‘The crop of a lifetime’

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This article was published 23/04/2018 (2758 days ago), so information in it may no longer be current.

Manitoba farmland prices should keep marching higher in 2018 following another tremendous year for Manitoba crop producers, Farm Credit Canada says.

Manitoba farmland prices increased just five per cent in 2017; not a bad rate historically, but below gains in recent years. But FCC noted farm cash receipts for Manitoba shot up 17 per cent for the first three quarters of 2017, tops in the country. That’s on the heels of a 13 per cent advance the previous year.

That bodes well for Manitoba land prices and the rural economy generally in 2018. Farm cash receipts are primarily revenues from both crop and livestock sales.

The figures are from FCC’s annual Farmland Values Report released today. FCC held a teleconference with media prior to the release.

Manitoba’s farm economy has been on quite a roll in recent years. Some farmland in the Pembina Valley now sells for more than $8,000 per acre, the highest price in the province. The average price in the Pembina Valley-Central Plains is $4,770, FCC figures show.

That’s above anything in Saskatchewan. The highest-priced land on the prairies is in Alberta, south of Calgary, selling for an average $5,461 per acre.

J.P. Gervais, FCC chief economist, wasn’t overly concerned that Manitoba posted just a five per cent gain in farmland values in 2017. He said a historic average is about four per cent — allowing for an average two per cent gain in farm cash receipts, plus two per cent inflation. Manitoba is poised to surpass that in 2018.

Craig Klemmer, agricultural economist with FCC, said the healthy returns for Manitoba farmers last year were because of excellent crops. Not only did farmers here grow above average crops, but farmers elsewhere, such as in southern Saskatchewan, suffered a severe drought and had very poor crops. That helped push up commodity prices and Manitoba farmers were poised to take advantage.

As well, crops were of a lower grade in Saskatchewan, Alberta, and the northern United States and Manitoba farmers were also able to capitalize with their good quality crops.

Market analyst John Duvenaud of Duvenaud Associates called 2017 “the crop of a lifetime.”

“Seeding was early and there was just enough soil moisture for germination. Then, a half inch or inch of rain every week, like clockwork, through June and July. There was always enough moisture, but never too much,” he said.

Saskatchewan posted a 10 per cent gain in farmland values, the best on the Prairies. But that was mostly from sales in the first half of the year before two Bank of Canada interest rate hikes and the realization that province was in a severe drought. The jump was also partly because of land prices needing to catch up in that province, FCC said.

Parts of southern Saskatchewan registered the driest year on record.

“They had expectations of a good crop. They didn’t know the challenges with the weather” that were coming, Gervais said.

Nationally, farmland prices rose 8.4 per cent, on par with a year earlier when the increase was 7.9 per cent. British Columbia registered the smallest gain of 2.7 per cent.

“I think it’s rather a sign of a stable and strong farm economy,” Gervais said.

The year started with record low interest rates in spring, but two rate hikes in the second half of 2017 tamped down buyer interest. “We know the majority of the sales took place in the first part of the year,” Gervais said.

In Manitoba, prices for higher-priced land were relatively flat in 2017 and the biggest gains were on low- to mid-priced land. The Interlake region posted a 6.5 per cent increase, and farmland in the Parkland rose the most by an average of 10 per cent.

For the first time, the FCC report posted value ranges for farmland in various parts of the country. For example, Eastern Manitoba farmland sold in a range between $800 to $5,000.

Experts acknowledge the good times can’t continue forever. For example, Manitoba’s farmland prices shot up like a champagne cork by 25 per cent in both 2012 and 2013. Prices appreciated by 12 per cent in both 2014 and 2015. International trade talks and at least one more Bank of Canada raise in interest rates threaten markets this year.

“We do expect at least one more increase in the Bank of Canada rate before the end of 2018, and we expect further pressures on interest rates coming from the U.S.,” Gervais said. Those pressures could come from trade talks with Canada, if they fail, or from a worsening of friction in trade between the U.S. and China.

But the positives in the market still outweigh the negatives and there’s still “momentum” there, Gervais said.

This is FCC’s 32nd annual Farmland Values Report.

bill.redekop@freepress.mb.ca