Farm Credit Canada (FCC) reports Saskatchewan had the highest increase in average farmland values last year.
Saskatchewan saw a 10.2 per cent increase compared to 7.5 per cent in 2016 and 9.4 per cent in 2015.
There was plenty of variability in the numbers across the province with double-digit increases on the west side of the province, as well as the southeast.
https://www.fcc-fac.ca/en/ag-knowledge/ag-economics/farmland-values-report.html
For example, west-central Saskatchewan saw average farmland values jump 16.6 per cent. The overall average was $1,925 per acre. Farmland values ranged between $800 and $2700 an acre.
Average farmland values in east-central Saskatchewan only increased 2.2 per cent. The overall average was $1,321 per acre, with a value range between $800 and $2,200 per acre.
FCC Chief Agricultural Economist J.P. Gervais suggests land availability was one factor for the difference.
He also notes that most of the increases came from sales made during the first half of 2017.
“There were lower interest rates and expectations of a good crop going into the year. We didn’t know about some of the challenges with weather in the southern part of the province,” Gervais said.
There was an estimated decline of two per cent in Saskatchewan farm cash receipts last year. Gervais says the ratio of land price to crop receipts is still close to historical levels.
“It has been trending up over the last five years, but it’s still just barely above the 25-year average. That suggests Saskatchewan started from a very low base. Despite the significant increases (in land prices) over the past few years, the fact that income has grown and is catching up to the level where the prices of land in Saskatchewan match up with farm income. So it’s a market that remains healthy in my perspective.”
Gervais is anticipating at least one more interest rate increase by Bank of Canada this year.
“I do think that is going to cool off the (farmland) market. Now to what extent is a big question mark. This is really hard to estimate.”
Gervais adds farm income and land prices go hand-in-hand. He says it’s the right time for producers to adjust business plans to reflect those pressures and assess their overall financial positions.
