Canada Markets

Economic theory would suggest a lag in the movement in land prices given a move in commodity values. Wednesday's release of the Re/Max Farm Report 2014 supports this finding, as the price of farmland in Canada has remained steady to higher in the past year despite weakness seen in commodity prices, issues related to grain movement on the prairies and this season's challenging growing conditions.

Of interest is that the buying interest across all three Prairie Provinces is reported to originate mostly from established farm operations that are looking to expand their land base. The Saskatchewan report suggests that there is some degree of Asian-Canadian buying interest, while the Alberta report notes the competition between recreational land buyers and the province's ranching sector who may be challenged to generate returns on their production.

Market activity ranges from robust in Alberta, where bidding wars are known to take place, to a slower pace in southwest Manitoba, where most farms are suggested to remain on the market for at least 12 months.

While prices have reached record levels in 2014. The year-over-year gain is lower than seen in recent years. The range in values in Alberta moved $200 per acre to $1,500 per acre higher in 2014 to a range of $1,000 to $10,000/ac, with the higher end representing irrigated land in southern Alberta. This compares to the zero to $2,000/acre increase in the range which took place between 2012 and 2013.

In Saskatchewan, the range of trade values increased $100/ac to $50/ac to end at $950/ac to $2,550/ac. This compares to the $50/ac to $500/ac increase in the range of farmland traded in 2013 as compared to 2012. In Manitoba, the range seen in the southwestern area of the province increased by $150 to $400/acre from 2013 to 2014. In 2013, the year-over-year increase in the trading range was $150/ac to $100/ac.

A lack of available supply on the market in Alberta should act to keep land prices firm, while prices are also expected to remain steady in Manitoba. While the market in Saskatchewan is easing, buyers will weigh the short-term commodity price decline with the long-term prospects when making decisions.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

Follow Cliff Jamieson on Twitter @CliffJamieson

(ES)

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