U.S. versus Canadian farmland prices

The average price for Canadian cultivated farmland was $6,900 per acre in 2025 compared to $8,150 (all figures Cdn$) per acre in the U.S. However, comparing value is a complex calculation, FCC economist Justin Shepherd wrote in an April 15 report.

 WHY IT MATTERS: Historically an advantage for Canadian crop producers, your land ownership costs per acre may not be the competitive edge they used to be.

For example, some U.S. farmland sits in zones with warmer climates and much longer cropping seasons, whereas some Canadian farmland stays snow-covered late into spring.

There are also variations in how Canadian farmland values are calculated.

To address this, Shepherd said, FCC calculated farmland value based on crop acres only and compared it to the equivalent U.S. value.

While U.S. cultivated farmland is more expensive, on average, than Canadian, the dollar per acre gap between the two countries has largely stayed similar since 2000.

Canadian land values have seen fairly consistent growth, averaging 8.7 per cent over the past decade, Shepherd said. U.S. growth rates have seen sharp spikes, such as between 2010 and 2015, followed by flat growth (2015 to 2020). The average growth rate for U.S. farmland was 5.6 per cent.

Since 2020, Canadian farmland values have risen faster than those in the U.S.

Canadian versus U.S. farmer revenue

Despite higher average land prices, U.S. farmers had a slight advantage over Canadians in ability to generate revenue from their land.

Using both countries’ agricultural balance sheets, Shepherd said FCC calculated the average farm is making mortgage payments on roughly 15 per cent of their farm’s real estate value.

Using the Saskatchewan Ministry of Agriculture’s formula for land investment cost, in 2025 newly-purchased Canadian farmland averaged a cost of $367 per acre. Owned land cost $143 per acre.

Using U.S. interest rates, newly-purchased U.S. farmland costs producers $381 per acre and owned land cost $127.

Last year, cultivated farmland payments accounted for 39 per cent of Canadian farmers’ grain and oilseed cash receipts.

“Meaning for every dollar earned, 39 cents went toward land payments,” Shepherd wrote.

The U.S. average was 33 cents per dollar of revenue.

“Although this calculation doesn’t include income from livestock or other sectors, it demonstrates that land costs as a percentage of grain revenues are comparable between Canadian and U.S. farmers,” Shepherd said.

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The Canadian Transportation Agency (CTA) on Thursday announced the volume-related composite price index (VRCPI) for Canadian National Railway (CN) for 2023-24 will be 1.8295, up 12.11 per cent from 2022-23.

CPKC’s (Canadian Pacific Kansas City), meanwhile, will be 1.7616, up 5.43 per cent.

The VRCPI is the major variable in the formula that decides the railways’ maximum revenue entitlements (MREs) each crop year. Set each year by the CTA, based on submissions from CN and CPKC, the VRCPI is an inflation factor based on a composite of forecast prices for railway labour, fuel, material and capital purchases.

For the 2023-24 crop year beginning Aug. 1, much of the difference between forecasted and actual cost increases that’s reflected in the increased VRCPI is “directly linked to unexpectedly high fuel and related material costs in 2022,” the CTA said in a release.

The CTA said its fuel model for 2022-23, based on third-party forecasts at the time, projected the railways’ fuel costs would rise by just over 30 per cent.

However, in 2022, those costs actually rose by over 63 per cent on “a notable shortage in the supply of diesel fuel in North America and increased global demand.”

Adjustments were also made for other cost components, including the railways’ “material component,” the CTA said. The agency already determined the cost-of-capital rates for each railway for the new VRCPI in separate rulings last Thursday (April 20).

With the VRCPIs now in place, the MREs — the upper-limit dollar figures on the revenue CN and CPKC can earn for shipping regulated grain in a given crop year — must be set by the CTA for 2023-24 by Dec. 31, 2024 at the latest.

The MRE limits the revenue CN and CPKC can earn for movement of western grain as far east as Thunder Bay or Armstrong, Ont., or up to Churchill, Man., or to ports in British Columbia.

If Prairie grain revenue in a given crop year overshoots their MREs, the two railways’ overages would then be payable to the Western Grain Research Foundation, the mandated beneficiary. — Glacier FarmMedia Network

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The Canadian Transportation Agency on Wednesday released its determination that CN’s 2021-21 Prairie grain revenue of $1,044,909,345 came in $2,399,676 above its maximum revenue entitlement (MRE) for the year.

CN’s rival Canadian Pacific Railway, meanwhile, booked 2020-21 Prairie grain revenue of $1,035.175,212, which put it $20,248,072 below its MRE for the crop year.

The CTA’s decision gives CN 30 days to pay out its overage — plus a five per cent penalty of $119,984 — to the Western Grains Research Foundation, the mandated beneficiary when either railway exceeds its annual revenue cap.

The CTA noted the 2020–21 crop year was a record year for the railways in terms of combined Prairie grain handle at 52,334,795 tonnes of western grain — the “highest volume ever on the record” and nine per cent over the 2019-20 handle.

CN moved 26.36 million tonnes of Prairie grain during the crop year, the CTA said, while CP moved 25.98 million.

CN and CP recorded average weighted haul lengths of 1,018 and 913 miles respectively during the crop year — a combined average of 966 miles, up 0.1 per cent on the year.

Commonly called the “revenue cap,” the MRE for each of the two railways varies with the tonnage of grain moved. A railway company can keep within its MRE, the CTA said, “so long as it does not charge more, overall, than the average rate per tonne as set by the first part of the MRE formula.”

The MRE formula factors in the tonnage each railway hauls, the average length of haul and the volume-related composite price index (VRCPI), an inflation index set each year by April 30 to reflect each railway’s costs for labour, fuel, materials and capital purchases.

The VRCPIs for CN and CP for 2020-21 were first set in April last year at 1.4202 and 1.4205 respectively — both down from 2019-20. However, both were later increased as the two railways sought to get additional costs factored into the VRCPIs. Among those were:

• costs CN incurred obtaining hopper cars, as per 10 car supply agreements and three purchase agreements;
• CP’s cost of capital, after an April 9 ruling from the Federal Court of Appeal that the CTA should determine CP’s cost-of-capital rate for 2020-21 with the same methodology used for 2019-20; and
• CN’s decision to extend its lease by three months to the end of the 2020-21 crop year on a fleet of G3 hopper cars, rather than return them at the end of April 2021 as originally planned, “given notable grain volume increases this crop year.”

The final VRCPIs used to set the MREs for CN and CP for 2020-21 were 1.4441 and 1.5055 respectively. — Glacier FarmMedia Network

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The Canadian Transportation Agency on Monday announced Canadian Pacific Railway and Canadian National Railway overtopped their maximum revenue entitlements (MREs) for the crop year by $1,500,513 and $1,047,285 respectively.

CN’s MRE-covered grain revenue for 2017-18 hit $788.06 million, while CP’s came in at $709.5 million, the CTA said.

The two companies now have 30 days to pay those MRE overages, plus penalties of five per cent (for CN, $52,364; for CP, $75,026), to the Western Grains Research Foundation (WGRF), the mandated beneficiary. Income from the WGRF’s endowment fund is directed to research work.

In all, the CTA said, the two railways moved 40,618,285 tonnes of MRE-covered western grains during 2017-18, down six per cent from the previous crop year. CN moved 20.98 million tonnes, while CP moved 19.63 million.

The CTA said the average length of haul in 2017-18 came in unchanged from 2016-17, at 953 miles (1,534 km), with CN’s at 1,007 miles and CP’s at 896.

The railways’ annual MREs are calculated by way of a formula factoring in the tonnage of grain and average length of haul along with the volume‑related composite price index (VRCPI), a figure the CTA determines by April 30 each year.

The VRCPI — an inflation index reflecting a “composite” of forecast price changes for railway labour, fuel, material and capital purchases — was set in late April last year at 1.3817, up 4.1 per cent from 2016-17, based mainly on an expected 3.5 per cent increase in forecast price changes for “railway inputs.”

That forecast hike was based mainly on expectations for a rise in West Texas Intermediate (WTI) crude oil values on average in 2017, the CTA said at the time.

The VRCPI’s increase for 2018-19, meanwhile, was limited to 2.8 per cent, due in part to the CTA replacing its 2017 railway input price forecasts with actual data.

Since 2000-01, the VRCPI has grown at an average annual rate of around two per cent.

In recent crop years, CN and CP both overshot their MREs in 2016-17 for a combined overage and penalties of almost $7.2 million; in 2015-16, for over $4.4 million; in 2014-15, for over $9.45 million; and in 2011-12, for over $672,000. CN overtopped its MRE in 2013-14, while CP exceeded its MREs in 2012-13 and 2010-11. — Glacier FarmMedia Network

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Calgary-based CP on Wednesday booked net income of $348 million on gross revenues of $1.662 billion for the quarter ending March 31, down from $431 million on $1.603 billion in the year-earlier period.

Describing March in particular as “one of our best months in recent history,” CP CEO Keith Creel nevertheless called Q1 “a challenging quarter, as we battled extreme weather and unprecedented demand, specifically in the northern reaches of our network.”

That said, the railroad delivered four per cent more carloads in Q1 compared to the year-earlier period, particularly in its energy, chemicals and plastics segment (74,200, up 11 per cent), potash (37,300, up 19 per cent) and intermodal (251,400, up eight per cent).

CP’s grain handle dropped eight per cent in the quarter, to 97,700 carloads, for revenues of $357 million, down nine per cent. Grain freight revenue per carload thus came in at $3,650, down one per cent.

CP’s overall operating expenses in Q1 rose 12 per cent from the year-earlier period, most notably in fuel ($215 million, up 26 per cent), compensation and benefits ($374 million, up 25 per cent) and materials ($55 million, up 12 per cent).

With winter largely past, CP “built a tremendous amount of momentum through March,” Creel said in a release Wednesday, “positioning us well for the rest of the year.” — AGCanada.com Network

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The Canadian Transportation Agency on Thursday issued its annual determination of how much, if any, revenue Canadian National Railway (CN) and Canadian Pacific Railway (CP) made over their maximum grain revenue entitlements (MREs) for the crop year.

CN’s Prairie grain revenue came in $5,773,741 over its $802.44 million cap, while CP’s Prairie grain revenue came in $1,078,947 over its $724.38 million limit, the agency said.

CN and CP each have 30 days to pay their overages, plus five-per-cent penalties of $288,687 and $53,947 respectively, into the Western Grains Research Foundation’s endowment fund, income from which is directed to research work.

The railways’ combined 2016-17 Prairie grain handle rose 6.9 per cent from the year-earlier period, to 43.2 million tonnes, with an average haul length of 953 miles, up 0.2 per cent, the agency said.

Of that combined grain handle, 31.79 million tonnes moved west to ports at Vancouver and Prince Rupert, while 11.4 million tonnes went east to Thunder Bay or other ports in Eastern Canada.

CN’s total Prairie grain handle for the crop year came in at 22.32 million tonnes, with an average haul length of 1,004 miles, while CP handled 20.87 million tonnes with an average haul length of 898 miles.

CN’s overage for 2016-17 is its fourth in a row, after it topped its MREs by 0.15, 0.9 and 0.7 per cent in 2015-16, 2014-15 and 2013-14 respectively.

CP’s grain revenue came in 0.5 per cent over its MRE in 2015-16, 0.3 per cent over in 2014-15, and 0.3 per cent below in 2013-14.

The annual MREs for CN and CP are calculated each year using a formula based on total grain tonnage and average length of haul as well as the Volume-related Composite Price Index (VRCPI).

The VRCPI is an inflation index accounting for forecast changes in the two railways’ costs for labour, fuel, material and capital purchases.

The 2016-17 VRCPI was set in April 2016 at 1.3275, a 4.8 per cent increase from the previous year, citing expected declines in the Canada/U.S. currency exchange rate, as the railways’ materials purchases are often paid for in U.S. dollars.

For 2017-18, the VRCPI was set last April at 1.3817, up 4.1 per cent based mainly on an expected 3.5 per cent increase in forecast price changes for “railway inputs,” particularly fuel costs. –– AGCanada.com Network

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The Canadian Transportation Agency — the tribunal which, among its other duties, sets the annual maximum revenue entitlements (MREs) on Prairie grain freight for Canadian National Railway (CN) and Canadian Pacific Railway — on Friday announced a volume-related composite price index (VRCPI) of 1.3817 for the crop year starting Aug. 1.

The new VRCPI is to be applied when the CTA rules on the railways’ maximum grain revenue entitlements for 2017-18, as expected by Dec. 31, 2018 at the latest.

The VRCPI is “essentially an inflation factor” for the forecast prices that CN and CP pay for labour, fuel, material and capital purchases.

The 4.1 per cent increase in the VRCPI from 2016-17 is based mainly on an expected 3.5 per cent increase in forecast price changes for “railway inputs” in 2017-18, the CTA said.

Those expectations come mainly from a forecast for West Texas Intermediate (WTI) crude oil values to rise to US$53.70 per barrel on average in 2017, from US$43.30 in 2016, the agency said.

The VRCPI has grown at an average annual compounded growth rate of 1.9 per cent over the 2000-01 to 2017-18 period, the CTA said, tracking up and down with “exceptional fluctuations” in recent years due in part to fuel price volatility.

The CTA last April set the 2016-17 VRCPI at 1.3275, a 4.8 per cent increase from the previous year, citing recent and further expected declines in the Canada/U.S. currency exchange rate.

A weaker loonie increases the railways’ costs for materials used in “day-to-day operations,” the agency said at the time, as CN and CP pay for many of those items in U.S. dollars.

The 2015-16 VRCPI had been cut in April 2015 to 1.2517, based in part on a sharper-than-expected drop in fuel costs, but was later raised slightly to 1.2668 after CN sought an adjustment.

CN and CP in January this year were found to have exceeded their 2015-16 MREs by over $4.4 million combined. — AGCanada.com Network

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Calgary-based CP on Wednesday announced full-year net income of $1.599 billion on $6.232 billion in gross revenues, up from $1.352 billion on $6.552 billion in 2015. Fourth-quarter net income came in at $384 million on $1.637 billion in revenues, up from $319 million on $1.687 billion in the year-earlier period.

Harrison, who announced Wednesday he will retire from CP effective Jan. 31, said the fourth quarter was “weighed down by challenging operating conditions, including unexpected and extreme weather on the West Coast that compounded the impact of an already delayed grain harvest.”

For 2016 overall, he said, the railway’s revenues were weighed down by “a precipitous decline in crude oil shipments and weakness in grain movements, particularly in the first half.”

CP in 2016 moved about 270,000 carloads of Canadian grain — down five per cent from 2015 — including 75,000 carloads in the fourth quarter, down six per cent. Canadian grain revenue for 2016 was down 10 per cent at $962 million, for revenue per carload of $3,559, down five per cent. Fourth-quarter Canadian grain revenue per carload came in at $3,758, up one per cent from the 2015 Q4.

In its U.S. grain segment, CP’s carloads for 2016 came in at about 162,000, up three per cent, for revenue per carload of $3,202, down four per cent. Fourth-quarter U.S. grain carloads came in at 44,000, up 10 per cent from the 2015 Q4, for revenue per carload of $3,488, up seven per cent.

In its fertilizers and sulphur segment, CP’s carloads for 2016 slipped three per cent, to 60,000, while revenue per carload rose eight per cent to $4,769. In potash, meanwhile, revenue per carload rose one per cent to $2,904 on about 116,000 carloads, down six per cent.

CP on Wednesday announced its chief operating officer, Keith Creel, will replace Harrison as CEO effective Jan. 31. However, Harrison is taking vacation leave “immediately” until then, during which time Creel will act as CEO.

Citing an unnamed source, the Reuters news service reported Wednesday that Harrison and U.S. investment fund manager Paul Hilal were finalizing a partnership expected to spur a financial turnaround for a U.S. railroad — specifically, Jacksonville, Fla.-based CSX.

Hilal previously worked for activist investment firm Pershing Square, whose investments in CP led to Harrison’s installation as CEO back in 2012.

CP on Wednesday said Harrison approached its board to discuss his retirement and “potential related modifications to his employment arrangements that would allow him to pursue opportunities involving other Class 1 railroads.”

Harrison’s retirement, CP said, will include a “separation agreement” with a “limited” waiver of his non-competition obligations to CP. In return, Harrison is to “forfeit substantially all benefits and perquisites he is entitled to receive from CP going forward, including his pension.”

A previously-agreed-upon consulting agreement between CP and Harrison “will not take effect” following his retirement, and Harrison has agreed to sell all shares he owns in CP by May 31.

“I have had a wonderful experience and depart with many friends and with full confidence in Keith’s ability to build on the great success we have enjoyed,” said Harrison, who came to CP following a stint as CEO for CP’s Montreal rival Canadian National Railway (CN).

CN also underwent a change of command in July, when chief financial officer Luc Jobin took over the CEO post from Claude Mongeau, who stepped down for health reasons. –– AGCanada.com Network

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The agency said Dec. 22 it has determined Canadian Pacific Railway (CP) and Canadian National Railway (CN) went over their maximum revenue entitlements (MREs) for Prairie grain by $3,386,483 and $1,041,913 respectively during the 2015-16 crop year.

The two railways’ respective MREs for 2015-16 had been set at $677,879,839 and $684,749,693.

CP and CN now have 30 days to pay their overages to the WGRF, which has been the mandated beneficiary for such payments under the Canada Transportation Act since 2000. The railways also must pay five per cent penalties of $169,324 and $52,096 respectively, the CTA said.

CN’s overage for 2015-16 is its third in a row, after it topped its MREs by 0.9 and 0.7 per cent in 2014-15 and 2013-14 respectively. CP’s grain revenue came in 0.3 per cent over its MRE in 2014-15, and 0.3 per cent below its MRE in 2013-14.

The two railways together moved 40,393,402 tonnes of Prairie grain in 2015-16, down 2.2 per cent from their total volume in 2014-15, the CTA said. Their combined average length of haul in 2015-16 was 951 miles, up four from the previous crop year.

CN’s Prairie grain handle in 2015-16 came in at 19,784,579 tonnes, with an average haul of 1,015 miles. CP’s handle in the same crop year was 20,608,823 tonnes, with an average haul of 890 miles.

The annual MREs for CN and CP are calculated each year using a formula based on total grain tonnage and average length of haul as well as the Volume-related Composite Price Index (VRCPI).

The VRCPI is an inflation index accounting for forecast changes in the two railways’ costs for labour, fuel, material and capital purchases.

The agency said in April 2015 it would trim the VRCPI for 2015-16 by 5.6 per cent, to 1.2517, based in part on a sharper-than-expected drop in fuel costs.

Specifically, the CTA said at the time, it had “over-forecasted” the expected change in the railways’ fuel costs for 2014-15, based on “third-party” outlooks for crude oil prices and the value of the Canadian dollar.

In April 2016, however, the CTA bumped up the 2015-16 VRCPI by 0.8 per cent, to 1.2668, after CN sought an adjustment.

CN had applied for the change earlier that month, the agency said at the time, based on a company commitment to obtain over 1,700 hopper cars from its U.S. subsidiaries.

Those U.S. cars, CN said at the time, were to be pressed into regulated grain service as replacements for withdrawn federally-owned hopper cars in Canada. — AGCanada.com Network

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The Calgary company on Wednesday booked overall net income of $347 million on revenues of $1.554 billion for its quarter ending Sept. 30. While net income was up seven per cent, total revenues were down nine per cent from the year-earlier period.

The most significant declines in revenue showed in the company’s Canadian grain handle, down 15 per cent from the year-earlier period at $222 million, and in its crude oil handle, down 88 per cent at $13 million.

The decline in Canadian grain revenue followed a seven per cent decline in Canadian grain carloads in the quarter, to about 65,000, for freight revenue per carload of $3,435, down $178, CP said.

The decrease, CP said, was “mainly attributable to a decline in volumes as a result of wet weather conditions that delayed the harvest of the 2016-17 crop” — and to lower freight rates in line with CP’s federally-imposed maximum revenue entitlement on Prairie grain for the 2015-16 crop year, often referred to as the revenue cap.

“Effectively the story is the grain story,” Reuters quoted CP CEO Hunter Harrison as saying on a conference call Wednesday with analysts. “If the grain had been like a lot of folks were predicting I think we would have been right in line with what we expected.”

CP’s U.S. grain handle improved in the same quarter, as the railway moved about 49,000 carloads, up 11 per cent, for revenues of $150 million, up one per cent, and revenue per carload of $3,077, down 10 per cent.

That revenue, CP said, was due to “increased shipment of mostly corn and soybeans,” though it noted those increases were partly offset by lower average freight revenue per revenue ton-mile, due mainly to longer hauls, as a “greater proportion” of its U.S. grain handle in the quarter was bound for export.

The railway’s fertilizers and sulphur segment also showed improved revenue per carload, at $4,476, up five per cent, though its potash segment saw revenue per carload down one per cent at $2,782. Revenue in those segments, CP said, was held down in part by lower fuel surcharges, due to lower fuel prices.

Percentage-wise, CP’s crude oil segment posted the most substantial drop in traffic and revenue, moving just 5,000 carloads during the quarter, compared to 25,000 in the year-earlier period, for revenue per carload of $2,732, down 36 per cent.

“Despite decreased revenues, tied to a delayed grain harvest and stiff economic headwinds, our business model continues to perform on the cost side,” Harrison said Wednesday in the company’s release.

“Given the delayed grain harvest, lower crude volumes and persistent economic challenges compounded by a strengthening Canadian dollar, we are now expecting mid-single-digit EPS (earnings per share) growth this year,” he said.

However, he noted, the company would deliver its “lowest-ever annual operating ratio (OR).”

The OR, a ratio of operating expenses to net sales, is cited within business sectors as a measure of a specific company’s relative efficiency in that sector. CP on Wednesday recorded an OR of 57.7 per cent, its lowest-ever against adjusted ORs in previous quarters.

CP’s Montreal rival, Canadian National Railway (CN), is scheduled to release its third-quarter results on Tuesday. — AGCanada.com Network

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