2025 Rental rates outpaced by cultivated farmland values yet again

If you’ve been watching land prices recently, you’re not alone. The latest FCC Farmland values report shows average farmland values rose another 9.3% last year - matching the pace seen in 2024. FCC has also been tracking Canadian farmland rental rates for years to better understand their relationship to farmland values. Rent to price ratios, however, did not climb at the same pace as farmland values. Canada’s rent to price (RP) ratio has steadily compressed from 2.70% in 2020 to 2.50% in 2024, and most recently, 2.35% in 2025.

For many farm businesses, renting land is a practical way to expand without the long-term financial commitment of buying. Still, lease terms - length, inclusions and renewal provisions - shape what tenants will pay. Because many agreements are fixed, rental rates often lag land values and adjust gradually. Ultimately, rents are limited by farm economics: tenants must cover costs and earn a return amid weak commodity prices and elevated input costs.

Rent to price ratio analysis

While there are different types of rental agreements used in the agriculture sector, this analysis focuses on cash rental agreements, which are measured as follows:

In 2025, Canada’s average rent to price (RP) ratio was 2.35% (Table 1). Across most provinces, the ratio remains within a relatively narrow 2% to 3% range, with the maximum and minimum values extending beyond this band, reflecting more outlying provincial observations. No rates are published for British Columbia as data in multiple regions of that province were deemed insufficient to provide an accurate average RP ratio. Rates are also not published for Newfoundland and Labrador or the Territories due to insufficient province-wide data.

Table 1: 2025 Rent to price ratio by province, with minimum and maximum range by province, including 2024 Rent to price ratio

Source: FCC calculations

Provincial Perspectives

The Prairies recorded the strongest gains in farmland values nationally; however, RP in Alberta, Saskatchewan and Manitoba declined, as rental rates did not increase at the same rate as rising land values. In Ontario and Quebec, average farmland value growth was modest in 2025, and RP ratios remained essentially unchanged relative to the previous year. RP ratios in the Maritimes also softened.

Cashflow advantage of renting over purchasing farmland has stabilized

Renting remains an integral option for operations looking to expand their land base. To compare any cash flow advantages of cash rental agreements versus purchasing land, we subtract the costs of land rental from new land purchase costs, assuming a 25% downpayment and a 25-year amortization (Figures 1, 2, and 3). Based on the province-wide RP ratio, the cash flow benefits of renting versus buying can vary significantly across different regions.

As the 2025 RP ratio in the Prairies declined, the cash flow advantage of renting land was nearly unchanged this year compared to purchasing for Saskatchewan and Manitoba. Alberta grew by $5 per acre, the most in Canada. Farmland purchase costs were helped by lower interest rates balancing out higher farmland values (Figure 1). Since 2021, Alberta's rent advantage increased by $87 per acre, Saskatchewan's by $55 per acre, and Manitoba's by $92 per acre.

Figure 1: Per acre difference in profitability for renting vs newly purchased land in the Prairies

Source: Statistics Canada, FCC

Ontario and Quebec producers have also experienced better cash flow with rental agreements than purchasing land although in 2025 that advantage decreased slightly. Between 2021 and 2025, Ontario's rent advantage over purchasing increased by $442 per acre, and Quebec's by $255 per acre (Figure 2).

Figure 2: Per acre difference in profitability for renting vs newly purchased land in Ontario and Quebec

Source: Statistics Canada, FCC

Atlantic producers are like the rest of the country as they have experienced improved cash flow from rental agreements compared to land purchases (Figure 3). From 2021 to 2025, New Brunswick's rent advantage rose by $105 per acre, while Nova Scotia's increased by $72 per acre. Prince Edward Island is an interesting case. Back in 2021, PEI producers experienced better cash flow from purchasing land over renting (the negative bar below) - the only province/year that we find in our data that this is the case. However, since then, the situation has reversed with trends mirroring the rest of the country. The RP ratio in PEI has dropped the most in Canada over the last 5 years due to rental market adjustments, which has improved the cash flow advantage for renting by $144 per acre.

Figure 3: Per acre difference in profitability for renting vs newly purchased land in Atlantic Canada

Source: Statistics Canada, FCC

Farmland values rose sharply in 2021 and 2022, creating a wider gap between purchase and rental prices. In the past three years, this trend leveled off, with some provinces seeing reduced rental cashflow benefits. Lower interest rates have helped decrease annual payments for newly purchased ground, even as cultivated farmland values increased in 2025.

Rent in dollars per acre is growing slower than cultivated farmland values

As noted above, the RP ratio decreased this year for most provinces and for Canada as a whole. This does not indicate that rent in dollars per acre necessarily increased or decreased; rather, it demonstrates that changes in rental rates were surpassed by the rise in farmland prices. To better understand the growth trends of each variable, it is useful to examine their respective $ per acre annual rates of change.

We anticipate that, because of the multi-year nature of rental agreements, rent growth will generally lag increases in cultivated farmland values which we see in Figure 4 for Canada on average. Notably, in 2022, rental price increases outpaced cultivated farmland values. This can happen in the short term when there is immediate demand for farmland due to strong margins and with a fixed supply of land for sale, the growth was felt most in rental markets. The other year that stands out is 2025 where $ per acre rent growth was zero, despite continued robust growth in cultivated farmland values. In an environment with tighter margins, producers may have chosen to strategically purchase land suited to their operations, while exercising greater caution with rental agreements.

Figure 4: Cultivated land values have been increasing at faster rate than rental rates since 2023

Source: Statistics Canada, FCC

Bottom line

The decision to rent or purchase farmland is influenced by multiple considerations, including the comparative cash flow benefits commonly linked to leasing and the asset appreciation evidenced by the significant increase in farmland values across the country. While the cash flow advantages of renting have remained stable over the past three years, potential changes may arise from 2026 onward. Producers are advised to continually assess their options for expansion, considering their individual financial circumstances and carefully weighing short-term profitability against long-term asset growth.

Article by: Megan Mailloux, Senior Analyst, Valuations & Justin Shepherd, Senior Economist, Economics

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