The Gleaner

Farmland values continue steady climb

Most farmers in the Valley won’t be surprised to learn that the average price per acre for good quality farmland has increased 887 per cent in the last 25 years across the Montérégie region. That works out to an average annual increase of 13.23 per cent, about twice the annual average return from the stock market over the same period.

Farm Credit Canada (FCC) published its annual farmland values report in the middle of March, and it shows that the price of farmland across the country has kept its steady rate of increase. The average increase from 2021 to 2022 was 12.8 per cent across Canada, 11 per cent in Quebec, and 4.6 per cent in Montérégie.

Despite a lower rate of increase in Montérégie, the average sale price of crop land was still $19,700 per acre, up from $2,221 in 1998. The top price for farmland registered in the region was $27,700 per acre.

FCC reports that the continued increase in farmland values is due to strong farm income and robust demand for the limited availability of farmland, only somewhat mitigated by elevated input prices and rising interest rates. The report notes that with “prices for most principal field crops reaching record highs, demand for well-situated farmland remained robust.”

Average farmland values in the area have increased at a steady rhythm of about $500-600 per acre per year over the last 25 years, but took a significant jump in 2014-2015, rising from $9,256 per acre to $13,887 in just one year. That was also a period of record yields for many crops, combined with a drop in the Canadian dollar to bring it closer to historical levels (the dollar having been at par with the U.S. dollar for several years), which helped boost exports and overall crop sales.

Even with the recent increase in crop prices, 100 acres purchased at $20,000 per acre and a 5 per cent interest rate with a 30-year mortgage would represent approximately $129,000 as an annual payment, while generating $200,000 in income at today’s corn prices (assuming 5 metric tonnes per acre at $400 each). The difference leaves a tight margin for crop inputs, machinery, and other costs. The same calculation for farmland at $27,700 per acre gives an annual payment of approximately $190,000, leaving almost no margin at all. (Gleaner Staff)

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