Joanne Paulson: Amid drought, war, interest rate hikes, Saskatchewan farmland values ​​are rising


That sounds like faith in the future to me, something we could all use a little right now.

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First there was this drought.

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Whether 2021 brought us the worst ever – at least in the larger area – in anyone’s memory is debatable, but damn it, it was among them. July 2021 was the hottest month ever recorded on Earth. Already. With almost no rain in these regions.

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Then there was, and still is, this war.

Using ridiculous and imaginary provocations as reasons (apologies, rather), Vladimir Putin’s Russia invaded Ukraine. (I wonder if that will put me on Putin’s sanctioned list? I would like that, I think.)

Also, there was and still is COVID-19.

Supply chain disruptions due to the pandemic still haunt us today. Its lingering effects, combined with fear and the direct impact of war, have rattled markets, fueled inflation and pushed up interest rates.

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And yet, farmland values ​​in Saskatchewan didn’t go down in the crazy first half of 2022. They went up.

Farmland prices rose an average of 8.4% to $2,384 per acre, year over year, the fourth highest increase in Canada and above the national average of 8.1 %. Prices are also up 14.9% on an annual basis.

For some, this may seem counter-intuitive. Farmers planted the most expensive crop in our province’s history, paying small fortunes for fertilizer, seed, fuel and other inputs, even as they wondered and worried: would the drought continue?

Yet as they faced ever-increasing mortgage interest rates, they were still obviously buying land. If you don’t have demand, you don’t have sales. If you don’t have sales, you don’t have an increase in value.

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Apparently, it takes more than drought, war, rising interest rates and spiraling inflation to discourage a Saskatchewan farmer.

Farm Credit Canada, where these numbers come from, will note that there are, of course, other factors at play.

As JP Gervais, chief economist of Farm Credit, told me, many of these land deals were in place before the Bank of Canada really started to raise interest rates, which helped. The supply of agricultural land is “quite limited”, he said. And like dad always told me, they don’t make any more.

Second, the same insecurity caused by the Russian invasion (and other global factors, such as weather-stricken agricultural countries) has driven up the prices of our crops. They are down somewhat from the start of this year, but generally remain well above the five-year averages.

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Canola, for example, cost $970 a tonne earlier this year and is expected to drop to $870 for this crop; but that remains well above the five-year average of $490.

Farm income drives purchases, and that includes land. This year, gross farm receipts will increase by more than 20%, Gervais said.

As the debate continues over the size of the 2022-2023 crop – the provincial Department of Agriculture and Statistics Canada disagree on the numbers – Gervais notes that it will still be a decent crop at a good price and a fairly high demand environment.

So farmers continue to buy land even though last year, for the most part, was a disaster. They are tough people accustomed to risk; and this generation of growers is farming in the most uncertain geopolitical time of their lives.

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While this will drive up crop prices, no one knows how long they will last. As we learned from Russia, almost anything can change in no time, including and perhaps especially the markets.

Despite living in a democracy with no imminent threat, our farmers still face uncertainties, such as carbon pricing and controlling fertilizer emissions, not to mention climate change.

Meanwhile, there are eight billion people who need to eat. Each of them. We cannot grow air or water, so this food growing business is unquestionably as important as it gets.

Farmers cultivate, of course, for personal reasons as well. They like it. Their families have always done it. They are attached to their land, to their animals, to their freedom as entrepreneurs.

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Still, it’s far from an easy life – about as risky as it gets. And they still buy the land, plant the food and feed the people. That sounds like faith in the future to me, something we could all use a little right now.

Joanne Paulson is a freelance writer and journalist from Saskatoon who has covered real estate on and off for over 25 years. Do you have a fascinating real estate story to share? Contact us at [email protected]

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