Call it a pause, though maybe not a correction, in the farmland value trend in Canada. It’s not a complete surprise, given the bull run land values have been on for years, but what does it mean for those looking to buy, sell, or rent?
J.P. Gervais, chief agriculture economist with Farm Credit Canada, says the farm income situation between Canada and the U.S. are similar but not the same, so we need to be somewhat cautious in drawing parallels between the two when it comes to farmland prices and farm profitability — both of which are predicted to decline in the U.S. this year.
The main driver of land prices is farm income, and Gervais says we’ll see that 2018 Canadian farm profitably will be off the record highs we’ve had the last several years, with 2019 predicted to be flat or in decline. That, combined with increasing borrow costs, has definitely cooled what was a red-hot market.
However, land rental rates are not coming down en masse, as the demand for land access is still there, and that has some people early in their careers wondering how to make things pencil out. At the end of the day, after three years of fairly stable rental rates, we are seeing those rates come down a little, according to Gervais.
Is it a year to be cautious? Likely yes — on managing costs, farm income predictions, land values, and debt accumulation.
Hear more from Farm Credit Canada’s J.P. Gervais and RealAg Radio host, Shaun Haney talking land value, price trends, young and old farmer perspective, and hockey, here: