Farmland values in Midwestern Ontario have continued their upward trajectory, albeit at a slower pace compared to recent years, according to a study conducted by Ryan Parker of VALCO Consultants.
Over the past two years, land values in 11 counties surveyed by Parker surged by approximately 25% annually. However, in 2023, the increase moderated to around 10%, signaling a potential shift in market dynamics.
Parker noted that despite the tempered increase, many areas in Southwestern Ontario witnessed record-high land values, with farms trading for over $25,000 per acre. Some pockets even saw transactions surpassing $40,000 per acre, reflecting the ongoing demand for agricultural land in the region.
Factors contributing to the slower growth include higher interest rates and declining commodity prices. Interest rates in 2023 were two to three times higher than the lows experienced in the previous years, posing a challenge for farmers seeking financing for land purchases. Additionally, the price of corn saw a significant decline, dropping by 35% throughout the year.
"While there was an overall increase in land values in 2023, the shift in demand was notable in the last quarter of the year," Parker stated. "Fewer bidders were observed for each farm, leading to some unexpected sales at lower prices."
Despite these challenges, Parker remains cautiously optimistic about the market's resilience. He anticipates that 2024 will bring a variable landscape for farmland values, presenting both buying opportunities and potential bargains for farmers with sufficient cash flow.
The study highlights the enduring demand for farmland in Ontario, driven in part by factors such as livestock density and the migration of farmers to less expensive areas like Grey and Bruce counties. Parker noted the movement of the Mennonite community into agricultural regions has also contributed to higher land values, with their aggressive purchasing leading to improvements in farm productivity.
As the region navigates through fluctuating market conditions, Parker encourages farmers to carefully assess their options and seize opportunities in the evolving landscape of farmland values.
Addressing the potential for future land values, Parker highlighted the possibility of approaching an average of $50,000 per acre soon, citing recent a recent sale just outside Stratford reaching this milestone, noting "a significant number of transactions are exceeding $30,000 per acre, with some even surpassing $40,000."
The average for the 11 counties studied stood at $25,000 per acre in 2023.
Parker's study can be viewed here.