OTTAWA, Canada, October 18, 2012 — Bonnefield Financial has just released a new research paper, The Economic Value of Farmland, that examines the rising costs of Canadian farmland from the perspective of Canadian farmers. The study shows that farmland prices have been driven by improving farm economics and that even though farmland prices have increased significantly in recent years, increased crop revenues have more than kept pace. The paper concludes that farmland in Eastern Canada is generally just as affordable for farmers as it was in the late 1980s and in Saskatchewan, farmland is generally more affordable for farmers than it was 20 years ago.
The research is modeled on analysis originally undertaken by Professor Joe Horner of the University of Missouri and has been adapted and extended to the Canadian farmland context by Bonnefield.
“There’s been a lot of talk about investors driving up farmland values but this research shows that’s simply not the case,” said Tom Eisenhauer Bonnefield’s president who with colleague, Marcus Mitchell, authored the report. “Our research shows that not only are the overwhelming majority of farmland transactions undertaken by farmers, farmers determine the price they are willing to pay for land based on the revenue they expect to generate from it.”
The report examines per-acre revenue and gross margins for several different crops and compares these figures to estimated typical mortgage payments. While the rising cost of farmland means that mortgage payments have been increasing in absolute dollars, the proportion of total revenue required to meet these payments has actually been steady, and in some cases has even declined, over much of the last 20 years.