Top Crop Manager

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Farm ownership, value and land use trends

Photo courtesy of Marleen Van Ham.

July 9, 2013, Guelph, Ont. – Several trends emerged from the Exploring Rural Land Use conference, held in Guelph, Ont., on May 14.

Farm ownership trends

Alfons Weeksink presented farm ownership trends based on surveys of farmers who rented land. He found that:
  • 60 per cent of land was held by owners who were on their own land;
  • Eight per cent were held investment companies,
  • 13 per cent held by owner investors; and
  • Three per cent foreign ownership.
Rental agreements were typically one-year handshakes that tend to get renewed annually but carry on for longer than 10 years. Eighty per cent are cash rent as opposed to share crop or other types of agreements. Rates were generally higher where locals own the land.

Weeksink posed the question, "Does the environment lose with land rental?" His studies indicated this was not a significant issue. Owners usually only maintain contracts with farmers that manage the land in a way that landlords felt was reasonable. Since the supply of land is limited, landlords have some power to enforce this. He also found that renting farmers tend to manage their rented land the same as their own, using the same equipment and products. He did find a decrease in woodland, pasture, and other ecological features being retained, and perhaps less investment in soil. Long-term impacts may result so further study is needed.

Farmland value trends

James Bryan of Farm Credit Canada suggested that land prices were strongly influenced by interest rates, cash receipts, government policy and world markets. In 2012, Canadian farmland values increased 19 per cent, the highest rate ever. Values have generally increased more than 10 per cent annually since 2007. 

Trends in Southwestern Ontario

Marleen Van Ham, an appraiser with Agri-Choice Real Estate Appraisals, discussed land value trends in Southwestern Ontario. Class of farmland does not always impact values, but the location and ability for quick conversion to cropland often does. Pasture land is definitely being converted to crops, woodlots are being cut, and fence rows and ditches are being removed. Census data from 2006 and 2011 show a loss of 714,000 acres of forage acres (484,000 of hay and 229,000 of pasture).

Van Ham indicated that there is a real "hunger" for land right now. Much of it being driven by dairy and poultry producers who are not as able to expand, so are becoming the new cash croppers. She described it as a trend in farmland amalgamation, with surplus, older farmsteads being removed. Recent farmland values recently peaked in January/February, slightly lower in March, with the following "per tillable acre" prices:

  • Elgin: $6-18,000/acre,
  • Norfolk: $8-14,000 (with ginseng and potatoes soils at high end),
  • Haldimand: $6-10,000,
  • Oxford: $15-22,000,
  • Brant: $8-13,000,
  • Waterloo: $9-15,000,
  • Perth: $12-20,000,
  • Huron: $9-15,000.
The price slowdown was attributed to people taking a breather from getting caught up in the hysteria of land sales. Interestingly, land purchasers acknowledge that under these conditions, the price paid cannot be covered by the income generating potential of the land.

The sale of farms to operating farms is putting the squeeze on the straight cash cropper. They really can't pencil the land purchase themselves and are reliant on retired and other farmers to supply land to the rental market. However, now the retirees are selling the farms to active supply management farmers, so the cash cropper land base is shrinking. As land rental availability gets tighter, it becomes more competitive and costly.

Van Ham indicated that the value of vacant land is higher than land with buildings, houses and outbuildings that pose a risk and added cost to the purchaser. The presence of water courses and woodlots also detract from land values. Buyers are looking for tillable land in large parcels with no fence lines or obstructions for big equipment. Farmers generally don't want to be house landlords because it can be difficult to find good tenants. Even with good tenants, the costs of taxes, heating, and maintenance can erode any chance of generating a positive balance sheet on this activity.

July 9, 2013  By Top Crop Manager


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