The value of farmland went from $27.7 billion in 2008 to $114.30 billion in 2022
The value of farmland in Saskatchewan continues to skyrocket. Last year, it went up by a record amount.
Experts say that this trend is a good sign for Saskatchewan’s agriculture industry in the long run. But higher property values are making it hard for farmers to grow their businesses or for young people to start their own farms.
“When it comes to food production, the world needs more Saskatchewan and more Canada,” said J.P. Gervais, the chief economist for Farm Credit Canada.
“Of course, there are challenges.”
Statistics Canada just put out balance sheets for the agricultural sector that show how things have been since 1981 in each province. The northern territories of the country were not included in the data set.
The total value of Saskatchewan farm real estate, which is mostly farmland but also includes service buildings and homes, has been between $16 billion and $23 billion for more than 25 years.
But data shows that the value of real estate has gone up steadily since 2008. In 2008, it was worth about $27.7 billion, but it was worth $114.30 billion last year.
Just from 2021 to 2022, the value went up by about $13.7 billion, which is a record rise from one year to the next.
StatsCan data shows that the same thing is happening in the other provinces as well. Saskatchewan’s growth started later than in other provinces, but its farmland is the third most valuable in Canada, and its value is growing at the same rate as in Alberta and Ontario.
Experts told CBC News that the rise in property values is caused by a number of things, including basic economics.
As the world’s population grows, there is more demand for food, which makes farmland, which is a limited resource on which food can grow, more valuable.
Saskatchewan has almost 40% of Canada’s farmland, according toThe Farming Census of 2021. Gervais said that problems with the supply chain caused by the COVID-19 pandemic or the war in Ukraine have made the need for that farmland even greater.
Over the years, technological improvements have also made farms more efficient, which has led to higher profits, said Jason Dearborn, a fifth-generation farmer and the CEO of Dominion Blockchain Solutions, which has about 50 farm investors, and which is run by his family.
Dearborn thinks that farmland was undervalued for many years, and he said that the free market, which is an economic system without government interference, has been the biggest reason why its value has been going up.
Gervais agreed that there are more kinds of buyers in the market, but he said that most sales are made to people or businesses who want to farm the land.
Researchers think that only about 2% of Saskatchewan’s farmland is owned by investors and big companies. However, André Magnan, an associate professor of sociology at the University of Regina, says that the increased competition has caused property values to rise.
Magnan said, “If you want to buy land and there are three or four buyers when there were only one or two before, the seller is probably going to be able to ask for a higher price.”
Dearborn says that this is where he thinks the farm real estate market is going now.
Gervais thinks that the rising value of the market shows a bright future for farming, even though there have been problems like drought recently.
Some farmers and researchers are worried, though, because competition drives up prices and bigger farms have more buying power. This makes it harder for younger farmers to start their own businesses and for smaller farms to grow.
Experts and data show that this is happening right now.
A higher price makes it hard to grow
Census information from the past 45 years shows that the number of farms in the province has dropped by half. In that time, the number of mid-sized farms has steadily gone down, while the number of large farms has steadily gone up.
Michael Gertler, the regional coordinator of the National Farmers Union in Saskatchewan and an associate professor of the sociology of agriculture at the University of Saskatchewan, said that this is happening in part because the economic systems in place encourage growth.
Gertler said that people who want to sell their small or medium-sized farms are also likely to take the highest offer. Larger operations have more money and can borrow more money, which lets them outbid their competitors, raise the land’s value, and grow their business even more.
“It’s disheartening,” said Kevin Chutskoff, a third-generation grain farmer in Togo, Saskatchewan, near the border with Manitoba.
In the past eight years, Chutskoff, who is 57 years old, has grown the family farm from about 700 acres to 2,000 acres. He and two of his sons are talking about making a few more changes to the farm. In that time, he said, the price of farmed land in his area has more than doubled.
He has also noticed that in the last few years, farmers who want to sell land put out a “invitation to bid.” Larger companies or organizations often outbid other people by several hundred dollars per acre, he said.
Chutskoff said, “You can’t afford to pay that much for it.”
“We were lucky that the people who did sell to us wanted the farmland to stay in the hands of a smaller farmer.”
Young farmers are getting help from the business world
Magnan from the U of R said that older and more experienced farmers are often affected differently by higher real estate prices.
“If you’re an experienced farmer near the end of your career and you’ve built up the land you need to run a successful farm, you like it when farmland prices go up because it means you’ll have more money when you leave farming,” he said.
“On the other hand, it will be harder for younger farmers to buy farmland at these higher prices, either because they are just starting out or because they want to grow their business.”
Chutskoff, who is also an account manager, told CBC News that young people wouldn’t be able to pay for farmland without a high-paying job outside of farming. This is because interest rates are high.
Another problem this causes for the industry is that farmers in Saskatchewan are getting older, and there are a lot less of them working now than there were 30 years ago.
Experts told CBC News that one of the most important issues in agriculture policy is helping young farmers get started.
Farm Credit Canada, for instance, has loan programs like the starter loan and the young farmer loan to help people get started in the industry. Gervais said that things like business plans are also helped by the Crown corporation.
Gervais said, “There’s no one solution that will work, so we have to work as an industry to find ways to help young entrepreneurs overcome some of the problems they face when trying to grow their businesses.”