Historic farmland values
Derek Shevkenek - Oct 31, 2022
Saskatchewan farmland values have increased strongly over recent years. However, how do todays' values compare to the past 30 years?
This is an important question for farmers to ask, as some consider expanding their operations, while others consider selling.
Below is a chart I created using Farm Credit Canada (FCC) data. The green line is the FCC data as-is. They do not adjust for inflation. You can see that compared to 1984, $1,000 in farmland value would be worth about $2,500 at the end of 2014. That's a 150% increase. That works out to a 3.1% average increase in value per year.
However, the purple line takes into account the effect of inflation. And in reality, compared to 1984, farmland values have only recently recovered the value it lost over most of the past 30 years. And most of that time farmland had lost 50% or more of its 1984 value. $1,000 in farmland in 1984 is actually worth about $1,200 in 2014 after inflation. Doing the math, over the past 30 years the value of farmland has increased 0.6% per year.
Whether it be farmland values, retirement portfolio values or financial projections - if the effect of inflaiton is not taken into account over medium or long term timeframes, the distortion of reality becomes significant.
For help making sense of your situation in this regard, you are welcome to call our office.