2024 Saskatchewan Farmland Study

[wheatking16]

We published our 2024 Saskatchewan Farmland Value Study.

You may find this interesting and worth discussing.

Or not...

The free signup gets you access.




[url]https://www.grainreport.klarenbach.ca/p/2024-saskatchewan-farmland-value-study-6da6[/url]
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[ajl]

Does your report come to a different conclusion than FCC? FCC, of course, has a horse in this race so it's credibility is suspect. It will always be higher at fcc. I watch auctions exspecially in AB. Some seems to sell steady and other parcels for less than it has been a year or two ago. Alberta parcels are hard to compare as few are selling and they are more unique.

[wheatking16]

My study focuses on Saskatchewan values and takes a different approach from FCC.

[jamesb]

We published our 2024 Saskatchewan Farmland Value Study.

You may find this interesting and worth discussing.

Or not...

The free signup gets you access.




[url]https://www.grainreport.klarenbach.ca/p/2024-saskatchewan-farmland-value-study-6da6[/url]
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Thanks, an interesting reading. I think a pullback is probable, the question is how much. Land prices here in SE Sask doubled in a few years so a retracement is certainly possible. I would like to think that most farmers (land owners) have learned to become better financial managers than in the past. If there is a extended cash flow problem for a year or two, that land for sale down the road wont have the appeal and I think prices can slide quick. Land sales by auction have shown a slight pullback in the last 6-8 months and have for sure not extended their rise we have seen the past number of years. Question for me is : Will foreign money in some way shape or form try to buy into Western farmland for a "safe haven" to park money ? This could certainly affect things as our land prices here are still way lower than many places in the world and we are in a stable place.
The question too is that farm land rent values would have to come down too if land prices drop I would think?

[wheatking16]

Thanks.

It will be interesting to see what happens.

Today, Tim Hammond and I published our conversation on the topic.

The conversation provides additional context for the study.

[url]https://www.youtube.com/watch?v=Mv355rSr6n0[/url]

[AlbertaFarmer5]

Thanks for the work you put into this, and posting it for public consumption. I've been looking forward to it since you first told me you were going to apply TA to the land market.

Seeing the values normalized for 2023 dollars, the lows have never been revisited, it has been within a steady uptrending channel the entire time. This is in contrast to commodities priced in constant dollars, most of which would be in a declining channel over the long run (feel free correct me if there are exceptions).

The ultimate value of the uptrending land is producing downtrending commodities. Does that seem sustainable?

Productivity has increased, with continuous cropping, fertilizer, chem, mechanization, so perhaps it is reasonable that land could be in a continuous uptrend, while the commodities produced are in a downtrend?

Or will the two trends eventually need to converge? “If Something Cannot Go on Forever, It Will Stop“

My bigger question, is how does an investor or farmer make use of this?

If the cycles within are decades longer than the average career, how does one take advantage of it? Realistically, there might be only a couple of decades in ones career when one might be in a financial position to take on such an investment, and before it is too late in life to take on a 25 year mortgage.

If that period doesn't coincide with the right part of the price cycle, what does one do?

Perhaps more relevant to an investor who can park their money elsewhere, and rotate into or out of farmland when the cycle indicates an opportunity. But for someone trying to make a career out of producing something on farmland they own, it seems to me that all one can do is buy when the opportunity presents itself, with a business plan to cash flow the cost of the land, not banking on inflation to make it viable.

If the land doesn't cash flow at the current value, without counting on inflation, then it wasn't a viable business plan to begin with, or the land value wasn't sustainable?



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[farmaholic]

Land value inflation doesn't pay the mortgage, what it produces does.
In my opinion the only thing land value appreciation has done is enabled people to dig a bigger hole(borrow more money against it). Unless you're borrowing against it's value, it really doesn't matter if it's $50K or $500K per quarter until its sold, if its ever sold.

Watch the values drop if the assets liquidity becomes a problem for people(especially investors) wanting to sell.

Weber's newsletter pointed out a Sask farmland disadvantage in returns.
Alberta land was higher from a robust oil industry injecting cash into people's pockets and that money sloshed around looking for a home. Add in some surface rights and mineral rights and it can be pushed further, oh yeah and more people.
Manitoba appears to have a clear production(growing crop) advantage.
Sask grain prices can even be discounted because of extra freight to port in basis deductions.

[farmaholic]

AB5, some people are running out of time in the cycle...

Unless "its different this time".

[bucket]

Week before in the producer front page said """prairie farmland still a bargain"""

This is what is wrong with reporters, they can not correlate what they write.

Sean Pratt and Robert Arnason should have coffee once in a while.?????

Must mean prairie farmland will become an even better bargain.

[AlbertaFarmer5]

Land value inflation doesn't pay the mortgage, what it produces does.

An important fact which is missed by many people.

Probably the best quarter in this county was offered to me by the retiring farmer when I was probably 20 years old. Price was even more of a premium than the quarter was premium because of the potential gravel development.
I declined because I needed to pay the mortgage either with what it was producing or what I could make off the farm at the time. I couldn't pay the mortgage with the promise of gravel development 20 years later.

It did sell. And 20 years later sold again to gravel interests for a healthy profit.
Coulda woulda shoulda.

But how do you cash flow the sure thing in the intervening 20 years?