Ontario farmers continue to spend big money on farmland, especially in the southwest part of the province.
According to the annual Southwestern Ontario Land Values report from Valco Consultants, the median price paid for an acre of farmland in this region of the province came in at $12,710 in 2017, an average increase of 9.7 percent over the previous year. The study is based on analysis of agricultural land sales in Huron, Perth, Middlesex, Oxford, Elgin, Kent, Lambton, Essex, Bruce, Grey, and Wellington counties. The median value of land sold in Oxford County exceeded $20,000, Perth topped $18,000 and Huron, Middlesex, and Wellington counties all posted median sales values over $14,000 per acre.
The full report is available here: 2010-2017 Land Values, Valco
Valco Consultants partner Ryan Parker notes land prices in 2017 showed their largest increase since 2013. He says historically low interest rates continue to be the prime factor driving land price increases. “Interest rates have been at historically low levels and have allowed for substantial expansion by large, progressive agricultural producers,” he says.
Higher rates, however, will likely temper that enthusiasm in 2018. “As these higher rates begin to be implemented on renewals it is likely this will start to impact buying decisions. The interest rate outlook will continue to have a major influence on the land value market and is something that producers will be keeping a close eye on,” adds Parker.
Listen to Ryan Parker and Bernard Tobin discuss the future of Ontario farmland prices. Story continues below.
Recent quota allotments of both dairy and poultry quota have also fuelled expansion plans and demand for land in these supply-managed sectors. This continues to have a significant impact on prices in heavily-populated livestock and poultry counties such as Huron, Perth, Oxford, and Wellington.
Where could prices go in 2018? The first indicator to watch will be interest rates. “The drivers that affect interest rates are almost exclusively based on factors outside of Ontario agriculture, yet the health of our agricultural industry is very dependent on interest rate stability. Any significant, rapid increase in interest rates would have a major impact on the ability of producers to continue to expand,” says Parker.
The largest looming issue in 2018 is the outcome of the NAFTA negotiations. Agriculture is a major part of NAFTA that can be significantly affected by a major change in trade policy with the U.S. in particular, says Parker. “Our supply management system seems to be the biggest sticking point with the U.S. The impact of a change in market access or any diminishing of supply management will have an obvious affect on dairy and poultry producers.”
At this point, says Parker, it appears the Canadian government is “fully supporting supply management and rebuffing any change on that aspect in NAFTA. Similarly, any market access changes for other sectors in Ontario agriculture could ultimately filter down to land values.”