Saskatchewan, Ontario Land Affordability Headed in Different Directions

A Farm Credit Canada analysis shows Saskatchewan farmland is becoming increasingly expensive when compared with revenues, while affordability in Ontario is actually improving.

Undertaken by FCC economist Justin Shepard, the analysis looked at the relative affordability of farmland by comparing annual land payments against gross revenue generated by a corn-soybean rotation for Ontario and a wheat-canola rotation for Saskatchewan.

On a national basis, farmland values have increased on average 7.9% per year over the past decade, while average annual payments have increased 6.6% per year. For the purposes of the analysis, average Canadian annual payments increased 3.8% to $148/acre in 2021, while farmland values per acre increased 8.3%.

As can be seen on the chart below annual land payments for Ontario now represent 60% of the gross revenue generated from a corn-soybean rotation – well down from the peak in 2019 and in line with the average since 2000 of 56%.

On the other hand, the affordability ratio reached 24% in Saskatchewan in 2021, partially due to low crop yields, but also higher land payments. Outside of 2021, gross crop revenue has stayed relatively high for Saskatchewan since 2013, but farmland has simply appreciated at a faster rate. As a result, land in the province is at the most expensive point in time in recent history when measured in terms of crop revenues, Shepard said.

Shepard also noted Ontario has historically seen significant volatility, with land payments accounting from a low of 37% to a high of 81% of annual corn and soybean revenues. In Saskatchewan, farmland values have been outpacing increases in canola and wheat revenues, leading to a decline in affordability, although there is less volatility per year.