The threat of interest rate increases hasn’t dampened the prices southern Ontario farmers are paying for land.
The annual Valco study of land values showed an increase in value of 9.76 per cent for farmland sold in 2017 over 2016. This increase is the largest since 2013.
The median price for land in the surveyed area is $12,710 per acre, according to Valco, a London, Ont. real estate appraisal company.
The bottom line: Quality farmland continues to attract strong prices in the Ontario market, even though prices for major farm crops continue to stagnate.
The Valco study is unique in that it mainly looks at the value per acre of productive land, focusing on land without new buildings. The study also strips out the value of improved older buildings, so it really looks at the value of cropland versus influences of other farm-based effects on price.
Ryan Parker, the Valco consultant who put together the report, noted prices were stagnant over the past three years, after strong grain and oilseed prices helped buoy prices from 2011 to 2013.
The increase from 2016 to 2017 is surprising, given that commodity prices remain stagnant and interest rates have started rising for the first time in years.
The largest reported increases in land price were in Wellington, Grey and Lambton counties.
The fact that land prices are rising during a period of stagnant crop prices shows that there’s the potential for a significant bump in land sale prices if commodity prices improve, the report said.
Rising interest rates could have an impact in the other direction, and could dampen the rate of farm land price increases over the next couple of years, the report added.
Other factors affecting Ontario farmland prices include:
- Livestock, especially in Huron, Perth, Oxford and Wellington counties, which have a significant number of farms that market supply managed commodities. The value of the barn isn’t included in this study, but the effect of the need for farmland for crops to feed these animals and land for manure application has an impact on land price. Rising quota allotments in both milk and chicken mean rising demand for that land from those sectors.
- NAFTA renegotiations, if market access for Ontario farmers to the U.S. is affected and if more U.S. milk and poultry products are allowed into the country.
The survey looked at price trends through several data sources. Counties examined included Huron, Perth, Oxford, Middlesex, Elgin, Lambton, Kent, Essex, Bruce, Grey and Wellington.
— John Greig is a field editor for Glacier FarmMedia based at Ailsa Craig, Ont. Follow him at @jgreig on Twitter.