Farmland values hold steady at 9.3%, but regional cracks and tighter margins signal caution ahead

Farmland values in Canada held steady in 2025, but the headline number masks a more complex and uneven market. Farm Credit Canada’s latest report, published March 24, shows a national average increase of 9.3 per cent, the same as last year, but regional dynamics and economic pressures are beginning to reshape buyer behaviour. To dive in to what's behind the growth in farmland value, Shaun Haney speaks with JP Gervais, executive vice president and chief economist at Farm Credit Canada, about what’s behind the numbers. While the national average appears stable, Gervais cautions that “there is no single Canadian farmland market,” highlighting that five provinces saw faster growth than last year, while five slowed, and British Columbia posted a slight decline. The Prairies continue to lead, with Manitoba and Alberta showing accelerated gains and strong transaction activity in some regions. In contrast, Ontario and Quebec recorded smaller increases, with buyers becoming more selective as values approach record highs. Gervais explains that these averages are weighted by acreage—meaning Saskatchewan alone accounts for roughly 40 per cent of the national calculation—underscoring how heavily Prairie trends influence the overall number. Across the country, a common thread remains: valuations are high relative to farm income. “Short term valuations are extremely high right now for farmland all across the country,” Gervais says, pointing to tightening margins driven by elevated input costs and uncertain commodity prices. Despite pressure on profitability and debt servicing, limited land supply and long-term confidence in agriculture continue to support prices. However, Gervais expects cautious buying behaviour to persist into 2026, as producers weigh expansion against financial risk in an increasingly tight margin environment. 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Joining us right now to break it down and provide some analysis is JP Gervais. He's executive vice president of the Ag Lending Portfolio at Farm Credit Canada. How are we doing today, JP? I'm doing all right. What about you, Shaun? Hey, man. Pretty good. Pretty good. So I guess the question is we've got a national average of 9.3% increase across the country. That's exactly the same as 2024. How do you break this down? What sticks out to you? Are things okay, or is there other reasons for caution and concern? Well, things are certainly okay. Doesn't mean that there are no reasons for caution. We can talk about that a little bit. I think the one thing to point out first is that the 9.3% increase in the average farmland value in Canada being identical in 25 that it was to what it was in 2024 actually is a bit misleading because if you, you know, and I think that's the, really, the, the, the value of the report is we're able to dive into the dynamics of each province and each region within a province. And so if you look at, you know, provinces in Canada, five provinces actually recorded an increase in 25 that was higher than what it was in 2024. Flip side of that, five provinces actually recorded an increase in or a lower rate of increase in 25 than what it was in 24. One of the provinces, British Columbia, recorded actually a small decline. So I would say that, you know, there is no single Canadian farmland market. So that's one takeaway, and that's not a surprise. We all know that farmland is quite local, but I think more so now this year than in previous years. And if you look at areas of strength, well, you know, look at the prairies. We got three strong increases in the prairies. Manitoba and Alberta actually recorded two of the provinces that recorded an acceleration of the rate of increase. So I think it speaks to a positive outlook over the long term, not discounting some of the big challenges we have. Short term valuations are extremely high right now for farmland all across the country. I think that's the one common theme. But overall I think it speaks to a resilient and some strength in the farmland market for 2025. Can you explain a little bit the methodology of how you put the average together? Is it evenly weighted across all the provinces? You just do an average of what each province was or do you look at a percentage of acreage basis, how exactly you put that number together? Yeah, so good question. So it's, I think it's important as well to spend a little bit of time on this. So first off, the average or averages that we report are weighted by the areas, right. So the province of Saskatchewan, roughly accounting for 40% of farm acres in Canada, would account for roughly 40% of the weight in the national average. And we do the same thing within a province. So different regions of the province will have different weights again based on how much of the farm area they represent within a province or within a country within a region. So everything is weighted by the share of acres in any given area. So that's one thing. Second thing is that to be able to, I think the value of the report is, provides insights as to not just the percent increases, but as well as the range of values that exist within the region. And to do this, to report on a year to year basis and have a consistent, consistent view of the farmland market, we make sure that we have what we call benchmark properties, benchmark farmland areas in the country. And we keep those benchmarks constant throughout the years. And so that gives us kind of that consistency year to year and on top of it. So we appraise these as part of our normal operations and, and then report, you know, what the outcome is. And to make sure that those benchmark areas are representative of the trends. We also look at the pure data sets that we collect throughout the year. We don't think that we have 100 of all the transactions in Canada. That would be too big of a, of a, of an endeavour. But we do have quite a bit of the transactions in the data set. So all in all the things, the benchmark properties, overall transactions, I do think that it represents a very, very significant share of the farmland market in Canada. So these aren't just transactions that FCC has been a part of, these are outside of FCC's ecosystem as well. Correct. So when we Finance a transaction we would appraise the asset and to appraise the asset we would require transactions that are not necessarily been financed by fcc. So that accounts for a lot of what is going on outside of the FCC ecosystem. For sure. Yeah. What's going on outside of the prairies? You mentioned the prairies are strong. What about outside the prairies? I think, you know, if you look at Central Canada, Quebec and Ontario, smaller rate of increase still positive. But buyers are very, very cautious. I think it's, we've had a quite a bit of activity in the prairies, certainly in Manitoba, parts of Alberta. But if you look at central Canada, a lot more cautious caution and I do think that buyers are more selective, right. Looking at certainly the top end of the market a little bit more closer let's say than the lower end of the market. And maybe that's just what how buyers felt there was value there to achieve. But overall valuations in Central Canada are very high. You know, they are at, at or near the historical record in each of the provinces. But certainly in central Canada when you're looking at what you can gross out of an acre of farmland and relative to an accounting for inputs and accounting for payments of the land, we're talking about valuations that are quite stretched at an all time high. So that perhaps explains why, and certainly explains why we have those valuations that have not gone up as fast as we would have had in previous years. Having said that, the rate of increase that we have in these provinces still speak to a healthy market. It's just that there is just no room for those valuations or less room for those valuations to go any higher. One of the other land markets in Canada that is very high priced is and did not have a good first six months of 2025 as British Columbia it was flat to the prior period. What's going on in British Columbia when you look at the 2025 in totality? Yeah, I mean some areas actually reported a decline in the value or the average value of farmland and that speaks to I think some of the production challenges that the province experienced in some very specific sectors over like certainly in the fruit sector. But you know, even if that's not accounted for specifically in the report, I mean the spillover effects overall in the market certainly as, as, as is part of the storey there in British Columbia that has experienced quite a few production challenges over the last few years and, and the market in B.C. is, is so diverse just to make up the mix of agricultural activities in the province. Explain as well, kind of that, that we're going to get some variability in the, in the values because it's not a homogeneous type of market, certainly less homogeneous than say a province like in the prairies, Saskatchewan, Alberta. So bottom line is more diversity in the values, production challenges coupled with some pressures on revenues in B.C. are really actually what are driving some of the market dynamics in bc. You know, as you do too jp you travel across the country, give a lot of speeches, interact with not only a lot of different lenders inside of your house, but also farmers that are borrowing that money. And there is a lot eyes watching this, this land market given some of the financial challenges in the cropping sector. So as a, you know, as a banker, how do you evaluate what's going on here at a time where you know, some people are saying oh we're going to see, we're going to see a big pullback here, it's inevitable because of farmers ability to service that debt. How do you evaluate what's going on right now? Well, I mean there's no doubt first off the ability to service the debt is challenged. I mean you look at input costs and then prior to the conflict and we got some breaking news this morning that who knows exactly how you know the next few days are going to evolve. But the bottom line is that you know, inputs were high to begin with and we were expecting some pressures on margins to begin with prior to any of the Middle east conflict that we've actually witnessed over the last few days. So the bottom line is that we, we know profits are tight and we know that the ability to service debt is pressured because of that profitability. Commodity prices have somewhat rebounded in for a few commodities but it's still very, very, very tight. And so that's the short term picture. Long term I am still very positive about the outlook for Canadian Ag, but I think we're at the point where, and folks might say, well jp you've said this in the past. Absolutely, I've said that I would have expected the rate of increase of farmland values to actually slow down bit more and a little bit sooner than they have. Bottom line is that those valuations are really high at a time where profitability is challenged. So I would expect that there is going to be a lot more cautious on the part of buyers. Fact of the matter is that land available in the market is still tight and that supply is tight. And when producers have a business plan that is geared towards expansion growth, they're going to see some opportunities in the marketplace. Despite the fact that valuations are super high and I think that still drives some of the market right now, or what we've seen in 2025. I do expect that cautious purchasing behaviour that we have in 25. I do think that this is going to extend into 26. We're going to see a lot more cautious buyers there and that should be perhaps reflected on farmland values. Having said that, I think the underlying positive trend for the industry, the world needs more of us. I do think that it's still very much present for the most part. I think farm operations see this as well in terms of, like, what they think of the future. But there is no doubt that there's going to be a really difficult 26 to navigate when it comes to profitability. Do you have any additional adjacent data to this? We're talking about the farmland values. What about number of transactions in 25 or days on the market? Do you have any of those kinds of insights that we can, we can combine with these, these land values that you're, you're, you're talking about here today? The short answer is no, we don't have. You know, wish we could report that we had X fewer transactions in any area or any province and so forth. The bottom line is that we can never be 100% sure that we are. We would be collecting all of the data. We collect a large amount of data now. There is no way for us to be 100% positive about the. That fact, fact that, oh, we got all the transactions that occur in the marketplace and so at arm's length and so we can make statement. I mean, I do know that, you know, because the numbers are so different year to year, that in Central Canada the market has been a lot less active. Buyers have been very cautious. You know, if you look at, you know, in Manitoba, we got more transactions than last year or recorded more transactions than last year. So which at the very minimum, which suggests that, you know, the market in Manitoba has been very active. Now, peace country in Alberta, like, there are some different areas like this that has been a lot of activity, but overall, can't really say for sure that the data would tell us that there are fewer or more transactions overall. Is this, is this all farmland? Like, does it include pasture land, for example, or is it just cropping land? Pasture lands available in the report, it's those separate from what we cultivated land. So you'll have a section on crops or pasture land that would, would report the same kind of data, kind of average increase, minimum maximum of the transactions that we've seen in the, in the data set and then build that range of values for people based on different regions. So you would have that, that, that, that information in the report. Now, bottom line is when it comes to pasture land that we haven't seen the same rate of increase with pasture land that we have had over the last three, four years dating back to 2022, I think it speaks that cattle producers have a long term memory when it comes to some of the, the challenges that they've seen prior to this run up in cattle prices that we've all recorded experience and are aware of. But yeah, pasture land have gone up, but less so than what all the other land has. How you know, you look at the last 24 months, the bank of Canada has been, has been in a period of rate reduction. We do have some interest rate risk in the market given what's happening in I in Iran here this last month. But how much of an impact has the bank of Canada lowering rates had on keeping land values increasing at that same as average for 24? It does have an impact. I don't think though that this is the main driver. I really don't. I think it helps, you know, it helps on the profitability side, it helps on the buyer side. It helps in a number of different ways. And yes, you know, if you look at the risk of seeing interest rates now slightly go up, I think that risk is a little higher now than what it was at the beginning of 2026. You know, where we thought that there would be actually maybe a cut in interest rate because of the Canadian economy slowing down and so forth. Now we still are in an environment where the Canadian economy is kind of just wait and see depending on how the outcome of the trade negotiations are going to look like for, based on a number of these different things. But you have this threat of inflation because of a conflict that raises the cost of some very basic commodities, energy, fertiliser and so forth. So I do think that interest rates perhaps will have less of an impact in the marketplace going forward than maybe we would have anticipated. But it plays a role definitely. Is it the main driver of what we're seeing in terms of purchasing behaviours and decisions? I don't think that, I don't think interest rates are as you look ahead to what we're going to see in 2026. And of course we're almost through Q1 already. As an economist, what are you watching and paying attention to? Is it kind of the same old things or are there some different metrics that you're watching pertaining to this land market. It's the same old things with maybe more of an emphasis on farm revenues. I mean net income would be the one thing. I mean inputs are so high and like I said, I mean we can't expect producers to, to, to, to be able to navigate this and be profitable in any type of normal situation with what we have in terms of dynamics. And on top of this, you high, you know, you put on some high uncertainty when it comes to the cost of inputs. You know, from a commodity standpoint, I do think that it will, needs, will need something in the marketplace to absorb some of the, the, the stocks that we have or that are projected to be available because supply is abundant. So that's what I'm going to watch for, hoping for another good year when it comes to yields so that we can actually, you know, have a little bit of a boost on revenues that would help a tremendous deal. But of course way too early to actually have any type of assessment there. So would be the same thing that I would, I would, I would, I would monitor on a day, on a, on a normal basis. But really, I think farm income trends are really critical this year because we're stretching valuations for farmland and we have some input costs that are not, not matching the pace of what we've seen with martyr markets. Let's just going to ask you like, are we, is farm income detached from some of these values? Because you look, you look at 24 yields, not super fantastic. We were disappointed. 25 yield surprises. Some people were yielded into some profitability. But a lot of producers would say on the prairies, not a great year. Why is land value still rising in the face of a couple years or multiple years of poor profitability? Well, I think it is decoupling to some extent in the sense that those valuations. Right. Think of price per acre relative to revenue per acre. I think that valuation is no doubt trending up. I mean the multiple that buyers are assigned in on the ability to derive income from an acre of farmland has actually went up and now is stretching as I said, historical record in a lot of different provinces. And, and you can account for interest rates. And of course we've overall, on the very long term basis we've seen interest rates come down. So it's, it's, yes, you know, it's, it's lately it's, it's stopped now. But I mean the trend has been, has been coming down and yes, it has helped kind of boost some of those valuations. But the bottom line is that? Yeah, I think it it does speak to different ways to value the asset going forward. But at some point those valuations are reaching a point where you would expect those valuations not to have a lot more room to go up. And I think that's going to be reflected in a very cautious outlook for 2026, given the dynamics with regards to profitability. Great stuff JP. Really appreciate you joining us here today. Always. This is very insightful and important reporting to have out in the marketplace. People understand what is happening with such an important asset like farmland values. Thanks so much for joining us. Yeah, thanks so much Shaun for the opportunity for the latest ag news, agronomic advice and more. Cheque out RealAgriculture.com and RealAg Radio.