How rising cost of Quebec farmland creates growth barrier for province's food producers

The average value of farmland in Quebec shot up by 10 per cent in 2021, and while this has been the trend for nearly four decades, it's worrisome news for those looking to start or expand operations.

That's according to Brenda O'Farrell, executive director of the Quebec Farmers' Association, who said the particularly steep land value increase during the pandemic is creating yet another obstacle for the province's food producers.

"As the value of land goes up, the need to increase the revenue from it goes along with it," she said, explaining that there is little point in investing in land if a farmer can't generate enough revenue to justify the cost.

Farm Credit Canada (FCC) released a report earlier this week that says Quebec's farmland value has been climbing for 36 years with average values going up by 7.3 per cent in 2020 and 6.4 per cent in 2019.

"For young farmers, it makes the hurdle to get into farming that much higher, because there are very few businesses that have such a high investment requirement in terms of land and machinery," said O'Farrell.

"In terms of established operations, it comes down to: what is the return on this land? Land can be valued at a high amount, but what kind of revenue can you make on that land?"

If land values are higher than the rate of return, there will be no incentive to start a new farm or expand operations given the cost of doing so, she said.

As it is, the price of food is going up at supermarkets, but farmers aren't seeing their own revenues rise, she said. On top of that, she added, a farmer's yearly revenue is precarious, often affected by oil prices, global conflicts and weather.

This year, at least, the FCC report says weather challenges were relatively limited in Quebec when compared to other provinces.

Montreal's South Shore has most expensive farmland

Regionally, the largest in 2021 was in the Chaudière-Appalaches at 15 per cent.

The most expensive farmland is in the Montérégie region, just south of Montreal, where the average per-hectare cost in 2021 was roughly $64,000. That's up 13.9 per cent from the year before.

"Buyers included cash crop producers, poultry, dairy, hog and field vegetable producers," states the report.

By comparison, Abitibi-Témiscamingue has the cheapest land, selling for about $3,700 per hectare.

Lyne Michaud, an FCC senior analyst, said factors such as location, what is commonly produced in a region and a land's capacity to perform can impact value.

For example, favourable weather conditions were conducive to fodder production in the Lower Saint-Lawrence, where mainly dairy producers and cattle breeders are located, all of whom need feed for their livestock, she said.

Michaud said growth is also driven by continued demand for farmland, high commodity prices and historically low interest rates. These factors, combined with the limited supply of agricultural land available on the market, cause rates to go up.

Quebec's farmland has 5th highest value increase

FCC's Farmland Values Report highlights some significant increases in average land values in several provinces. 

The highest recorded increases were in Ontario, where values rose by 22.2 per cent and in British Columbia, where values went up 18.1 per cent.

Prince Edward Island came in third with farmland values going up by 15.2 per cent, and Nova Scotia saw an increase of 12.3 per cent.

Quebec had the fifth highest land value increase, whereas Alberta's land went up by only 3.6 per cent, according to FCC.

O'Farrell said the pandemic may have also contributed to the limited supply of land as people with deep pockets working remotely have moved out of cities in some cases, buying large tracts they won't farm.

This is most evident closer to urban centres, and may be a part of the reason farmland is so expensive in the Montérégie, she said.

And while land may be cheaper in Abitibi-Témiscamingue, O'Farrell noted, a farmer in Outaouais can't exactly expand operations on a plot 400 kilometres away.

"It might be part of your business plan to expand, but the availability of land is very, very tight," said O'Farrell.

She said the rising cost of land is one of many things worrying farmers as they look to a future that is so difficult to plan for and these obstacles make it even harder to encourage younger generations to take up the trade.

"The risk and how you manage your risk becomes a much more complex equation," said O'Farrell.

"In that sense, it's not the farmland values per se that is worrying, it's the whole equation that farmers are now facing."