Over the past three decades, the price per acre of Canadian farmland has surged by over 800%, reaching an average of around $4,500. In key regions like Ontario, the prices have escalated even further, averaging nearly $18,000 per acre, with some farms in Southern Ontario fetching over $30,000 per acre. This phenomenon is driven by a combination of factors, including increased demand for agricultural products, shrinking farmland availability, and evolving investment strategies.
Drivers of Farmland Price Increases
Population Growth and Dietary Shifts
The global population is growing, and with it, there is a rising demand for crops and livestock. This demand is further intensified by shifting consumer preferences towards high-protein diets, which require more agricultural inputs. As a result, the value of farmland has increased significantly.
Farmland Reduction
At the same time, since 2001, Canada has lost approximately 8% of its farmland, exacerbating the pressure on remaining agricultural lands. This reduction in available farmland contributes to the escalating prices as the competition for land intensifies.
Renting vs. Financing
Investment funds and private equity firms are increasingly partnering with Canadian farmers to acquire farmland and share in the profits, offering farmers an opportunity to rent instead of finance.
Many farmers are now opting to rent farmland rather than purchasing it. According to Farm Credit Canada (FCC), rental rates have remained largely unchanged in 2023, but renting offers a cash flow advantage and reduces financial risk compared to financing a purchase. This trend provides farmers with a viable alternative to owning land, allowing them to manage their operations more flexibly, although the multi-generational farm families still form the vast majority of those purchasing agricultural real estate.
However, for some, because farmland values are so high and continuously increasing, coupled with high interest rates, the pressure on budgets is leading farmers to seek alternative options. Some are even selling off all or a portion of their land to access the equity, and then may choose to rent.
Farmland Value Increases
The value of Canadian farmland has been on an upward trajectory. In 2023, the average value of cultivated farmland increased by 11.5%, following a 12.8% increase in 2022 and an 8.3% increase in 2021. These rises are among the highest reported by the FCC since 2014. Notably, these increases occurred despite elevated interest rates and farm input prices.
Regional Variations
The greatest increases in farmland values in 2023 were observed in Saskatchewan (15.7%), Quebec (13.3%), and Manitoba (11.1%). Other provinces saw increases below the national average, such as Ontario (10.7%), Nova Scotia (7.8%), Prince Edward Island (7.4%), Alberta (6.5%), and New Brunswick (5.6%). British Columbia experienced a decrease of 3.1%, but has the highest per-acre land values.
Irrigated Land
Demand for irrigated land is strong, with significant increases in values reported, particularly in Manitoba (18.1%) and Alberta (11.7%).
Pastureland
Pastureland is typically less valuable than cultivated farmland. The most substantial increases were in Manitoba (19.0%), followed by Saskatchewan (12.7%) and Alberta (9.6%).
Overall, the Canadian farmland market has experienced significant increases in value, with limited demand, alongside a period of elevated interest rates and high farm-related costs.