Ontario farmland prices cool down, but still pop 11 % in 2023, FCC says

OTTAWA — Average Ontario farmland prices climbed by almost 11 % in 2023, but only at about half the phenomenal rate of increase measured in 2022, according to a Farm Credit Canada report. Eastern Ontario’s most eastern counties, however, bucked the provincial trend.

Ontario’s overall trajectory saw farmland prices rise 10.7 % in 2023, trailing a national increase of 11.5 %. It’s a far cry from 2021 and 2022 when Ontario farmland posted whopping back-to-back increases of 22.2 % and 19.4 %, the highest in Canada by a substantial margin in both of those years. National farmland prices rose 8.3 % in 2021 and 12.8 % in 2022. Ontario’s percentage increase last trailed the Canadian average increase in 2018.

Meanwhile, 2023 farmland prices in the Ontario region east of Kingston increased 15.5 % to hit an average $12,800 per acre in 2023, up from a 14.9 % increase posted in 2022. It was the only region in the province to see an increase in the land-value growth rate last year. Eastern Ontario’s central region — everything west of Kingston to Durham County — saw farmland prices increase 1.8 % to hit an average $13,000 per acre in 2023, the smallest increase in the province and way down from the 23.3 % increase that region posted in 2022.

Farmland values increased between 8 % and 13.3 % in the broader Southwestern Ontario area (everything west of Durham and bounded by the Great Lakes.)

Interest rates and lower commodity prices led to less interest in Ontario farmland, according to FCC, with real estate professionals reporting fewer bidders on available properties. However, good land close to established operations sold quickly, while marginal land stayed on the market for longer. Demand came from a variety of sources, including large intensive, supply-managed farm operations, cash crop producers, part-time farmers and investors.

Nationally, the increase in farmland prices in Saskatchewan (15.7 %), Quebec (13.3 %) and Manitoba (11.1 %) exceeded Ontario’s rate of increase (10.7 %) in 2023.

Four provinces had single-digit average increases — Nova Scotia (7.8 %), Prince Edward Island (7.4 %), Alberta (6.5 %) and New Brunswick (5.6 %). British Columbia saw an average decline of 3.1 %, although that province has the most valuable farmland on average, according to FCC.

The number of farmland transactions in 2023 is estimated to have fallen slightly from 2022 as operators became more cautious in their investment decisions. “The expectation of weaker farm revenues and elevated borrowing costs and input prices are expected to stretch out this cautious environment for farmland transactions into 2024,” according to FCC chief economist J.P. Gervais.

“Farmland prices have continued to increase at a rapid pace over the last couple of years, even when economic conditions suggested the growth should slow,” Gervais also observed. “A limited supply of available farmland combined with a robust demand from farm operations is driving that growth.”