Prices for Saskatchewan farmland are soaring in step with the rise of grain prices, but land inventory is becoming tight as investors compete for prime acreages.
"Rising values are just not enough to entice farmers to sell [due to high crop prices]," according to a survey by Re/Max Real Estate. Even farmers ready for retirement are reluctant to sell today, the report found.
In the past year average prices for an acre of farmland in northern Saskatchewan have risen from $650 to $1,200 per acre to $800 to $1,100 per acre, according to Re/Max, while prime farms in southern Saskatchewan are seeing prices listed as high as $2,000 per acre.
"Prices have experienced double-digit increases of from 20 per cent to 25 per cent," Re/Max found in its Farm Edition 2012 report. Most of the sales are for large blocks of from 10 to 20 quarters (1,600-to-3,200-acre) parcels, but smaller farms are also selling.
Fuelling the farmland price pressure are large real estate investment syndicates, such as Calgary's Prairie Merchant, controlled by former Dragons' Den panellist Brett Wilson.
"I see Saskatchewan farmland as a long-term hold - with a limited supply of good, arable farmland and [an] ever-increasing demand for food on a global basis," Wilson said.
Prairie Merchant is not alone in seeing the potential in Prairie farmland. Other investment firms that are involved in the purchase of Saskatchewan farms include: Calgary-based Agcapita, which is holding about 60,000 acres of Saskatchewan farms; Assiniboia Farmland; Bonnefield Financials Inc.; and Hancock Agricultural Investment Group, a division of Manulife Financial Canada. Most of these firms buy farmland and then lease to farmers, with a future sale as the exit strategy.
Re/Max notes that severe drought conditions in the U.S. Midwest should help to keep crop - and land prices - high in Saskatchewan: "[Farmland] prices could set a new record over the next several months."
from Western Investor December 2012
