Farmland rental agreements shifting to cash rents
We’ve heard lots of talk about the farmland rental market, but the most recent Census of Agriculture points to what really changed between 2011 and 2016, and what remained the same in the market. While there’s been a move to cash rents as the preferred type of rental agreement, overall ownership of Canadian agricultural land remains relatively stable.
More rented farmland acres, but little change as a % of total acres
The area devoted to ag land in Canada decreased from 160.2 million acres to 158.7 million acres between 2011 and 2016. As the total number of ag acres fell in Canada, the number of rented acres increased. In 2011, 36.8 million acres, or 23% of the year’s total farmland, had been rented or leased. Just over 40.1 million acres (or one-quarter of total ag land) was farmed on rented or leased land in 2016. That’s a 2% increase in rented land as a proportion of all ag land in Canada between 2011 and 2016, and a 9% increase in the period’s rented farmland acres.
That means in 2016, nearly 100 million acres, or 63% of Canada’s total agriculture land, was farmed by the land owners themselves. Government leases added another 21 million acres, or 13% of Canada’s farmland, at that time.
Rental structures trending towards cash rent
If the ownership of land farmed in Canada didn’t change that much in the most recent Census period, the type of rental agreement favoured by producers did.
Between 2011 and 2016, land owners and tenants shifted towards cash rental agreements. As a proportion of all farmland rental agreements, they grew faster than other agreement types. The proportion of land being managed by cash rent increased 10% (to 34 million acres) between 2011 and 2016. Not surprisingly, total cash rent for Canadian producers increased near 40% over that time period. 2016’s cash rents accounted for over 4% of total farm expenses, an amount that increased 0.7 percentage points in the Census period as a proportion of total expenses.
Farmland managed by crop share agreements also increased, but not to the same extent. Over the Census period, the number of acres managed by this type of agreement expanded 3%, covering 4.5 million acres. Despite the increase in acres, total shared rent expenses declined 13% (and, as a proportion of total farm expenses accounted for only 0.5%).
Acreage covered by other, less traditional rental agreements decreased 6% (to 1.5 million acres) in the same period.
Do you know when the time is right to buy or rent farmland? Understanding your costs of production, cash payments and likely revenue streams is a great place to start. Understanding interest rates and your liquidity position is also essential.
Craig joined FCC in 2009 as an Agricultural Economist, specializing in monitoring and analyzing the macroeconomic environment, modelling industry health, and providing industry risk analysis. Prior to FCC, he worked in the livestock branch of the Saskatchewan Ministry of Agriculture. Craig holds a Master of Agricultural Economics degree from the University of Saskatchewan.