Farm land prices across the heart of southwestern Ontario’s farm country have reached levels unimaginable just a few years ago and the repercussions are showing up in a multitude of ways.

And don’t expect this to change anytime soon, says Phil Shaw, columnist and commodity market expert whose work appears regularly on  Telvent DTN, in publications such as Today’s Farmer, Country Guide Magazine  and who writes and podcasts “Market Trends”, a monthly analysis of grain prices for the Grain Farmers of Ontario.

Speaking at a Mitchell seminar sponsored by BDO, Shaw said the surge in land prices has been fueled by prices for corn and soybeans at the same time as there are historically low interest rates.

U.S. Federal Reserve Chairman Ben Bernanke has said he won’t raise interest rates before 2015. Shaw sees crop prices being sustained until 2015. The combination is “testosterone” for land prices, he says.

Although prices have risen across the province,  “ground zero” seems to be Perth and Oxford Counties, he said. While his area around Dresden in Chatham-Kent crop land has been selling for $7,000 an acre, there is no livestock industry. In places like Oxford County with a heavy concentration of dairy farms, prices have hit as high as $20,000 an acre, he said. With a shortage of dairy quota, some dairy farmers are turning to buying more land as an alternative.

Kurt Keller, a representative with Zahnd Real Estate and a former Perth County resident who lives in southern Huron County adds one more factor to the rising price of land – non-farm buyers, some foreign buyers and some Canadian urbanites. When you look at the volatility of stock prices with the crash of stocks such as Nortel, farmland looks like a nice, stable investment, he says, especially when land has doubled and in some cases even tripled in the last five years.

Like most things, the more people competing to buy, the more the price is driven up.

And ironically, high prices seem to make people value their land even more, so that there seem to be fewer farms for sale in the last year or two than previously, Keller said. Of course a farmer who chooses to sell is unlikely to find a place to invest his money that will produce a return like the $200-$300 an acre he can get from renting the land to a cash cropper.

With row crop prices at record highs, pasture and hay fields have been plowed up in favour of corn and soybeans. Joan McKinlay, president of the Ontario Soil and Crop Improvement Association says the 2011 census shows there are 500,000 fewer acres of hay and 250,000 fewer acres of pasture since the previous census. Given the trend, that may be an even bigger loss since the census.

Pasture and hay are an important part of a crop rotation from a soil conservation point, McKinlay points out. The biggest concern in removing them from the rotation is water erosion. “The reason we’ve had erosion under control is because we’ve had forage in the crop rotations,” she says.

Grassed areas help rain water infiltrate into the soil instead of running off. Hay and pasture also provide cover for the soil.

The conversion of pasture and hay fields to crops is more problematic when many of these areas being plowed up are hilly land that’s more prone to erosion when cropped.

Phil Beard, general manager of the Maitland Valley Conservation Authority, says high crop prices are hindering efforts to build resilience into the landscape. In the Garvey/Glenn project inland from Lake Huron near Port Albert, one area that was to have been  planted in trees will now be planted in corn instead.

Geoff King, stewardship co-ordinator with MVCA who has been heavily involved in the Garvey/Glenn project, points out that many of the lands in question are less than prime farm land.

In the short run there may be gains in cropping this land but the longer-term consequences can be loss of resilience with increased erosion, loss of crop inputs and related costs, increased impacts downstream, water quality impacts, loss of land impacts and impacts on health tourism.

Travelling back and forth from her Grey County farm to the OSCIA office in Guelph, McKinlay has witnessed the changes in the landscape that high crop prices have brought.

“It’s a bad time to be a tree,” she observes as she has seen piles of trees cut or bulldozed out and farmers clearing fence lines.

Richard Keeso of J. H. Keeso and Sons Ltd., a Listowel sawmill, says high commodity prices and the soaring value of land has been too tempting for some farmers. Farmers have been nipping at the edges of woodlots, particularly where an irregular shape might project into a field, he said.

“They’re squeezing every (cropland) acre they can out of their property,” he said. In some cases they’re willing to pay a fine imposed under their county’s tree bylaw in order to get the land cleared.

Huron County’s Forest Conservation Officer David Pullen says there have been seven court cases resolved in the last couple of years involving woodlot clearing under the county’s Forest Conservation Bylaw that was first enacted way back in 1947. That bylaw came about after several municipalities in the south part of Huron became worried about severely degraded lands on some of the lighter soils and got together to host Edmund  Zavitz for a tour the area, including around Zurich, to figure out how to restore ag production. Zavitz, whose story is told in  “Two Billion Trees and Counting: The Legacy of Edmund Zavitz” by historian John Bacher, was largely responsible for the development in the 1940s of county tree bylaws, the conservation authorities, and the massive reforestation effort that was required to bring large areas in Ontario back into a state that would allow for production on the agricultural land.

Today, there is pressure on forest cover all across the county, Pullen  said.

“One trend I’m noticing is that quite often the properties (being cleared) have little potential for sustainable agricultural production,” he said. The property may have poor soil or not have access to a drainage outlet.

In the cases of lands occupied by tree plantations, they were probably reforested in the first place because the soil was unproductive to agriculture, he said.

Keeso says wetlands are suffering the most from the pressure to put every acre into production. Often these areas are forested by soft maple which many people call a “weed” tree. Another lowland tree is ash and with the spread of the emerald ash beetle, some owners see an opportunity to harvest everything they can before the insect kills the trees.

But in the long run, farmers gain by having enough forest cover to help prevent erosion from water or wind, Pullen says.

“It’s just so linked to soil conservation, whether wind or water,” he said. “It’s critical, to protect the soil.”

Across the Maitland River watershed, says Beard, 60 per cent of the land is prime agricultural land, but 80 per cent of the land is under cultivation, meaning a lot of marginal land is already being farmed.

Particularly in the southern part of the Maitland watershed where there is hardly any non-prime land and a farmer might rent land at $400 an acre, it’s hard to convince people to plant windbreaks and buffer strips along streams and open drains.

But Paul Vander Molen, a landscaper with Lawnmaster in Seaforth, says he has had some success persuading farmers to do just that. He’s been working on behalf of MVCA to try to increase tree cover in the southern Maitland watershed. Many of the owners know him and know he grew up as a farmer.

He takes every opportunity to point out the benefits of protecting the soil. In one case two farmers were clearing out the fence-bottom between their two properties. When they worked up the area they were amazed at the quality of the soil. Vander Molen pointed out the trees they had removed had acted as a windbreak, keeping soil from migrating. What’s more, he told them, he could remember when all the soil was like that.

MVCA estimates the watershed needs an additional 100,000 acres of trees to have the ideal ratio of tree cover but at the current rate of reforestation that would take 1,000 years.

As a beef farmer (she and her husband James and son Robert operate Silver Springs Farms, a cow-calf operation marketing breeding stock at Ravena in Grey County), McKinlay says the beef industry is going to need to adapt to the new reality of higher-priced land and forages.

This past summer offered lessons, she says. Faced with a half-crop of forage, a lack of availability to buy from neighbours and high prices for any forage that was available, more farmers than ever experimented with replanting wheat fields with cereal grains immediately after harvest, looking to have the grain grow enough to provide forage before winter set in. It may have been the specific conditions of this year but for many people it worked.

Beef producers will have to employ more intensive management to stay viable, McKinlay says. You can use 100 acres of pasture and turn cattle loose on it and you can have a reasonable rate of gain at a certain stocking level. If you employ rotational grazing, the more intensive the management, the more beef you can raise on the same area.

Beef producers are also going to need to take advantage of alternative feeds.

Another side effect of the expansion of farms to take advantage of high crop prices is that most often the buyer has any interest in houses on farms they purchase. In Huron County that’s led to an increase in requests for surplus farm residence severances. Some municipalities have been fighting restrictions under the provincial policy statement to try to keep as many homes in rural areas as possible.

Across the border, Perth County has a strict prohibition on severances of surplus farm residences. There, buyers of farms with houses they don’t need have little choice but to rent the houses out, even if they don’t want to. Often, Keller says, these tenants aren’t as concerned with maintaining the farmhouse as an owner would be and the house can deteriorate. In a couple of cases he knows of, tenants have taken advantage of their rural location to plant marijuana in nearby fields.

Ironically at a time when land is seen as too valuable to waste in windbreaks, buffer strips and fencerows, the very topsoil that makes the land valuable for crops can be endangered by the lack of those soil-conserving practices.

Vander Molen points out that across the border in the U.S. Midwest, farmers are planting windbreaks to try to help preserve moisture for their crops. Increasing wind speed  is drying out farmland faster and depriving crops of the moisture they need to grow. Windbreaks slow the wind and preserve the moisture.

Speaking at the BDO meeting in Mitchell, Steve Bowers, field adviser with Trees Ontario and Rural Voice columnist, said farmers who remove trees and windbreaks seeking to maximize crop yields may actually hurt yields instead. His presentation illustrated how yields may be reduced next to a row of trees (something evident to anyone looking at a field of corn) but that’s more than made up for by increased yields because of a micro-climate created in an area up to 10 times the height of the windbreak – something much less evident to the naked eye.

A pamphlet circulated by Conservation Ontario gives examples of how windbreaks actually increase yields in the rest of the field.

Bruce Whale, a Drayton-area dairy farmer tells his success story in the pamphlet. “Twenty-five years ago we planted windbreaks around the perimeter of some of our fields,” he says. “We definitely see earlier germination of crops along the windbreak. Corn plants near the trees germinate 10 days ahead of corn planted further into the field. The pollination and tasseling is five to six days ahead too. The soils warm up faster.”

Nebraska researchers confirm Whale’s observations, saying average soil temperatures in sheltered areas are slightly warmer than in unprotected areas.

Ontario researchers have found soybean yields in Southwestern Ontario were 25 per cent higher and corn yields were six to eight per cent higher in areas sheltered by windbreaks.

Cornell University research shows better results where crop protection products are applied in fields sheltered by trees. Shelter belts located downwind stop drifting crop protection sprays from leaving the field.

Reduced wind speeds also allow bees and other pollinating insects to do their yield-enhancing work.

One of the things that some farmers fear about windbreaks is encouraging damage from wildlife but researchers in South Dakota estimate that birds consume about 260 pounds of insects each year per half-mile of wind breaks.

But exactly at the time when farmers need to be encouraged in their conservation efforts, governments are cutting back. Beard points out that the reduced money available from the Environmental Farm Plan lately has been spoken for within hours of the program opening for applications. It’s made it hard to convince farmers in Perth County to undertake conservation projects. This situation is eased in Huron because the county has put its own conservation funding program in place.

“You need a clear indication from society that it (conservation) is valued,” says McKinlay, of the cuts by governments to conservation programs as they try to deal with budget deficits. “The indication from the market is that crops are valued.”

Douglas Hocking, MVCA’s water quality extension co-ordinator agrees. “Federal and Provincial grant dollars are being re-directed away from stewardship and environmental protection projects like erosion control – and farmers rely on the environment (snow, rain, soil, temperature) for them to generate their livelihood,” he says.

The high land prices have had one positive effect on woodlots, Keeso says. A few years ago when timber prices were high and crop prices were low, a farmer who was selling his land would typically conduct a harvest of his woodlot designed to reap the maximum value before the sale. Often this was such an aggressive cut that the woodlot would be unproductive for decades. Now, with timber prices lower than they have been in years, and the rest of the farm so valuable, most people can’t be bothered harvesting the bush at all before selling.

It would be ideal if farmers who are selling would bring in a woodlot consultant to harvest mature trees and cull the woodlot of diseased or damaged trees so they can advertise their farm has a managed woodlot, Keeso says.

McKinlay hopes that farmers will look beyond short-term profits from their land.

“I really hope people will keep in mind that it’s long term,” McKinlay says. “Once you have lost the organic matter it’s tough to put it back.”

Hocking agrees, making a number of salient points.

“Every time the watercourses turn brown they are losing soil that took 10,000-plus years to form on their farms. Sorry won’t put it back,” he says.

“Every time the snow banks turn brown with ‘soil’ they are losing soil that took 10,000-plus years to form on their farms. Sorry won’t put it back.

“Every time the ditches and drains fill with soil and flood their fields and need clean-outs they are losing soil that took 10,000-plus years to form on their farms. Sorry won’t put it back.

“Every time the air gets dusty they are losing soil that took 10,000-plus years to form on their farms. Sorry won’t put it back.”

Hocking asks farmers to look at the long term. “What do you want to leave for your children? It is a lot easier to farm topsoil than subsoil.”◊

Farm land prices across the heart of southwestern Ontario’s farm country have reached levels unimaginable just a few years ago and the repercussions are showing up in a multitude of ways.