Saskatchewan farmers have always had their share of woes, and according to a recent report, now they can add stagnant property values to their list of worries.
The Spring 2006 Farmland Values report from federal financing provider Farm Credit Canada (FCC) shows farmland values in the province increased only 0.5 per cent from July 2005 to January 2006. Combined with 0.8 per cent in the first half of 2005, the year resulted in a 1.3-per-cent increase over 2004.
Nationally, the average value of Canadian farmland increased 1.5 per cent during the last six months of 2005, compared to a 1.6-per-cent increase in the first six months of 2005.
Tim Hammond, a Royal LePage real estate agent for Saskatchewan farmland and ranches who is based in Biggar, west of Saskatoon, predicts the worst is yet to come for his province.
"I know Farm Credit came out with a report that said things were basically stable, but I think their next report is going to show that farmland values have dropped five to 10 per cent," he says.
"I'm not sure if that's going to be across the board in Saskatchewan, but I have seen a significant drop in western Saskatchewan," says Hammond.
He says the economics of farming is the principal reason for poor farmland values. "Things are tougher and tougher. I have family that farms, so I'm pretty close to the production side of things."
He adds that despite the report's findings, he expects land values will start to decline. "Maybe they should've dropped two per cent last year and the year before that, and they didn't. But I can say with pretty good confidence that it's going to be at least a five-per-cent drop (next year). I've seen some areas as high as 15 (per cent)."
Hammond adds that although grain-producing land values have been more stable in the eastern sections of Saskatchewan, prices are typically lower there to begin with. "My average selling price is still over $400 an acre (in the west)," he says, "whereas in the eastern side it's maybe $300."
He also notes that selling farmland is becoming more difficult. "If it doesn't sell in two weeks, it'll be two years," he says. "Usually the neighbours will step forward pretty quickly if they're interested. If not, it's kind of hit and miss out in the open marketplace."
Comparatively, Alberta farmland values increased 3.2 per cent in the first half of 2005, and 2.8 per cent in the second half, says the FCC report.
Some farmland buyers in that province are coming from overseas.
Ben Van Dyk, a Dutch agent with Info Market Group GMAC Real Estate in Coaldale, Alta., says he and his company have moved more than 250 families from Europe to Canada, and averages about 10 to 15 families a year.
"There's still opportunity here versus the European Union," Van Dyk says.
"It's still fairly easy to keep farming compared to over there. Most of the farms there are small and expansion possibilities over here are quite a bit more."
He says rising land prices in the province are definitely a deterrent, but there are still attractive areas. "In the farm production areas like Bow Island, Taber, Vauxhall and Rolling Hills (southeastern Alberta between Lethbridge and Medicine Hat), there's still affordable farmland ... It has gone up some, but it's still affordable at the current interest rates."
Van Dyk notes European farmers seem to take the transition to Canada in stride. "Overall, it's a very successful move for just about all farm immigrants."
Any challenge they may face here, they have likely faced an equivalent back home. "Market forces take their toll there (in the European Union), too," he says, adding if it's not avian flu, it's swine pest or cattle disease.
The one challenge foreign grain farmers in Canada find difficult is the marketplace for their crops. In Europe, says Van Dyk, "you can ship to a co-op and they will take care of your product. But here, farmers have to get used to the idea that the (Canadian) Wheat Board might not sell their wheat. They might have to have it in a bin for two or three years before they get paid. And that's hard to accept - that you grow product, but you're not allowed to sell it."
|Ben Van Dyk|
Manitoba, a province in which farmland values are much like those in Saskatchewan with increases of only 0.2 per cent in the last half of 2005, also benefits from foreign farm immigrants.
Gabriele Peters, office manager at Star-7 International Inc., an immigration consulting firm in Winkler, Man., has helped hundreds of European families move to rural areas in the province. "There's more and more (interest) every year, it seems," Peters says.
"Economically, Germany isn't doing so well. There aren't many jobs available and the students are having a lot of difficulty finding placements."
She says the main challenge for the immigrant farmers is property size. "It's on a totally different scale here, and a lot of them (immigrants) are more like hobby farmers than big-scale farmers."
But even that is a manageable obstacle, in her experience. Peters couldn't recall a single family moving back to their homeland after not having been able to make a go at Canadian farming.
The FCC report also showed that the largest increase in farmland values was in British Columbia, which recorded 10-per-cent growth. Ontario had second-largest increase at 3.8 per cent, while Alberta came in at fourth - behind Newfoundland - with an increase of 2.8 per cent. Rising land prices in Alberta were particularly focused on the Lethbridge-Edmonton urban corridor, the report said, while a strong energy sector also continues to affect the demand for land.
Royal LePage's Hammond believes there is still potential for Saskatchewan's would-be farm sellers.
"Two-thirds of the deals that I am doing are investors that are buying the land. They just turn around and rent it back - either to the guy that sold it to them, or to a neighbour," says Hammond. "Values are dropping, and they (investors) are seeing it as an opportunity.
"They're long-term investors, and they know over the long term that Saskatchewan is a good buy. Things might drop a little bit more next year, but over the long haul there's potential for land values to do really well in Saskatchewan."
He says having a tenant that pays a fair lease rate is the key, since "if two-thirds of the buyers are investors, they're looking at it from an investment standpoint as opposed to agronomic."
He warns that potential investors must have reasonable expectations. Ten-per-cent rates of return are extremely difficult to come by, he notes, but if expectations are in the five- to six-per-cent range, "then we can usually find them something."
So for Saskatchewan farmers facing uncertain property values, are foreign farmers possible saviours?
Not likely, says Hammond. "We've just basically got straight grain producers here. For the Dutch, a grain farm is 320 acres. To go commercial in Saskatchewan, you need 4,000 acres. So it's too big of a transition.
"But if you're a hog producer in Denmark, it's very easy to be a hog producer in Alberta.
"What I see," he adds, "is that European market going to Ontario, or B.C. or Alberta, and what it does is displaces those farmers, and they come to Saskatchewan. So we're kind of at the bottom of the filter. Everything kind of gets shuffled down to us."
(Nicole Strandlund can be reached at email@example.com)