The threat of interest rate increases hasn’t dampened the price southern Ontario farmers are paying for land.
The annual Valco study of land values showed an increase in value for farmland sold in 2017 of 9.76 per cent compared to 2017. The median price for land in the surveyed area is $12,710 per acre. This increase is the largest since 2013.
The bottom line: Quality farmland continues to attract strong prices in the Ontario market, even though prices for major farm crops continue to stagnate.
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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 crop land versus influences of other farm-based effects on price.
Ryan Parker is the Valco consultant who put together the report and he reports that prices were stagnant over the past three years, after strong grain and oilseed prices help buoy prices from 2011 to 2013. The increase from 2016 to 2017 is surprising considering the fact that commodity prices remain stagnant and interest rates have started rising for the first time in years.
The largest increases in land price were in Wellington, Grey and Lambton counties.
The report says that 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. Rising interest rates could have an impact in the other direction, the report says, and could dampen the rate of farmland price increases over the next couple of years.
Other factors affecting Ontario farm land prices include:
- Livestock has a big impact, 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 could also have an impact if market access for Ontario farmers to the U.S. is affected and if more American 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.
Valco is a real estate appraisal company based in London, Ont.
