is concerned regarding the sustainability of the profession for smaller farms with limited purchasing power and for newcomers to the profession.
The current situation is concentration, that is to say larger and larger farms, fewer and fewer farmers and fewer and fewer people benefiting directly from their agricultural activity.
Since 1976, the number of farms smaller than 760 acres has fallen by half (47%), according to Statistics Canada (New window).
Mr. Dignard would like to have precise data on the size of land sold. He is convinced that a price of $30,000 per acre is only for small squares of land.
I would like to know the average size of sales. If you make a purchase of 50 to 200 acres, well, it’s not the same price as 500 acres, 1000 acres.
Ms. Pfenning would finally like to have a better idea of the influence of speculative buyers who, although in the minority, can play a role on these prices. We know there are a large number of acres, but not exactly how large are already owned by either developers or investment companies. They block off this land sometimes for more than 20 years in some cases to turn it into a factory or housing.
With information from Colin Butler, CBC
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