Tim Hammond, a broker with Hammond Realty in Biggar, Sask. spoke about farmland values at Agri-Visions at the Lloydminster Exhibition Grounds on Feb. 14. GEOFF LEE LLS PHOTO
Farmland values in Saskatchewan and Alberta are expected to see modest gains over the next couple of years with commodity prices levelling off.
“I would predict that values are probably going to stay pretty firm and maybe a modest increase of two to four per cent depending on the area,” said Tim Hammond, a broker for Hammond Realty in Biggar, Sask.
“It’s not the same kind of growth we saw in 2010 and 2011, so if farmland does increase, it’s going to be incremental.”
Hammond presented his forecast while speaking about trends in farmland values at Agri-Visions at the Lloydminster Exhibition Grounds on Feb. 14.
According to Farm Credit Canada, in 2016 prices rose 7.9 per cent in Canada, 9.5 per cent in Alberta and 7.6 per cent in Saskatchewan, with 2017 statistics due in April.
The key driver behind land prices though is farm cash receipts.
“What we’ve seen is cash incomes on grain farms and all kinds of farms increase significantly over the last decade,” said Hammond.
“Guys are making more money, guys are grossing more money, more production and they feel good about that, so they’re reinvesting those profits back into farmland.”
Hammond noted everything from commodity prices, availability of land and available credit to regulations and law and currency rates relative to the U.S. dollar affects land values.
He said farmland values in Saskatchewan have risen by 150 to 175 per cent over the past decade up to 2016.
Hammond Realty manages between $120-150 million a year in farm land and business sales in Saskatchewan.
“In 2003, we had to list 10 farms to sell one and now we’ve got 10 buyers for every one farm that we list,” said Hammond.
‘It’s good to see positive changes.”
Hammond said Alberta has also seen tremendous growth in farm values over the last 10 years.
“The percentage increases aren’t the same as Saskatchewan, but Alberta starts at a higher dollar per acre to begin with so really the dollar per acre increases have probably been similar to what Saskatchewan’s experienced as well,” he said.
Hammond said with a fallback in commodity prices in 2016, the only way for farmers to offset lower farm income is by producing more and producing it better.
“I am really optimistic; I think the fundamentals are really solid,” said Hammond adding, “I think we can continue our level of production.
“Commodity prices might fall back a little bit, but overall we’re not overvalued to begin with, so I think that’s going to provide support going forward.”
Hammond said there is a tremendous demand for farmland with a limited supply and lots of interested buyers.
“So that’s going to create positive impact on land values too, so when it does hit the market, guys are going to compete heavily for that,” he said.
Hammond also thinks strong farm values are good for the industry, calling it a barometer for the health of the industry.
“The net worth statement goes up,” he said.
“A lot of farmers, even though they do have RSPs and stuff, a good part of their retirement is tied up in farmland so, of course, they want to see it perform well.”
Hammond noted that climate change, especially in southeast Saskatchewan, has the potential to increase production and farm land values.
“We’ve noticed it in southeast Saskatchewan, more rain and more heat; it’s changed what we can grow, the yields that we grow, and ultimately more production is going to impact positively on farm land values,” he said.
Farmers in that area are starting to grow more corn and soybeans that is attracting interest in land from Ontario farmers who grow those crops and are looking to expand or relocate.