Why crop receipts matter to Canadian farmland values

The 2016 FCC Farmland Values report indicates Canadian farmland has continued to increase in value.  I’ll look at Saskatchewan and Ontario values to illustrate the different relationship crop receipts have with farmland value growth rates across the country. Understanding the link between crop receipts and land values tells us how some values have strengthened – and why their strength may also ebb. 

Canadian crop receipts likely grew in 2016

We expect crop receipts at the national level climbed 2% in 2016. Pushing them up were both rising yields and production growth resulting in the second-largest crop in history (91.7 million metric tons). As a result, 2017’s crop receipts should also grow slightly.

Increasing global supplies of three major crops (corn, soybeans and wheat) pressured commodity prices in 2016. Buffered by the low loonie however, producers here didn’t face the price drops U.S. producers saw. Corn, wheat and canola were on average 10% lower than the five-year average, and Ontario soybean prices were about the same as that average.

Saskatchewan and Ontario differ

But the relationship between crop receipts and farmland values isn’t static.

Saskatchewan’s farmland values have generally tracked crop receipts over the last ten years (Figure 1). On a per acre basis, the average price of farmland outgrew crop receipts in  2016 when weather impacted the quality and harvest of several crops in western Canada. AAFC estimates Saskatchewan crop receipts declined 5% in 2016.

Ontario offers a different picture (Figure 2). Crop receipts peaked in 2013, and have remained relatively stable since then. Farmland values continued to climb in response to different pressures. 

Crop receipts and farmland values: monitor their movements

Crop receipts aren’t the only driver of farmland values. That relationship also evolves over time, as it has recently given a strong demand outlook for Canadian agricultural commodities and the environment of low interest rates. But crop receipts are key.

Two ways to strengthen crop receipts

  1. Productivity growth can help absorb potential price pressures from growing global supplies.
  2. Being efficient should provide the flexibility to face different market conditions in the future. 

For more information about the trends in farmland values for your region, watch our video or download the full report. And don’t forget to sign up for the FCC webinar on April 18, where you can ask our Chief Agricultural Economist JP Gervais questions live.

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