By Mario Toneguzzi, Calgary Herald September 10, 2012 7:00 AM
CALGARY — Soaring commodity values and limited supply continue to push Canadian farmland values to new heights, with price per acre now commanding top dollar in most markets across the country, says RE/MAX in a report released Monday.
The RE/MAX Market Trends Report, Farm Edition 2012, highlighting trends and developments in 16 markets throughout Canada, found that prices have increased almost across the board this year with only the Annapolis Valley, parts of Windsor/Essex, and the Fraser Valley reporting levels on par with 2011.
The report said tight inventory has been an issue in all markets, restricting year-over-year sales activity to a large extent. While low interest rates, high commodity prices, and nutrient/supply management requirements have been the primary factors fuelling the trend toward expansion, increased advancement in farm equipment has also been behind the push for additional acreage, it said.
“Farmers have yet to be deterred from expanding their operations, despite rising values and tight supply,” said Elton Ash, regional executive vice-president of RE/MAX of Western Canada, in a statement. “Pent-up demand has been building, with some farmers making their move after years of sitting on the fence, waiting for prices to correct. Most now believe that there is room for further growth, given the upward momentum of commodity values.”
The report said demand, sales and the value of farmland have climbed in central Alberta again this year. Prices have increased 20 to 25 per cent over year-ago levels. The price per acre of dry land now ranges from $2,000 to $4,500, depending on location and land quality. The average is approximately $3,300 an acre.
“Offering the best and most productive farmland in the region, the Olds area remains among the most sought-after, with price per acre topping $4,500,” said RE/MAX. “Proximity to Highway 2 can also be a factor, with parcels close to this transportation corridor now commanding upwards of $6,000 per acre.
“This pales in comparison to the $20,000 an acre that some land fetched just a few years earlier — when oil and gas were booming and development closer to the cities was on a tear.”
The report said expansion by large operators continues to be the main driver of farmland sales, whether it be cash crop or supply-managed livestock operations. However, inventory remains scant.
The report also said demand remains exceptionally strong for farmland throughout southern Alberta, with buyers eagerly waiting for the right property to come on-stream.
“Inventory has been a considerable challenge, as a shortage of listings continues to characterize the market,” said RE/MAX. “As a result, sales are off last year’s pace and are expected to remain below year-ago levels through to year-end. Cultivated dry land remains in greatest demand, with prices at record levels, as existing farmers continue to eye expansion.”
Price per acre of dry land now sits at $800 on the low end, up to $2,500 to $3,000, although $1,500 to $2,000 is most typical. Irrigation land, with pivot — if it can be had — now generally runs from $5,500 to $6,500 an acre and generally sells in quarter sections of 160 acres, added RE/MAX.
“But oilseed prices in Alberta hit some record highs in June, reaching an index value of 158.5. Alberta’s major oilseed crop is canola, and it tracks fairly closely to some of its agricultural substitutes, notably corn and soybeans in the U.S. Because of the severe heat and drought south of the border this year, corn and soybean prices have risen sharply — and have risen even more through July and August,” said Hirsch.
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