of FCC Farmland Value Report Showed Increase in 2023grow the land affordable price Farm management challenges. The cost of renting farmland is generally lower than financing, making it a valuable option to support cash flow and minimize financial risk. Location is always a key factor, and as many leases are fixed for multiple years, increases in farmland value do not immediately impact returns.
Rent-to-price ratio analysis
Although many different types of rental contracts are used in agriculture, we focused here on cash rental contracts.
The national RP ratio in 2023 was 2.52%, a slight decrease from 2022 (Table 1). British Columbia’s ratios have not been published this year because data from multiple regions was deemed insufficient to provide an accurate average RP ratio.
Table 1. 2023 rent-to-price ratio by state. Minimum and maximum ranges by state, including 2022 rent-to-price ratios.
The largest increases in farmland values in 2023 were in Saskatchewan, Manitoba, and Quebec. In these states, rents increased as well, and the RP ratio remained stable.
Ontario saw the highest increase in 2022, followed by a slower increase of 10.7% in 2023. The decline in the RP ratio this year indicates that cash rental rate agreements are not evolving as rapidly as farmland prices.
Similar results were observed in the Atlantic provinces, with New Brunswick and Prince Edward Island both seeing lease growth at a lower rate than farmland value growth. These states experienced above-average increases in farmland values in 2022.
Cash leases are often negotiated for long periods of time to encourage better land management as a risk mitigation measure for the tenant. Because each state’s cash rental rates and farmland values vary widely, only state and national weighted averages are disclosed here. The highest RP ratios are typically found in farmland with the lowest per acre value in the state. Specialty crops such as potatoes generally fetch higher prices than other crops.
Farmland rental can complement land purchases and is often part of a long-term strategic growth plan. To learn more about how rentals and purchases affect your cash flow, Read the full FCC Economics blog post.
