Farmland price growth in Canada accelerated, marginally, last year despite a slowdown in two of the key Prairie provinces to the weakest in more than a decade, the country’s top agricultural lender said.
Farm Credit Canada, which has a loan portfolio of more than $41bn, pegged at 5.4% growth in Canadian farmland prices in 2020, growth of 0.2 points year on year, despite “almost an entire year of disruptions caused by the pandemic”.
The market “remained strong and stable” even in a period “marked by economic turbulence” caused by the Covid outbreak, said the group, highlighting “temporary food processing plant closures, some displaced exports, sector-specific labour shortages and significantly altered consumer buying habits”.
Even in the land market, 2020 was marked by a “noticeable decrease” in sales in the first half of the year, particularly in April and May, followed by a sharp second-half recovery which saw full-year sales “like those of the past few years”.
The modest price acceleration defied a slowdown of 0.8 points in price growth, to 5.4%, in Saskatchewan, Canada’s top grain-growing province – the slowest pace of appreciation in 14 years.
Values appreciated slowest in the south of the province, where values tend to be higher.
In neighbouring Manitoba, the pace of price growth slowed by 0.4 points to 3.6%, its weakest since 2005, with north western areas seeing a fall in values.
FCC noted that “2020 growing conditions varied throughout the province”, with “overall moisture levels were below average”, while “insect infestations were an issue… with flea beetles in canola fields, cutworms and grasshoppers in other crops”.
‘Robust grain shipments’
However, in Alberta, the third of the three key Prairie growing states, price growth accelerated to 6.0% from 3.3% in 2019.
“Improved growing and harvest conditions for 2020, along with increased grain shipments, made this year much better than the past few,” the group said, highlighting the 9.6% growth reported in Alberta’s Central region.
“The stronger increase from recent years was due to better-than-average growing conditions, a healthy supply management sector and robust grain shipments.
“Farms continue to expand as land becomes available.”
British Colombia in the far west saw the fastest pace of land price growth, at 8.0%, up from 5.4% in 2019, and the highest pace in four years.
‘Commodity prices climbed’
The strength of demand for farmland reflected in part low borrowing costs, with interest rates “kept close to historic lows”, but also the rise in crop prices – which has been particularly marked for Canadian canola, values of which have hit a record high in 2021.
“Despite important supply chain disruptions caused by the pandemic, commodity prices climbed in the last half of 2020 for many crops,” FCC said.
Jean-Philippe Gervais, FCC’s chief economist, said that “despite having gone through a uniquely volatile year, farm income generally improved and the overall demand for farmland remained strong throughout 2020”.
“Domestic demand for food remained strong and global supply chains continued to have an appetite for Canadian food and commodity exports.”