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Fall 2011 Farmland Values Report (Farm Credit Canada)

Saskatchewan farmland values rise again, says FCC

Regina, Saskatchewan, November 14, 2011 – According to a new Farm Credit Canada (FCC) Farmland Values Report, the average value of farmland in Saskatchewan increased by 11.6% during the first half of 2011. In the previous two six-month periods, farmland values increased by 2.7 and 2.9% respectively. Farmland values have been rising since 2002 in this province. The FCC report provides important information about changes in land values across Canada and is available at http://www.farmlandvalues.ca/.

Comparatively, the average value of Canadian farmland increased by 7.4% during the first six months of 2011, following gains of 2.1 and 3.0% in the previous two six-month periods. Farmland values remained stable or increased in all provinces. Saskatchewan experienced the highest average increase at 11.6%. 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 are the ongoing strength of commodity prices, combined with land values that previously increased at a slower rate than other areas of the country.

“Farmland is more than a production resource – it’s a source of wealth for farmland owners. So it’s not surprising that changes in the price of farmland generate interest from producers and others in the industry,” says Michael Hoffort, FCC Senior Vice-President of Portfolio and Credit Risk. “The upward trend in farmland values appears to have accelerated. Canadian farmland values have risen steadily during the last decade.” Previously, the highest semi-annual average national increase was 7.7% in 2008. The last time the average value decreased was in 2000, when it dropped by -0.6%.

The average national price of farmland has increased by about 8% 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,” says 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.”

“Agriculture matters to Canadians and the positive overall health of the industry is definitely being reflected in recent land value trends,” says Hoffort. “It is an indicator of the industry’s strength and it is good news for producers who hold land as an asset. At the same time, it can be a challenge for those who want to buy farmland to expand their operation. That’s why we offer loan products that can help young farmers buy land.”

“Producers often ask if they should purchase land now while prices are trending upward or wait to see if they come down. The answer is that it depends. Sound information and an assessment of personal risk tolerance can help make the decision easier. The next six-month report will be very interesting,” says Richard Hayes, FCC Senior Director, Valuation.

The FCC Farmland Values Report has been published since 1984. To view previous reports, visit http://www.farmlandvalues.ca/.

To see the FCC Farmland Values Report video, visit www.fcc.ca/farmlandvaluesvideo.

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Spring 2011 Farmland Values Report (Farm Credit Canada)

Welcome to Farm Credit Canada’s Spring 2011 Farmland Values Report.

This report covers the period from July 1 to December 31, 2010.

Saskatchewan

Saskatchewan farmland values increased an average of 2.7 per cent during the second half of 2010, following gains of 2.9 and 3.4 per cent in the two previous reporting periods. Values increased by an average of 0.5 per cent per month during 2010. Farmland values in Saskatchewan have been rising since 2002.

This increase was driven by higher land prices in a couple of rural municipalities in the southern half of the province that experienced considerable sales activity. The balance of the province remained relatively stable during the reporting period.

Strong demand was evident for good quality land, especially in lentil producing areas. The favourable rate of return that many land owners are now receiving from cash rent resulted in land being pulled off the market. While there were fewer sellers in the market overall, active bidding occurred on any land that was listed for sale.

Continued low interest rates, increasing commodity prices and rebounding cattle prices also contributed to strong land demand. Saskatchewan also saw purchasers from other countries relocating to farm in the province.

While seeding and harvest in a large portion of the province was challenging due to excessive moisture, the crop that was harvested was variable in terms of quality and quantity.

Factors that contributed to minimal land sales in some areas of the province included unseeded acres due to spring flooding.

National Trend

The average value of Canadian farmland increased 2.1 per cent during the last six months of 2010, following increases of 3.0 and 3.6 per cent in the previous two reporting periods. When combined, the increase in the average value of farmland across Canada rose by 5.1 per cent in 2010.

Farmland values remained stable or increased in all provinces. Prince Edward Island experienced the highest average increase at 3.2 per cent, followed by Saskatchewan at 2.7 per cent.

New Brunswick and Ontario each saw 2.4 per cent growth, followed by Alberta at 1.5 per cent and Manitoba at 1.3 per cent.

Quebec (0.9 per cent), Nova Scotia (0.6 per cent) and British Columbia (0.4 per cent) rounded out the list of provinces that experienced a rise in farmland values.

Values were unchanged in Newfoundland and Labrador.

Canadian farmland values have risen steadily during the last decade. The highest average national increase was in 2008 at 7.7 per cent. The last time the average value decreased was in 2000 at -0.6 per cent.

Cash crop producers lead buyer activity. Strong demand with limited supply made farmland a hot commodity due to its historic performance as a stable investment and its current income generating potential.

Low interest rates also encouraged buyers to seize opportunities and influenced farmland values upward. Although it seems that more people are interested in purchasing farmland, the supply is limited. This continues to fuel competition in the farmland market.