Spiralling farmland values have benefitted farm wealth but slower rates of land price increases could be cause for concern.
Land prices generally have a basis in productivity, commodity prices and interest rates. A shortage of land available for sale has driven land prices upwards as buyers chase fewer parcels.
Until now, price increases have reflected profits and production levels.
The annual farmland values survey by Farm Credit Canada showed an eight per cent average price increase last year - the slowest rate in eight years.
Given pressures from lower commodity prices, various trade wars and trade issues, speculation indicates land price increases could be half the 2018 level.
As prices shift away from profitability and profits, land values are in a little balloon with the possibility of real issues if interest rates and export markets change markedly.
The 7.4 per cent increase in Saskatchewan farmland last year is above the national average and masks a chase for less productive land. Farmland in the southwest region with lighter soils traded up 12.5 per cent last year in a range from $800 an acre to $2,700 an acre.
The higher rate was driven by scarcity of sale signs and strong cattle prices, leading agricultural experts to caution buyers to place more emphasis on land productivity as future land price increases in case of tough times in future years.
Saskatchewan farmland prices have increased by 120 per cent since 2009, pushed by Alberta buyers where land is twice as high priced, as well as commodity prices, profits and aggressive-minded expansion plans.
A sudden shift in the farm industry outlook could make the recent land purchases much less attractive.
Ron Walter can be reached at ronjoy@sasktel.net
