As crop yields climb in Grey and Bruce counties, so do land prices

Two years of strong growing conditions have increased yields in Grey County so they are now similar to those in northern Huron County.

Why it matters: When the value of land rises in areas where it once was less expensive, it drives up land values in the rest of the province.

“Not only is agronomics catching up in Proton compared to Wingham, but so are land values,” said Ryan Parker, Valco Consultants Inc. partner and appraiser, speaking at the Grey County Soil and Crop Improvement Association annual meeting last month.

Parker has tracked the yearly farmland value for workable acre prices across 11 southwestern Ontario counties, including Grey and Bruce, since 2010.

Each report contains information based on vacant or minimally improved land with no significant buildings, houses or livestock barns. The data excludes generational farm sales and land around major urban centres where speculation development values would skew the results.

In 2010, the average price per arable acre was under $6,000 across southwestern Ontario, with the top end at $12,500.

“This first four-year period (2010 to 2014), (per acre land values) were increasing 20 to 30 per cent a year across 11 counties, which was historical,” said Parker, adding the post-recession interest rate drop and 2011’s $7 corn boosted financial confidence.

Previously, Farm Credit Canada’s land value study showed a five per cent average increase in yearly land values from 1985 to 2009. However, the last 12 years show a 13 per cent average annual growth across the 11 counties.

“We get to 2021 and things change. We’re up to $18,000 per acre median last year across 11 counties. That’s three times what we were in 2010,” Parker said.

Set to release in February, the early results for Parker’s 2022 report show a $10,000/acre jump in Perth County, edging values toward $36,000/acre and in Grey to $21,000/acre.

“The median in Bruce County in 2010 was under $3,000 a workable acre. It’s now sitting at $16,000,” he said. “I can pretty much guarantee that Grey is going to be over Essex again this year, and Grey has also climbed over top of Lambton.”

Parker said buyers from Huron, Perth, Oxford and Wellington counties are turning their sights on Grey and Bruce counties and further north to New Liskeard, despite more affordable acres available in West Elgin and west Middlesex.

“It is interesting that none of those groups want to look south because there is good ground and cheaper ground to the south and the west,” he said. “But everybody, for some reason, has a barometer that heads north, and that has had a major impact here in Grey.”

One anomaly last year was a cash cropper who bought most of the 1,500 acres sold in Elgin County, a livestock-dense area, resulting in a $10,000/acre boost. Parker said the acres were within a 30- to 45-minute tractor drive from Oxford, where land costs $35,000/acre.

“It was undervalued. It shouldn’t have been $15,000; it should have been $20,000. So I’d say that’s a big piece,” he said. “Now, is $28-$29,000 too high? It didn’t look like it this year because the crops on that farm looked really good this year.”

Parker believes the market is reaching the top of the curve, and prices will stabilize from when land sold for $15,000/acre in 2021 and nearly doubled by the spring of 2022.

Grey County saw a 38 per cent average increase this year over last, which Parker attributes to undervalued land hitting market value and strong demand for 50-acre house-heavy farms in the previous 24 to 36-month pandemic period.

However, with a tripling of interest rates, the 50-acre farm trend is waning, reflected by a 25 per cent market value drop.

Grey County is poised to realize a continued push on land values as farmers move north and yields align with those further south and west, he predicted.

While the farmland market remains strong, Parker suspects reassessing soon-to-mature one-year terms at triple or more interest rates will prompt a market slowdown.

Additionally, he said the slight slide in crop prices and increased input costs for 2023 could cool farmland purchases.

As 2021 and 2022 mirror the early 2010’s yearly increases of 20 to 30 per cent per acre, Parker cautioned the critical difference is it’s on $12,000 to $35,000/acre, not $5,000 to $15,000/acre.

“You get 25 per cent on $40,000, and that gets to $50,000 fairly fast, right?” said Parker. “So, that’s going to be interesting to watch.”

Corn yields grow in Bruce and Grey

Traditionally 240-bushel corn on 200-acre fields wasn’t a Grey County producer expectation. Now it’s more attainable, said Deb Campbell, an agronomist and owner of Agronomy Advantage Inc.

“Part of it was driven by some stellar environmental conditions, good sunlight, good rainfall, some good nutrition, some excellent farmers,” said Campbell.

New genetics with the potential to deliver better yields also contributed.

“As agronomists, we’re seeing some incredible genetic gains happening. Whether it’s faster than what we’ve seen in the previous 10 years, time will tell,” said Campbell. “But certainly, in the last five years, the genetic gain in corn, soybean and canola has been phenomenal.”

According to Growing Ontario’s Corn website (gocorn.net), from 2018 to 2022, Dundalk met or exceeded Wingham-area yields, aside from 2020, when it fell just shy of Wingham, located in northern Huron County.

A hesitancy to move toward new practices, genetics or new traits could cost efficiencies and yield gain, said Campbell.

“Make sure you’re always testing and always moving forward in your plans,” she said. “If you’re working with four and five-year-old genetics, you’re probably missing out on some opportunity.”

For example, Campbell said genetics around root development have seen radical evolution over 20 years and have increased root size, direction and ability to penetrate, resulting in higher production.

“Another area of focus in these genetics is the number of kernels per bushel, the kernel weight itself,” she said. “We used to figure the number of kernels; the number of rows round was set at the six-to-eight leaf stage in corn period. Not anymore.”

The new expectation for kernels per bushel has dropped from 80,000 and 90,000 kernels per bushel to 60,000 to 75,000 with a dozen hybrids because the kernels are larger and heavier, reflecting plant health.

Back-end season plant health is driving the last 10, 15 and 20 bushels on new genetics, she said, making an August crop plan for plant health critical to optimal yield.

“That tends to mean fungicides, (and) having a slow-release, split-applied nitrogen plan, and even a solidified sulphur plan, in some cases,” said Campbell.

She suggested producers explore and evaluate how optimizing late-season genetics could enhance their operations along with tiling, especially given its success in the Dundalk area over the last decade.