The rolling parkland hills of Riding Mountain National Park aren't as ruggedly beautiful as the Welsh Hills that Paul and Helen French could see from their former home in Shropshire in the West Midlands of Britain. Still, the couple can't help but feel lucky to have found their piece of pastoral paradise in the Canadian West.
After immigrating to Canada a little more than six years ago with their two children, the couple now own and run Frenchs Farm and Cottage Guest House on more than 900 acres – six quarter sections – east of the park in western Manitoba.
"We had a good life in the U.K., but we couldn't get into farming there," says Mr. French, who worked as an engineer in Britain. On the advice of a friend who moved to Saskatchewan to farm, they came to Canada and, after some tire-kicking in other provinces, bought the land they farm today.
"Manitoba was the cheapest," Mr. French says. "At the time, a family of four could survive on $40,000 a year."
More importantly, the Frenchs were able to do what they couldn't in Britain – buy land. In 2006, they paid about $400 an acre for their farm, now home to 180 grass-fed cattle and a few dozen heritage-breed hogs.
"When we left, land in the U.K. was a good £10,000 [about $20,000] an acre," Mr. French says.
Certainly, the French's story is a familiar one in Canada with its long history of European farmers seeking opportunities they couldn't find in their homelands. Yet more recently, global demand for arable farmland has pushed prices up across Canada, making the prospects for would-be farmers like the French family much less viable. Last year saw a record increase of 19.46 per cent for agricultural land in Canada, Farm Credit Canada statistics show.
"We got in at the right time," says Ms. French, adding that their land is now worth about $700 per acre. "We wouldn't have got what we've got if we had come over now."
Up until the last few years, European farmers saw opportunity coming to farm in Canada, able to take advantage of a wide differential between the high prices per acre in Europe and here. What was once a familiar occurrence a few years ago, however, slowed substantially after 2008 when interest rates cratered and grain and other agricultural commodity prices soared, spurring a farmland real estate boom.
Agricultural land real estate agent Dolf Feddes, who emigrated from the Netherlands with his family in 1999, says European immigration is much lower compared with a decade ago.
"Years ago we went to Europe to do presentations and attend trade shows to recruit farmers, but in the last few years, we've cut back because here is where the action is," says the hog farmer and real estate agent with Canadian Farm Realty.
In southern Manitoba, local and Ontario farmers, seeking substantially lower-cost land than in their own province, have been buying up tracts of prime cropland. "Ever since 2008, we've had a grain boom so [land] prices exploded," Mr. Feddes says.
Some are buying to expand operations and are able to borrow more at low interest rates. Others are renting to other farmers. Mr. Feddes says land in southern Manitoba that rented for $50 to $65 an acre about five ago now fetches between $100 and $140.
Investment funds seeking safer assets than the stock and bond markets are also driving demand, says Harold Davis, an agricultural prices analyst with Prairie Crop Charts in Winnipeg.
"The lack of safe assets drives holders of capital to explore a wider range of investments, including non-traditional investment assets such farmland," he says.
Agcapita is a Calgary-based fund company that invests in agricultural farmland in Saskatchewan. Stephen Johnston, a partner with the firm, says it is among the largest of a handful of investment firms offering Canadian retail investors access to farmland investment, and it's the only RRSP eligible farmland fund in Canada.
While demand for farmland is high, Mr. Johnston says Canadian investment rules prohibit non-residents and publicly traded firms from owning farmland in Canada, and has kept investment funds to a small fraction of the overall investment in agricultural land, he says.
"Agricultural investment funds make up only about $200-million of more than $150-billion in farmland real estate in Manitoba, Saskatchewan and Alberta," he says. "My estimate is that funds own no more than 0.1 per cent to 0.2 per cent of all the farmland Western Canada so they are a very small component of the overall market."
While interest from investors is growing, farmers seeking to take advantage of higher crop prices are primarily driving prices upward in Canada, Mr. Johnston says.
Although several straight years of record prices have raised concerns that the bubble may be about to burst, J.P. Gervais, the chief economist with Farm Credit Canada, a Crown corporation, says the hope is for a soft landing.
"People keep talking about the condo market in Vancouver and Toronto and how they'd like to see a soft landing to a cooling market, and that's also what we would want to see," Mr. Gervais says. "If we have crop prices coming down this year like we expect, we would have crop receipts coming down which would lower pressure on farmland values."
Ontario farmland prices led the nation in 2012 increasing about 30 per cent; in Manitoba prices have jumped about 26 per cent, and in Saskatchewan, 20 per cent, FCC figures show. Overall, prices across Canada have been on the uptick since 1993. Statistics Canada data for per acre prices for agricultural land and buildings show that average prices have risen from $555 in 1993 to $1,798 in 2012.
Although prices are soaring in some regions for certain types of land, opportunities for lower-cost farmland still exist in Manitoba, says Neil Fraser, a real estate agent with Rolling River Realty in the western part of the province. Pasture land values have not seen the same rise as crop land, partly due to the BSE cattle scare a decade ago.
"Demand for grain land is so strong I could sell 20,000 acres within a week if I had it," he says. "Where we are up here in parkland, this is traditionally cattle country, and a lot of the calls I've been getting on ranchland are from the Europeans."
For the most part, his European clients have had large operations in their homeland that are still small by Canadian standards, so they come here to expand, buying multi-million-dollar ranches and mixed-use farms.
"Here, they can increase their operation by about 20 times."
Frenchs Farm is by no means a large operation, and it has yet to turn a profit so both Paul and Helen French work other jobs – Paul as a welder and Helen as a bookkeeper for businesses in the village of Kelwood near their farm.
Then again, they didn't leave good careers in Britain thinking they'd get rich farming in Canada, says Ms. French, a former civil servant. They sought the slower-paced lifestyle and open spaces.
"We got the lifestyle we wanted – even if it's not the financial one we anticipated," she says with a laugh.
Agricultural land values on the rise
Statistics Canada data on the average price per acre from 1970 to 2012:
Farm Credit Canada historical national average percentage increases from 1993 to 2012:
1993: 2.01 per cent
1994: 8.47 per cent
1995: 10.03 per cent
1996: 11.3 per cent
1997: 8.03 per cent
1998: 2.71 per cent
1999: 0.2 per cent
2000: 1.5 per cent
2001: 1.4 per cent
2002: 5.27 per cent
2003: 3.83 per cent
2004: 4.55 per cent
2005: 3.12 per cent
2006: 4.65 per cent
2007: 11.58 per cent
2008: 11.72 per cent
2009: 6.6 per cent
2010: 5.16 per cent
2011: 14.81 per cent
2012: 19.46 per cent
2012 increase by province:
Ontario: 30.14 per cent
Quebec: 27.4 per cent
Manitoba: 25.63 per cent
Saskatchewan: 19.68 per cent
Alberta: 13.31 per cent
Nova Scotia: 9.79 per cent
PEI: 8.98 per cent
B.C: 0.1 per cent
New Brunswick: 0 per cent
Newfoundland: 0 per cent