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FCC: The effects of deteriorating farmland affordability

April 2, 2024  By Farm Credit Canada

Despite Canadian agriculture facing challenges in 2023 – such as commodity prices declining, elevated input costs and interest rates, and severe weather events – farm cash receipts ultimately grew 3.6 per cent, to a new record of $98.6 billion. With the availability of farmland for sale remaining tight, average farmland values increased 11.5 per cent in 2023, down from the 12.8 per cent in 2022.

Farmland prices across Canada have experienced strong growth over the last decade (2014–2023), up 9.1 per cent on average annually. Farmland value increases differed among regions, with Eastern Canada experiencing higher average annual growth rate of 9.9 per cent, compared to Western Canada averaging 8.0 per cent. Rising farmland values lead to discussions on affordability of newly purchased farmland. Affordability of farmland is influenced by a range of factors, including land prices, interest rates, farm income, urban population and farmland supply.

Farm Credit Canada (FCC) has introduced and estimated a farmland affordability index. While important nuances exist across provinces, farmland affordability deteriorated to its worst level in 30 years at the end of 2023 as farmland values and mortgage rates increased. FCC also explores reasons why land prices continued to appreciate in 2023 amid a rising interest rate environment. |READ MORE



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