According to a new Farm Credit Canada (FCC) Farmland Values Report, the average value of farmland in Alberta increased by four per cent during the first half of 2011.
Alberta farmland has been rising in value since 1993, with the average land increasing in worth by 1.5 and 2.9 per cent, respectively, in the previous two six-month periods.
Despite the increase, Rocky View farmer Joe Zink said it is more and more difficult for producers to stay afloat.
“The irony is, almost every farmer in Rocky View is a millionaire in terms of the value of their property but that doesn’t relate to cash income,” said Zink. “And the only way they can generate income is to sell off little pieces, that is the only thing we are offering them.”
Zink, who has been a farmer for 30 years, said the high land value is tempting for farmers who are struggling to make a living. A number of producers in the Highway 8 area have already sold their land, he added.
“That farmer who has a quarter section worth millions, he might be prepared to leave that for years if he could make a living off of it,” said Zink.
His solution is to offer some benefit to farmers who choose to stay in the industry. Zink said most Albertans don’t agree with the idea of subsidizing farmers, adding other programs could give producers the needed income while offering benefits to non-agricultural community members.
“What I am saying is it is in the interest of the non-farming people of Rocky View to offer another option to farmers,” said Zink.
His ideas range from simple to complex, and include farmers earning money for removing trash from ditches to planting trees and clearing pathways.
The Alberta trend in farmland values is echoed across the country, with Canadian averages having increased by 7.4 per cent during the first six months of 2011, following gains of 2.1 and three per cent in the previous two six-month periods.
Farmland values remained stable or increased in all provinces, with Saskatchewan experiencing the highest at 11.6 per cent.
The Saskatchewan results appear to mirror the U.S. situation, where double-digit increases in farmland values have been reported in several corn and soybean states.
Two contributing factors to the current value increase in Alberta are the ongoing strength of commodity prices, combined with land values that previously increased at a slower rate than in other areas of the country, according to an FCC report.
The average national price of farmland has increased by about eight per cent annually since the commodity price increase began in 2006.
That’s about twice the rate observed in the first part of the decade.
Near-historic highs in crop prices and lows in interest rates are other factors supporting higher land prices.
“Low interest rates, good crop prices in recent years, along with low returns in financial markets mean farmers are buying more land,” said Jean-Philippe Gervais, FCC senior agriculture economist.
“These three factors combine to increase demand for land and push prices up. As long as crop prices continue to be strong, farmland values should remain high.”
