Farmers changing crops as land values head higher
Michael Kane
Vancouver Sun
Wednesday, April 04, 2007
Farmland values in B.C. increased by 8.2 per cent during the last six months of 2006, the fastest rate in Canada, continuing a trend that has seen prices soar by more than 60 per cent this decade.
In the red-hot Fraser and Okanagan valleys, that's forcing some farmers to shift to more profitable crops such as blueberries and grapes, and others to shelve expansion plans as they are priced out of the market.
Increasingly farmers are competing with urban migrants who are pushing up prices for rural acreage, according to the spring farmland values report from Farm Credit Canada.
"People are coming here with monopoly money. It's Alberta oil money or Vancouver professionals. They want to have a little five-acre piece with a vineyard and make wine," said Robert Van Westen who runs Van Westen Vineyards on the Okanagan's Naramata benchlands.
"I tried to buy land about a year ago and I was quoted $1.2 million for five acres."
"There is no way I can manage that."
Naramata now has 19 wineries and half the homes in the area are summer homes and vacation rentals, Van Westen said Tuesday.
Farm Credit Canada, a Crown corporation that is the leading provider of financing to the agricultural industry, says a limited supply of arable land and strong competition is boosting prices in southern B.C.
Farmland with mature blueberry plantings and land suitable for blueberry production is being gobbled up, with 16,000 acres now devoted to the healthful fruit, up from 12,000 acres three years ago, according to the BC Blueberry Council.
In the Fraser Valley, some farmers are switching to grapes because blueberries have become so competitive, said Jim McCaughan, president of the Fraser Valley Real Estate Board.
While the average price for farmland in B.C. is about $2,400 an acre -- up from a low of about $800 in 1987 -- McCaughan said it costs anywhere from $45,000 to $95,000 in the Fraser Valley.
Mike Raffan, a 52-year-old former restaurateur, won't say what he paid for Township 7 Vineyards which grows grapes both in Langley and the Okanagan, but he confirmed that his five acres in Langley cost more than $80,000 apiece.
"I would love to have more land but we're just new into the business and it's going to take us a while to accumulate cash," Raffan said. "The alternative is to purchase additional grapes and we're going to have to do that again this year."
However, high grape prices have prompted Ben Stewart to cap purchases and production at Quails' Gate Winery in the Okanagan because he says there is "a disconnect between what the consumer is willing to pay and what the people who are buying this land are asking for grapes."
Based on highest and best uses, he said a realistic price for good quality farmland in the Okanagan is about $65,000 an acre, but some smaller parcels under 10 acres are going for more than $100,000.
"Those are hobby farms at best so the reality is that for agricultural end users, and this includes people trying to get into the business, the thresholds are becoming unbelievable and untenable."
Grape prices in the Okanagan are now quadruple those in Ontario and cannot be sustained, Stewart said.
"The whole 'Brand Okanagan' is almost too successful, which is great, but on the other hand, it has definitely put a damper on us trying to expand."
Farm Credit Canada says agricultural land values on Vancouver Island have also increased, but at a slower rate, while less populated areas of the Interior involving livestock production and forestry are showing smaller increases.
"Given the economy in British Columbia there's a lot of upward pressure on land values and agriculture is feeling that," said Steve Thomson, executive director of the B.C. Agricultural Council.
"There is a general shift to higher-value crops like blueberries and greenhouse production because, obviously, you can't produce low-value crops at these land values."
Lower-value Fraser Valley crops that are being sidelined, or at least not expanded, include processing peas, beans, corn, strawberries, and some fresh-market vegetables, said Mark Sweeney, berry industry specialist with the B.C. Ministry of Agriculture.
Most provinces continue to see growth in farmland values consistent with an upward trend since the start of the decade, Farm Credit Canada says.
Alberta showed the second largest increase during the last six months of 2006 at 4.8 per cent, followed by Manitoba at 2.9 per cent, Newfoundland at 2.8 per cent, New Brunswick at 1.8 per cent, Ontario at 1.7 per cent, Saskatchewan at 1.3 per cent, Quebec at 0.9 per cent, and Nova Scotia at 0.7 per cent. Values were unchanged in Prince Edward Island.
