Has farmland values reached their peak?

As more investors flirt with the idea of putting their cash into farms, some are arguing that the values have reached their peak.

Acquiring good farmland has been as difficult as winning the lottery in recent years with intense competition from investment groups and individuals.

But after years of rising values, some experts are arguing that they have reached their peak.

“High commodity prices and low interest rates, that’s what’s driven farm values,” says Realtor Robert Alexander from R. W. Alexander Real Estate Brokerage in Ontario. “But commodity prices have backed off somewhat; interest rates, I think, are going to hang in there for another year or so.

Farm real estate values rose by 15.1 per cent last year, according to Statistics Canada.

“Speaking to the fact that prices seem to have generally plateaued a bit, we’ve seen sharp increases and now it seems to have leveled off,” adds Alexander.

Stephen Boyd, head of the Canadian Agricultural Financial Statistics section at Statistics Canada, tells CREW that it was those high commodity prices and low interest rates that were previously driving an increase in farmland values – and sales, Alexander adds – over the last four or five years. Farmland assets totalled $488.4 million during the 2013 calendar year, a 12.2 per cent rise over the year-ago period.

The value of farm real estate, meanwhile, accounted for $352.01 billion of those assets in 2013. “They’re not making any more land,” Alexander says.

At the same time last year, farm real estate was valued at $305.74 billion, while total assets were valued at $435.18 billion.

Still, Boyd adds that while crop prices have dipped by about 20 per cent in the last year, livestock prices have increased. “It will be interesting to see if livestock will have as much of an impact [on farm real estate values] as crop has on values,” he says.

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