Why would a farmer want to enter into a long-term land conservation agreement with a non-farm organization?

Also called conservation easement agreements, these voluntary, legally binding agreements between a landowner and a land trust organization or government agency permanently restrict certain uses of that land — which can sound kind of scary and, well, permanent.

But conservation agreements can help an agricultural landowner protect their land from development and can also be used as a part of their succession or exit plan.

“The landowner still gets to retain ownership of the land, so they can have some protections put in place, and they know that if they pass the farm on or sell the farm, it won’t get converted into non-agricultural uses,” says Joel Enman, farmland protection and stewardship program manager at Ontario Farmland Trust.

“In Ontario we see a lot of risk of urban sprawl and also aggregate extraction that, depending on how deep the pit is, can breach the water table which affects the local aquifer, so a lot of landowners are worried about that.”

For others, recognition of the habitat value is a driving motivator for a conservation agreement.

“One of the main reasons is that they (landowners) want to maintain that habitat value and ensure that the family is able to protect the wildlife habitat affiliated with those parcels,” says Carol Graham, conservation program manager with Manitoba Habitat Conservancy.

“Sometimes it is in reaction to seeing a lot of land conversion occurring and they recognize this is a mechanism to conserve what habitats are remaining on the landscape. Some use it in recognition of the best use of the land and realize the option to generate revenue from that habitat by entering into a conservation agreement.”

Manitoba Habitat Conservancy is one organization that can offer to purchase a piece of land, but a lot depends on the landowner’s wishes and priorities.

“Landowners come to us and indicate what portions or which habitats they’re most interested in conserving, and based on funding available, we can provide for payment for that habitat,” Graham says. “Wetlands and species-at-risk habitat, which typically is grasslands, are priority habitats that receive support from funders. Or they (landowner) may choose to donate the habitat interest and receive a tax receipt, creating opportunity to conserve additional habitat types. In either case, terms of the agreement are the same.”

A number of tax advantages to land easement agreements

Not all land trusts or conservation organizations have the funding available to compensate landowners by purchasing habitat interest under an agreement. However, there are some enhanced tax incentives for land under conservation easements that can be beneficial, especially for retiring farmers and the next generation. These include the Ecological Gifts program, a federal tax incentive program that waives capital gains tax for qualified farm property when farmers register an easement on it.

This incentive doesn’t just apply to farmers (who also qualify for a one-time, lifetime capital gains tax exemption upon the disposal of farm property).

“Under a conservation easement agreement, if the land does qualify for the Ecological Gifts Program, meaning that it’s ecologically sensitive … the capital gains tax (can be waived) at the time of protection,” Enman says.

There are situations where landowners donate the property directly to a land trust or other conservation organization that then manages the land. However, even when the landowner retains ownership, they can receive a charitable tax receipt for the appraised value of the conservation interests that can be used against their income tax.

“For a standard easement agreement that’s able to be used over five fiscal years, and any property that qualifies for the Eco Gifts Program, those tax benefits can be used up to 10 years so that’s also an incentive,” Enman says.

Flexibility built in to land easement agreements

Every conservation easement agreement is unique because every property is unique.

Some components are common to most agreements, building in flexibility for current and future landowners in how the land is used.

At the Ontario Farmland Trust there are typically two easement styles. For some farms it makes the most sense to create a single protected zone which applies standard protections that sit across the whole property, including preventing future severances of the property and aggregate extraction. There is also a style of easement which delineates zones of protection.

“We typically have three zones that have increasing levels of restrictions on the land,” Enman says. “We have the farmstead area which is the area that’s typically around the building cluster close to the road that will allow for some non-agriculture development if somebody wants to develop a secondary residence or a pool or a woodworking shop in the future.”

The agricultural zone that includes the fields and pastures allows for normal agricultural practices. The third and highest level of restriction includes wetlands, native grasslands, forested and other natural areas that the landowner wants to ensure are fully protected and cannot be converted into agricultural or other uses in perpetuity.

“The intention, at least of the Ontario Farmland Trust, is to protect farmland forever, so we want easement agreements to be restrictive enough that the farmland doesn’t get lost in the future, but flexible enough that future changes in farming practices will still be acceptable and usable by the farmer because we want to make sure that these lands continue to be farmed,” Enman says.

Instead of putting a large area of land under a conservation agreement right off the bat, it can be done over time on multiple parcels of land.

“If you have a 600-acre farm made up of four different parcels, the easements could correspond with each one of those parcels,” say Enman. “If it makes the most sense tax-wise to do two parcels one year, then two parcels five years later, it doesn’t have to be all or nothing.”

Steady demand for land conservation agreements

Interest in conservation agreements has held steady over the past 25 years or so since they were introduced, and for Manitoba Habitat Conservancy, with over 200,000 acres of wetlands, grasslands and other habitats under agreements across the province, there is usually more demand than available funding.

“We are not noticing any indication that interest in conserving habitat with a conservation agreement is declining,” Graham says. “You do see trends: different regions have demonstrated high interest in the conservation of habitat and are not as intimidated by the presence of an agreement. Having the ability to talk directly with someone with an agreement, like a neighbour, has helped communicate the benefits, which has probably led to a lot of the success we’ve had in the province.”

Although a conservation agreement restricts what can be done on the land in terms of removal of protected habitat, it doesn’t prevent farmers from using it to make an income or for recreation.

“Agricultural activities such as haying and grazing are permitted, and farmland surrounding the habitat can remain as farmland,” Graham says. “We are often asked about recreational use, such as hunting, which is also permitted on conservation lands at the landowner’s discretion. How your land is being used today can continue to be used in that manner with the agreement on it.”

It is important to remember that the agreement stays on the title of the land, so if the land changes hands either by intergenerational transfer or sale to a third party, the new owner will be subject to the agreement. Some farmers may be concerned that will affect the value of the land itself.

“There appears to be less concern by those interested in purchasing land with a caveat on title,” Graham says. “Sometimes there is a worry about restricting opportunity in the future, but we have developed a good partnership with local industry to allow for a balance between conservation and economic development.”

Things to consider before you enter into a conservation easement agreement 

• Be aware of who is on the title of the land because every party will have to sign off on the agreement. Make sure anyone who should not be on the title (e.g., a deceased person) is removed from the title.
  
• If there is a mortgage or line of credit secured by the property, the lender will need to give permission for an easement to be registered, so make them aware that you are thinking of doing this.
  
• What is the landowner’s vision for the future conservation of the land? If there are multiple landowners on the title, do their visions all align? Make sure you discuss this ahead of time.
  
• Make sure your children, grandchildren and any other family members who might have an interest in the property are involved in the discussion. They will inherit the property and the restrictions in the future, so they should be a part of the process.
  
• Seek legal and financial advice so that you know how to manage the terms of the agreement and can make sure it meets the family’s expectations, especially if the land will stay in the family.
  
• Ensure your family’s interests are not compromised by the conservation agreement. Build in options to allow for things like construction of a house or cabin on a certain portion of the land to allow for flexibility in the future.
  
• Do it in stages. You don’t have to commit to all or nothing. Consider doing a certain number of acres at a time over several years to make sure you are comfortable with the agreements.
  
• Be patient. It can take time for an agreement to be completed because there is a lot of administrative and legal requirements behind it.
  
• Shop around. There are many organizations offering conservation easement agreements, so if the first one you speak with doesn’t fit what you want, try another one that may be better aligned with your vision for protecting the land.

To learn about term conservation agreements, visit https://www.producer.com/news/conservation-easements-with-limits-have-appeal/

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Producers made strong bids for available land, increasing values by 12.2 per cent in Manitoba, 11.4 per cent in Alberta and 9.4 per cent in Saskatchewan, says the 2025 Farmland Values report from Farm Credit Canada.

In its report, FCC said agricultural land values were “resilient” last year and defied expectations of a downturn.

“The market remained supported by farmland’s long-term investment appeal, tight supply and strong competition from expansion-focused producers,” says the FCC report, released March 24.

“The Prairie provinces drove much of the year’s average increase (across Canada).”

Overall, the value of cultivated land jumped 9.3 per cent from coast to coast, but provinces outside of the Prairies saw weaker gains or losses in value:

• British Columbia, a 1.7 per cent decline.
• Ontario, 2.2 per cent increase.
• Quebec, 4.8 per cent gain.

FCC attributed the modest rise in Ontario to farmers becoming picky. They were willing to pay high prices for top-quality land but avoided marginal properties.

A similar situation has developed in Saskatchewan. Expanding producers are driving demand for the best land in the most productive regions.

In 2025, price increases in northeastern, northwestern and east-central Saskatchewan were around 12 per cent. Those regions produce the highest yields for key crops like canola and wheat.

In west-central Saskatchewan, where yields are lower, farmland values increased 4.8 per cent in 2025.

The average price of cropland in northeastern Saskatchewan is getting close to $5,000 per acre. That’s a massive jump from 2019, when average values in the northeast were $2,000 per acre.

Farmland realtors on the Prairies have also noticed this trend of robust demand for fertile land.

“Good land in a good area is still going up,” said Tim Hammond of Hammond Realty in Biggar, Sask.

In southern Alberta, dryland prices surged upward by a 16.4 per cent in 2025. Irrigated land, which is now at $20,000 per acre in the province, played a role in the value gains in southern Alberta.

As irrigation districts have expanded, dryland acres close to irrigated land have become more valuable, FCC said.

A major theme in the FCC report was the shortage of land for sale in multiple provinces and regions.

This could be part of an ongoing trend, for the last 15 years, where retiring farmers rent their land instead of selling.

Whatever the reason for the shortfall of properties on the market, it’s clear that supply is “tight”, said J.P. Gervais, FCC executive vice-president of ag operations.

“This is something that has been certainly documented last year, and if I’m not mistaken, the year before,” he said.

“One of the overall drivers of farmland values, how tight the supply, does matter when (it) comes to the valuations that we’re currently seeing…. Generally speaking, very tight availability of farmland (for sale).”

Pastureland also higher

The FCC report had data on pastureland values, which saw a 5.2 per cent increase across Canada thanks to stronger prices for beef cattle over the last few years.

Gains were much higher in Alberta’s Peace region and northern B.C., where values climbed 17 to 18 per cent.

Across the Prairies, Saskatchewan saw the largest increase in pastureland prices of 7.6 per cent.

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Realtors in Saskatchewan have noticed a shift in the market, where some properties are going up in price and others are not.

Buyers are still willing to pay a premium for productive land, but demand is much softer for mediocre cropland.

Tim Hammond, founder of Hammond Realty in Biggar, Sask., described the current situation as a “split market.”

WHY IT MATTERS: After 15 to 20 years of rising values, Canada’s land market may have entered a new phase.

“Good land in a good area, is still going up,” he said.

“Average land in an average area, it’s struggling. It is going sideways and in some cases it’s going down…. I haven’t seen a mix like this since I started in 2002.”

Hammond made his comments March 10 during a webinar hosted by Dan Aberhart, who runs Aberhart Ag Solutions in Brandon, Man.

Aberhart invited Hammond and Trent Klarenbach, a market analyst who turns Klarenbach Research in Saskatoon, to discuss farmland values on the Prairies.

A snapshot of prices will be revealed next week, when FCC releases its annual report on farmland values March 24.

In 2024, values increased 9.3 per cent year over year across Canada, including a 13.1 per cent jump in Saskatchewan.

It’s possible that FCC will report another increase in 2025, but realtors like Hammond say something has changed.

Two or three years ago, when he put cropland up for tender, Hammond would receive 10 offers.

The top three or four bids would be very close on price.

“What we’re seeing now, instead of getting 10 offers, we’re getting two or three,” he said.

“And the spread between the top bid and second highest bid is five, 10, 15 percent.… I’ve always said, land is only worth as much as the second highest bid.”

Other experts have made similar comments about demand and buyer interest.

It remains strong in certain geographic pockets, but less so in other areas.

“Farmland is still very much a regional market,” Justin Shepherd, senior economist with Farm Credit Canada, said last August.

“There could be areas that see (more) farmland value growth … but there could be other areas where there is (less) competition for that farmland, where you could see things slow down.”

Similar market for U.S. farmland?

A comparable situation has developed in the United States, where buyers are driving up the price of productive cropland while demand is weak for less fertile land.

Sellers of land, outside of the best areas, might need to lower their expectations, said a January report from Farmers National Co., a firm that manages farmland across the Midwest and Northern Plains.

It’s not necessarily a buyers market, but buyers are getting picky, said Colton Lacina, Farmers National Co. senior vice-president of real estate operations.

“(They) are carefully assessing soil quality, the percentage of tillable acres, water access and how a parcel fits into their current operations. Those details matter more than ever.”

A plateau in values would be a significant change for Canadian producers, landowners and the psychology of investors because the market has increased for nearly 20 years.

An FCC report on historical farmland values indicates that the average price increase was 10.7 per cent annually from 2007-23 across Canada.

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When a child is added to title, are you selling half the land to them or are you adding them for estate planning purposes only? What happens if your child goes bankrupt or gets divorced and the ex-spouse thinks they have a claim to the land? Typically, when a spouse or child is added to title, the intention is for estate planning purposes only and no sale is recorded on the tax return.

Years later, it can become fuzzy who owns the land for tax purposes. For example, a farmer inherits land that his parents gifted to him and not to his spouse. He then adds his spouse to title. Next, a child is added to title for succession planning. However, none of this was reported as a sale on a tax return and the original farmer is still the 100 per cent beneficial owner of the farmland for tax purposes.

When someone is added to title, we recommend legally documenting your intentions. If you are selling half the land, it should be documented and reported on the tax return. If a spouse or child is added to title for estate planning purposes, this is joint tenancy with right of survivorship. This creates a bare trust, where the owners on title do not match the beneficial owner that receives all the income from the land.

The federal government first announced bare trust reporting requirements several years ago, which would require filing a yearly T3 trust return. However, implementation of mandatory filing has been delayed several times. The most recent announcements included exemptions for principal residences where one of the people on title lives in the house. Right now, there is no exemption for farmland and bare trusts need to be filed in early 2027 for 2026. However, this could change.

The reason for bare trust reporting is to crack down on the “wild west” of who is the owner of the property. In the example where a farmer added a spouse and child to title, only the farmer who was the original owner of the land is the beneficial owner, owning 100 per cent of the property for tax reporting purposes, even though there are three names on title.

The alternative to adding a child to title is distributing land through your will. In Saskatchewan, this requires the estate to go through probate, with a cost of 0.7 per cent of the fair market value ($7,000 per $1,000,000 of assets), and 0.4 per cent land title transfer fees.

The overall 1.1 per cent cost may be better than a yearly bare trust filing, depending on the value involved and other risks. If you add your child to title and then decide to sell the land, they will have to sign off on the sale. This could be an issue if your child doesn’t agree with selling “their inheritance.” If you add a child to title to avoid probate, but your child has a divorce, and the land is disputed, the cost can be far higher than 1.1 per cent of the land value.

Missing the capital gains exemption

Canadian individuals have access to a $1,250,000 “tax-free” capital gains exemption provided they own qualifying assets. Farmland qualifies if someone in the direct family tree has actively farmed the land for at least two years with gross farm income in excess of their off-farm income. This excludes hobby farmers with lots of off farm income.

When someone dies with joint land with the right of survivorship, probate often isn’t needed and the deceased landowner is just removed from title. Claiming capital gains exemption on the final tax return for the deceased landowner is frequently missed. This can result in hundreds of thousands of additional taxes when the land is sold.

Claiming capital gains exemption on the final tax return increases the tax cost (adjusted cost base) for individuals who inherit the land. When the land is eventually sold there is a smaller gain to be taxed on their return as a result of the increased ACB. There is no alternative minimum tax for claiming the capital gains exemption on the final return and the only cost is repaying the Old Age Security (OAS) in the year of passing. This cost depends on when during the year the person passes. In January, only one month of OAS needs to be paid back; if in December, you would need to pay back the whole year’s OAS (approximately $9,600 in 2025 if you are over age 75).

Key takeaways

Please legally document what your intentions are when someone is added to title and beware of the potential hassle of bare trust filings in the future.

When someone passes who owns qualifying land, make sure that the capital gains exemption is claimed on the final tax return. Keep this page of the final tax return in a safe place with your will, lawyer or accountant to document the updated adjusted cost base of the land when it is next sold or transferred.

Levi Derksen, CPA, is a senior manager in the ag team at Buckberger Baerg & Partners LLP in Saskatoon. You can contact him at lderksen@bbllp.ca

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So, I’m surprised that future farmland values aren’t discussed more between farmers and lenders. The reason is likely because these values are speculative. Lenders deal with enough risk; they need to bank on what certainty they can.

And anyone who knows for sure what farmland values will do should have moved to Vegas a long time ago.

A farm that can service its debt and show healthy farmland asset appreciation is attractive to a lender. Remove one of those two variables and you begin to see the banker’s dilemma. For example, perhaps a farm can service debt but lacks sufficient farmland equity as security. Or the operation shows a healthy net worth on paper but can’t cover its loan payments in the current environment.

I first noticed that nobody was putting down payments on farmland when I worked in public accounting in Saskatchewan. All farmland deals were 100 per cent financed.

Forget the standard 20 per cent down on home mortgages; it was rare to see any down payment on farmland at all. The reason is that many of the operations purchasing farmland have grain in their bins and are already carrying operating debt balances.

Instead, financial institutions would lend against an ever-increasing equity base while ensuring adequate working capital and debt servicing capabilities were in place.

And, no, Chinese investors aren’t driving up the price of farmland. The drivers of farmland price appreciation are still farmers. Farmers reinvest “good times” profit in more farmland.

I’ve also noticed that after selling their farm some people will turn around and buy other farmland. They often do this to offset capital gains. It’s an asset class they know, and which has a good recent track record of returns.

According to the Historic Farm Credit Canada Farmland Values Report 1986-2024, Canadian farmland has averaged an 8.3 per cent annual return over the past 30 years.

Some say the run can’t go on forever, and yet we’ve been hearing that for the past 15 years.

Yes, you can farm without owning land, but it’s my opinion that farmers should own at least some of their land to build wealth and to have some equity if they need to refinance when times get tough. If farmers keep buying, we’re likely to continue to see positive appreciation.

Positive appreciation

If you expect farmland appreciation to continue, you are likely trying to buy as much farmland as possible. You may also be expecting future drops in interest rates, which will make debt servicing less expensive and make it easier to qualify for additional credit.

You may believe the uses of farmland for food, feed, fibre and fuel will continue to grow. You may be particularly bullish on biofuel policy.

But what happens when farmers quit buying?

Farmland depreciation

If you expect farmland to flatline or depreciate in the near term you may be considering selling your farm. You certainly aren’t looking to buy. You likely also expect interest rates to go up.

You may expect the combination of government policy, including trade risks, to be a bearish factor.

You might believe competition from Australia, Russia and South America will further pressure commodity prices.

You might also believe that government financial support will decline. Currently, the Canadian government guarantees $1.5 million for a house purchase through the Canadian Mortgage Housing Corporation but only $500,000 for a purchase towards farmland through the Canadian Agricultural Loans Act.

What does the future hold?

What will Canadian farmland ownership look like in 10 years?

If we assume the average appreciation rate from the past 30 years, it will be more expensive. A piece of farmland worth $1 million today will be worth almost $1.5 million in 10 years’ time using an annual appreciation rate of four per cent.

At three per cent annual farmland appreciation, you will double your farmland investment over 24 years.

If the Bank of Canada is targeting inflation in the two to three per cent range, will farmland values rise at the minimum rate as well? Not necessarily. Farmland prices are mostly driven by farmers. If farmers see a path to produce positive financial returns, then demand and values will continue to rise. However, if farmers see a future where the financial environment, government policies and weather risks aren’t worth the reward, then we can expect farmland values to depreciate or flatline. CG

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“Demand for farmland remained strong in the first half of the year regardless of lower commodity prices,” said FCC chief economist J.P. Gervais in a news release.

“Buyers continued to invest, driven by long-term confidence in the agriculture sector and the limited supply of available land.”

The overall range of sale prices per acre has increased “only modestly,” the farm lender said. Provinces that had seen strong growth in recent years are seeing softening farmland prices while regions that had previously seen more modest growth are seeing solid gains.

“Overall, the market appears to be stabilizing,” FCC said in the news release.

Where and why values are growing

Farmland values gained 10.4 per cent year over year between July 2024 and June 2025.

That compares with 5.5 per cent growth in land values in the first half of 2024 and a 9.3 per cent annual increase that year.

Manitoba led all provinces with 11.2 per cent growth in the first half of 2025, with the Parkland and Westman regions seeing the strongest growth. In the Parkland region, large grain operations are building their land bases, FCC said. Alberta and Saskatchewan saw growth near the national average with 6.6 per cent and 6.0 per cent respectively.

New Brunswick saw the second-highest growth with a 9.4 per cent increase January to June. Strong growth in southern New Brunswick, particularly the dairy farming region, drove the increase. Gains in the other Maritime provinces were more modest with Nova Scotia at 1.0 per cent and Prince Edward Island at 2.3 per cent.

British Columbia and Ontario land values remained flat, and Quebec saw 2.6 per cent growth.

Cash receipts steady

FCC noted that farm cash receipts, interest rates and the overall supply of farmland are key drivers of values.

In the first half of 2025, cattle receipts were up 18.3 per cent on record prices. This pushed total mid-year cash receipts up 3.3 per cent. Grain and oilseed receipts rose slightly in early 2025, though this varied by region.

Grain and oilseed receipts are expected to fall by six per cent in 2025 compared to last year. Increased production, the effects of China’s tariffs on Canadian canola and peas and tariffs between the U.S. and China are expected to weigh on commodity prices.

However, easing interest rates and healthy balance sheets carrying over from the record crop years of 2022 and 2023 should lend support to farmland values.

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Rollins said the administration wants a 100 per cent American workforce and suggested some people receiving government aid could replace immigrant workers.

“Ultimately, the answer on this is automation, also some reform within the current governing structure. And then also, when you think about, there are 34 million able-bodied adults in our Medicaid program. There are plenty of workers in America,” she said at a press conference outside the Department of Agriculture headquarters.

Most adults on Medicaid work full- or part-time or are not working due to illness or disability, caregiving, or school attendance, according to a May brief by the health policy organization KFF.

The farm sector has warned that mass deportation of farm workers would disrupt the U.S. food supply. In June, the Trump administration signaled it might pause raids on some farm worksites. It has since reversed course.

Trump’s tax-cut and spending bill, passed on July 3, introduces work requirements for Medicaid, which the Congressional Budget Office has said is expected to leave nearly 12 million people uninsured.

Later on Tuesday, Secretary of Labor Lori Chavez-DeRemer said at a cabinet meeting at the White House that the Department of Labor had developed a new office to work with farmers and ranchers, but did not provide more details.

The Labor Department oversees the H-2A program, which provides seasonal visas for agricultural workers.

Farmland owned by ‘adversaries’

Rollins also said at the press conference that the USDA will curb farmland purchases by “foreign adversaries,” including China, and terminate agreements and contracts with people and entities from those countries.

Asked about land already owned by Chinese-owned companies Syngenta and Smithfield Foods, Rollins said the administration is still considering its options.

“You’ll likely see an executive order on this very soon from the White House and we’ll be looking at multiple different authorities within the federal government to begin to claw that back,” Rollins said.

In 2023, Arkansas ordered Syngenta to sell 160 acres (65 hectares) of farmland under a state law barring some foreign entities from acquiring or holding land.

Twenty-six states limit or ban foreign businesses, governments or nationals from owning private farmland, according to the National Agricultural Law Center, and some of those laws have faced legal challenges.

Only about 3.4 per cent of U.S. farmland is owned by foreign entities, and Canada owns the largest share, about 30 per cent, according to the USDA.

Rollins said she will be a member of the Committee on Foreign Investment in the United States, or CFIUS, “as of this afternoon.” The interagency body reviews foreign investments in the U.S. for national security threats.

Bipartisan lawmakers have supported limits on ownership of farmland by foreign countries, citing national security concerns.

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The value of the sector totalled $832.5 billion as of Dec. 21, 2024, up by $38.9 billion or 4.9 per cent from the same date the previous year. That compares with 8.5 per cent growth in 2023.

Farm equity rose in every province but gains in Saskatchewan and Alberta accounted for more than two-thirds of the national increase.

Lower crop values weigh on current assets

Farmers’ total assets grew by 6.3 per cent in 2024 to reach $991.5 billion with most of the growth due to the rise in farm real estate value. Farmland value rose 7.0 per cent to $713.3 billion in 2024.

The value of current assets (short-term assets like cash and crop or livestock inventory) fell by 0.8 per cent to $57.9 billion, mostly due to lower values for crop inventory. The value of crop inventories was down by 17.9 per cent to $21.9 billion as crop prices fell by 14.6 per cent, StatCan said.

Poultry and market livestock inventory value grew by 26.6 per cent to $16.5 billion on sharply higher prices. However, inventory fell by 4.9 per cent.

Farmers’ ability to pay interest declines

Canadian farmers’ total liabilities grew 14.4 per cent to reach $159.0 billion at the end of 2024. This was the largest percentage increase in total liabilities since tracking began in 1981 said StatCan. Most of the rise was due to long-term liabilities. Rising liabilities in Alberta, Ontario and Quebec accounted for more than two-thirds of the national increase.

At the same time, farmers’ ability to meet interest payments fell for the second consecutive year. The interest coverage ratio settled at 2.12 at year’s end. This was the lowest ratio since 2007.

A lower ratio indicates that farms are less able to service debt obligations.

The interest coverage ratio continued to deteriorate because of the decrease in farm income, said StatCan. That decrease was due to a decrease in crop inventories and higher interest expenses, it said.

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FCC’s rent to price ratios are based on cash rental rate per acre divided by the value of cultivated farmland per acre.

In 2024, the average rent to price ratio was 2.50 per cent compared to 2.52 per cent in 2023.

Saskatchewan and New Brunswick saw no change despite strong increases in farmland values in 2024. Rental markets quickly adjusted to the change in farmland prices.

Overall, Canadian farmland values grew by 9.3 per cent in 2024. Saskatchewan saw the highest growth at 13.1 per cent. British Columbia came second with 11.3 per cent growth. FCC did not report the rent to price ratio for B.C. land due to a lack of available data.

Prince Edward Island had the highest rent to price ratio of 4.10 per cent. Ontario clocked the lowest overall ratio at 1.2 per cent.

While the rent to price ratio of Prairie farmland was stable, the cash flow advantage of renting increased slightly compared to buying, FCC said. The increase ranged from $5 to $10 per acre. This was influenced by lower interest rates, which helped offset some of the rise in farmland values compared to land payments.

Since 2020, Alberta’s rent advantage has increased by $77 per acre, Saskatchewan’s by $58 per acre and Manitoba’s advantage by $95 per acre.

These advantages were dwarfed by those in Ontario and Quebec, which saw rent advantages grow by $620 and $368 per acre, respectively.

“Despite the advantages of improved cash flow by renting in 2024, it is always prudent to carefully evaluate production costs before entering into new land rental agreements to fulfil operational requirements,” FCC said.

1 acre = 0.405 hectares

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The answer to that question raises more questions. Because there are several important considerations to think through very carefully before making that leap.

To start your farm-buying path off on the right foot, let’s look at some of the important issues you’ll need to consider.

The big decision

First, you will need to decide on the type of farm you wish to buy. The answer to this “big decision” question will both drive, and be driven by, all the considerations that follow. Ultimately, the type of farm you decide to purchase might not be the one you started out thinking about, but it’s important to trust the process.

The business plan

Once you have an idea of the type of farm you prefer, you will need to prove to your bankers that you can make the business work. To do this, you will need to create a business plan.

Simply put, you will not receive bank financing without a solid business plan.

Your business plan should include a well-researched and thought-out analysis of the market you intend to enter, reasonable estimates on the expected costs and revenues over a five-year period, financing required to buy and operate the farm (such as mortgages and lines of credit) and your repayment ability.

Every business plan should also include a SWOT (strength, weaknesses, opportunity and threats) analysis. Analyzing the internal and external factors that affect your business’s operation can better inform decisions and help establish your business strategy.

Consulting lawyers, accountants and business advisors early in the process is always a good idea.

Availability of land

An inevitable truth for Canadian farmers is that good quality farmland is hard to come by. Knowing how to locate farmland for sale is one of the most important steps toward buying your first farm.

Many farmland sellers are not farmers. They are landlords who often sell to the farmer currently renting their land. Connecting with those considering selling farmland now or in the near future is key to creating opportunities, both for your first and subsequent farm purchases. And starting your business by renting farmland could be a viable long-term option to gain access to farmland in the future.

Another option for locating available land for sale is through a real estate agent who specializes in selling farmland. If there is land for sale in your area, they will know!

Choosing the right farmland

Once you have located available land, you will need to figure out whether it’s right for you and your business. To make this decision consider the type of land your farm operation will require, water rights and grazing areas, municipal zoning, proximity to landfills and other potential hazards to your farm, windmill and solar panel leases that could affect the property, and any houses, barns or sheds located on the property.

Purchase costs

Once you have decided on a property to purchase, you will need to prepare for purchasing costs. Purchasing a farm property can include legal fees, land transfer tax (note that some land transfer tax exemptions are available to farmers and should be investigated), title insurance, Harmonized Sales Tax/Provincial Sales Tax on the purchase price, possible licences and permit fees (e.g., building permits, pesticide use permits, etc.), business insurance and mortgage fees.

Thankfully, one cost that purchasers can often avoid is real estate agent commissions. In many provinces, the seller’s realtor will generally enter into an agreement with the buyer’s realtor, and the commission payable to the buyer’s realtor will come from a share of the seller agent’s commission. If this is the case in your province there is little to no downside for you, the buyer, to engage the services of a real estate agent to help you locate available farmland.

Running the business

Finally, before you buy a farm, you need to know exactly how you are going to run your business. Starting a new farm means that you will need a plan for hiring workers, buying and maintaining equipment, buying and growing livestock and/or crops, efficient production strategies and a strong farm maintenance plan. You should also determine the need and budget for crop and/or farm consultants and veterinarians.

Start with the end in mind

While this article provides a foundation for the issues you will need to tackle when purchasing your first farm, the most important message is to plan ahead so that there are no surprises along the way. The best way to do that is to build your advisory team now. A top-tier group of advisors, who are willing to work together to further your goals, is the best way to ensure your first farm purchase is a success.

Todd Devitt is a lawyer with McKenzie Lake Lawyers located in London, Ont., with offices also in Guelph. Todd is an experienced business law lawyer with a focus on agri-business and succession planning. For more details, please view his biography at mckenzielake.com.

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