Albertans looking east to Saskatchewan for farmland

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The purchase price on most of the land is in the range of $900 to $1,000 an acre. That’s a bargain compared to what most comparable land is worth in Alberta.

Here in Saskatchewan, here’s a lot of talk about a big land deal around Conquest, just west of Outlook. In the last couple of months, approximately 85 parcels of land have been purchased by Van Raay Land Inc. and Van Raay Land Inc. et al. The total is around 10,500 acres for a price tag of roughly $9.5 million.

Cor Van Raay Farms Ltd. is one of the Alberta’s largest cattle feeders.

No word on the plan behind the sizable Saskatchewan purchase. Some wonder if the land will be used as a base to produce grain and forage for a large cattle feedlot. Others wonder if the land is just a long-term investment.

Since Saskatchewan’s farmland ownership laws changed in 2003, there’s been an influx of investors from outside the province. Saskatchewan land prices remain the lowest in North America, leading investors to conclude that our prices have a great likelihood of appreciating.

For 2008 (the last year available), Statistics Canada pegged the average price of Saskatchewan farmland at $435 an acre. This includes both grain land and grazing land in all parts of the province. By comparison, the number for Alberta was $1,392 an acre, Manitoba was $772 and Ontario led the nation with an average of $4,593.

Relative bargain

The land purchased by Van Raay is generally good cultivated land in a key lentil-growing region. The purchase price on most of the land is in the range of $900 to $1,000 an acre. That’s a bargain compared to what most comparable land is worth in Alberta.

Alberta prices have been pushed upwards for many years by all the wannabe cowboys wanting to live on acreages. There is also a much higher population and a lot more business development than in Saskatchewan.

However, in the last couple of years, Saskatchewan has seen significant development in the Highway 11 corridor from Regina to Saskatoon and up to Prince Alberta. The land north of Saskatoon is now some of the highest priced in the province.

The area between Saskatoon and Rosthern also has the province’s highest concentration of dairy farms. The supply-managed dairy industry has the cash flow and net returns to bid aggressively for land. It’s quite common to see quarter sections sell for more than $200,000.

In 2008, the grain industry did amazingly well. In 2009, despite declining grain prices, many grain producers still had good returns. The upcoming year is a big question mark with cereal crop prices expected to languish at disappointing levels.

In the previous couple of years, a lot of land changed hands. With returns now less certain, there appear to be fewer deals. However, prices seem to be remaining strong.

In the part of the world where I farm (down in the southwest near Cabri), the recent sale of a particular section of land has raised some eyebrows. The four quarters went for about $800,000, an average price of $1,250 an acre.

That’s way above what the market price has been in the area, but if you get a couple of motivated buyers, it’s surprising what can happen.

Land prices don’t always increase, as evidenced by what happened in the high-interest rate era of the early to mid-1980s. However, over the long term, many observers believe farmland is a sound investment. It earns annual income and it’s a lot more tangible than a piece of paper.

Kevin Hursh is a consulting agrologist and farmer based in Saskatoon. He can be reached at [email protected]

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