The Patz McMillan Team

As Margaret Mitchell wrote in the classic novel, Gone With the Wind, "Land is the only thing in the world that amounts to anything, for 'tis the only thing in this world that lasts.... 'Tis the only thing worth working for, worth fighting for – worth dying for."

Farmland is a hot commodity in Canada, according to Farm Credit Canada (FCC), which provides financing for farms and agribusiness. The average value of Canadian farmland increased by 7.7 per cent during the last six months of last year, which the company says was Canada's highest increase since 2002.

"Most provinces continue to see growth in farmland values, with British Columbia experiencing a huge 14.5 per cent increase," says the FCC report. "Overall increases are consistent with an upward trend in land values since January 2000."

In B.C., much of the increase in value is because of strong demand for land suitable for grape production, says the report. "There is a noticed increase in demand for small wineries as well as wineries consolidating to achieve economies of scale and secure their own production base," it says. In the Lower Mainland, out-of-province investors are snapping up land and pushing up values. In the B.C. Peace region, the report says the full impact of a downturn in the forestry sector has been delayed due to the substantial harvesting of "cheap beetle wood", which must be harvested before it becomes unusable. About 13.5 million hectares of B.C.'s forest area (roughly four times the size of Vancouver Island) has been destroyed by the mountain pine beetle.

The second-hottest province is Alberta, where values went up 10.3 per cent during the last half of 2007. "Values continue to increase throughout central and northern Alberta," says FCC. "With grain and oilseed market prices reaching record highs, so have the demand for grain growing land. Demand for specialty crops such as potatoes are also key factors in increased prices of irrigated land. A growing interest in using plants for alternative fuels such as ethanol and bio-diesel adds strength to the demand for land."

The report says that closer to urban areas, Alberta farmers are selling their farms at high prices and relocating to other less-expensive areas of the province.

In Saskatchewan, the investment community has noticed the interest in farmland and a couple of financial companies have set up partnerships that work much like real estate income trusts. Investor funds are pooled to purchase farmland. One company, Agriculture Development Corp., says on its website, "Large pension funds and institutional investors are beginning to place their money in farmland. Why shouldn't you?"

It says Saskatchewan farmland saw a 9.4 per cent average annual rate of return between 1972 and 2003. Among other reasons cited for investing in farmland: it's a stable, income producing asset; it's in limited supply and decreasing; it's "impossible to steal;" and it's "fundamental to life".

In the last six months of last year, Saskatchewan farmland increased in value by 7.8 per cent, says FCC. It says grain prices have increased rapidly to "their highest level in years".

"Adding to this strength is the recognition that Saskatchewan farmland is attractively priced relative to farmland in other provinces," says FCC. "The demand for land is coming from the combined effect of investors, out-of-province buyers, and local farmers."

The only provinces to see a drop in farmland values during the period studied are New Brunswick, where values dropped by 3.3 per cent, and Prince Edward Island, which dipped by 1.4 per cent. In New Brunswick, "Uncertainty in the potato industry, as table-stock and seed-stock producers have not rebounded from the average prices and low demand for their crops over the last year, has negatively affected land values. Most land sales involved potato growers who were retiring, and sales have involved production units which deal mainly with the processing industry," says FCC. In PEI, there were few land transactions. Renting has become a popular alternative to buying land.

But next door in Nova Scotia, values rose 3.3 per cent due to demand for land by dairy farmers. There have also been strong returns in the blueberry industry. Demand is coming from established farm operations, and from people who are moving to the area and setting up hobby farms.

Manitoba's values were up by 7.3 per cent thanks to an increase in cash crop prices. Quebec's values rose by 3.6 per cent, with the highest increases recorded in areas with the greatest grain crop potential. In Ontario, values increased just 1.2 per cent. However, urban sprawl outside the greenbelt and around Toronto is still pushing prices higher.