In 2022, the cost of farmland in Canada experienced its most significant increase since 2014, rising by almost 13%, as per a recent report by Farm Credit Canada, a government-owned agricultural lender. While it was anticipated that higher interest rates and expensive fertilizer costs would dampen land prices and sales, the report highlights that demand for farmland remained strong, leading to a bullish market.

According to J.P. Gervais, the chief economist at Farm Credit Canada, the complete impact of higher interest rates on farmland demand has not yet been observed, with tight supplies being a significant driver of the gains. In contrast to the country’s housing market, which slowed down in 2022 due to the central bank’s interest rate hikes, the farmland market in Ontario witnessed the largest gains, with prices soaring by 19% on account of robust demand from large farm operations and investors.

Looking ahead to 2023, higher borrowing and fertilizer costs are expected to put pressure on sales, although prices are likely to continue to increase, albeit at a slower pace, as per Gervais. He also remarked that the strong demand for farmland and limited supply would aid in maintaining a relatively stable market.