Land price increases slowing

In 1967, my father Henry C. Siemens, [deceased] my brother Jack Siemens who farms with his son Jonathan, and myself then a fledgling farmer bought our neighbour’s quarter section for $300 an acre, an exorbitant price gushed our neighbours at the time.

It was a high price as we soon learned especially when then prime minister the elder Trudeau told us to sell our own wheat because the Canadian Wheat Board price was a measly $1.35 a bushel or thereabouts and the total quota for a few years about three bushels an acre. Yep, $4 an acre gross receipts and by 1970, the poorest of those poor years we couldn’t pay the interest on that $300 an acre land or $48,000 for the quarter section. That despite good crops.

My father offered to give the land back to our neighbour, but no said Mr. Dyck, hang in there, things will improve. And improved they did in 1972 when the price of grain shot up and if I recollect correctly we paid that land off the following year.

Fast forward to 2016 and the price of land has kept climbing, but there seems to be a little stall right now.

Farm Credit Canada in its latest survey of land prices reports average farmland values in Canada continued to climb in 2016 but lost steam in most provinces.

FCC’s latest Farmland Values Report shows farmland values increased by an average of 7.9 percent in 2016, compared to 10.1 percent in 2015 and 14.3 per cent in 2014.

FCC Chief Agricultural Economist J.P. Gervais said what stands out is that, for the third consecutive year, growth has slowed down.

Should farmers and landowners be concerned? Over the years when I’ve asked people why they pay these high prices that keep the land rentals up, and the ownership tight, often it is because they can.

Or land doesn’t come up for sale more than once in a lifetime, so if a piece that you want comes up for sale, people who can buy it. The other common answer is they don’t make more land – we have what we have and there isn’t any more being produced.

I’ve seen farms grow from small family farms to large corporate family farms often to the chagrin of younger farmers who can’t compete with the rental or the cost of ownership. It sometimes means heartbreak or at least a realization that if I want to farm and I can make it on the smaller land base I will, or pulling the plug, selling or renting out what he has and getting day job or even working for the larger farm that offered to buy him out.

Today farmland values are still increasing but at a slower pace. “That’s true at the national level when you average out all the different provinces but also for most provinces,” said J.P. Gervais. “In some cases, if you think of Ontario and Quebec in central Canada, we have four years of consecutive increases slowing down.

In the prairies, if you think of Saskatchewan for example, that’s the third consecutive year where we have the rate of growth in farmland values that’s coming down so really I think farmland values are cooling off. I’m calling this a slowdown because we’ve had 10 amazing years of growth when it comes to farm income.”

He said in less than 10 years farmers have actually more than doubled crop receipts and that’s especially true in the prairies. In 2016, while the final figures are still not in, Gervais said crop receipts have likely slowed down.

“In Saskatchewan, for example, you’re likely to get crop receipts down in 2016 relative to 2015.

Part of this is because of some of the production challenges we had, quality issues as well and softer pricing,” he said. “We did face lower prices on average in 2016 than in 2015.

So overall I think we’ve had slower growth when it comes to farm revenues and that slows down farmland value increases that we’ve seen over the last few years and I think that’s the number one driver. Gervais said other factors, such as interest rates, also play a role but lower income is the main factor.

When you hear of land exchanging hands for $6,000 to sometimes $10,000 an acre for small much-desired farmland, the $300 an acre we paid in 1967 is quite a bargain, but we also farmed with 14-seeder discers and 14-deep-tillage cultivators. The first and only grain bin I bought was a total of 1,300 bushels, wouldn’t even hold a truck load today. •