Canada’s dwindling farmland base and rising rental costs threaten the country’s agricultural sustainability, researchers warn
Canada’s agricultural sector faces mounting pressure as the country continues to lose farmland to urban development, while some existing acres sit vacant.
That’s according to new research released by the Canadian Agri-Food Policy Institute.
Only about seven per cent of Canada’s land mass is used for agriculture, making preservation of existing farmland critical to the sector’s future, said Tyler McCann, managing director of the Canadian Agri-Food Policy Institute (CAPI).
“For the purpose of this paper and this research, it comes from the acknowledgement that actively used farmland in Canada is decreasing, and there is a need to address this,” said Courtney Anderson, a CAPI distinguished fellow who analyzed farmland economics across the country.
WHY IT MATTERS: Canada faces a critical agricultural land crisis as farmland continues disappearing to urban development while economic pressures force farmers into unsustainable practices.
On May 27, three agricultural policy researchers with CAPI highlighted the economic and environmental challenges facing Canadian farmland. They warned current policies fail to adequately balance competing demands on the country’s limited agricultural land base.
Anderson’s research found farmland rental rates now represent almost 90 per cent of average net operating income per acre, leaving farmers with only 10 per cent of income to cover other production costs.
“There’s only 10 per cent of the income available to cover all the other costs of production for a farmer that’s operating on that land,” Anderson said.
The study revealed significant regional variations, with provinces having the highest population density showing the lowest capitalization rates. Ontario and British Columbia face particular pressure due to their dense populations, while provinces with lower population density have higher capitalization rates, reflecting limited alternative uses for farmland.
Anderson warned appreciation in the value of farmland alone is not enough to offer an all-in discount rate of return for the typical investor, despite large appreciation in farmland values across most regions.
The research comes as Canada grapples with the fact roughly half of farmland losses is attributed to urban expansion, while the remainder represents previously farmed acres no longer in production for various reasons.
“It’s pretty hard to undo asphalt pavement and go back and create more farmland,” Anderson said.
Dislène Sossou, a CAPI doctoral fellow studying soil conservation practices, found farmers face complex trade-offs when adopting sustainable practices. Her research showed some conservation practices are complementary, such as cover crops and multi-cropping, while others like minimum tillage and multiple cropping act as substitutes.
“Farmers with a succession plan tend to allocate more land to high-value crops, and this strategy can enhance profitability, economic profitability, but it can constrict soil environmental sustainability,” Sossou said.
The research also examined how climate shocks affect farming decisions. Andu Berha, another CAPI doctoral fellow, found while farmers typically specialize in high-performing crops under normal conditions, they diversify when extreme weather hits to reduce risk.
“When this extreme weather event hits, they diversify to reduce the downside risk,” Berha said. However, he noted this approach does come at a cost, meaning farmers who diversify due to this climate volatility tend to see a measurable decline in their overall productivity.
Crop insurance plays a crucial stabilizing role, with Berha’s analysis showing that farmers with strong insurance coverage are more likely to maintain their existing, profitable cropping patterns even after a severe weather short event.
However, insurance claims and payouts have surged in recent years, jumping from $2 billion to $5.4 billion in total direct payments under business risk management programs, making the current approach financially unsustainable, Berha said.
The researchers called for more targeted policy approaches that account for differences between large and small-scale farmers. Large farmers typically have better access to finance and insurance and can absorb shocks more easily, while smaller operators face tighter margins and limited access to services.
“Small farmers may need to create cost sharing for insurance premium or simplified application procedure. Meanwhile, large farmers might benefit more from market-based instrument or incentive tied to performance,” Berha said.
All three researchers emphasized the need for better data to inform policy decisions. Current analysis relies heavily on five-year-old census data.