(The Leader-Post) Saskatchewan farmland values increased an average of 3.4 per cent during the second half of 2009, following gains of 3.4 and 8.8 per cent in the two previous six-month periods, according to Farm Credit Canada (FCC).

Farmland values in the province have been rising since 2002 and increased by an average of 0.6 per cent per month during 2009, said FCC's farmland values report released Monday.

Several factors played a role in the increase of land values, including low interest rates, investor demand, strong pulse crop prices and good yields in most areas.

Heavy clay soils in lentil-growing areas commanded a superior price, mainly due to strong commodity prices. Due to low interest rates, purchasing farmland is sometimes seen as the lower-cost alternative to renting, which has contributed to continuing strong demand, the report said.

Saskatchewan farmland is also attractive to investor groups and out-of-province buyers who view prices as reasonable when compared to other provinces. As well, local producers continued to expand their land base, keeping the market price strong.

Speculators have been purchasing farmland around the urban fringes with anticipation that the land will eventually be developed for commercial, industrial or rural residential uses.

However, the late harvest, challenges in the cattle industry, lower commodity prices and higher input costs in the spring are some of the factors that moderated the overall increase in land values.

Overall, the average value of Canadian farmland increased 3.6 per cent during the last six months of 2009. Farmland values remained the same or increased in each province, while Manitoba experienced the highest average increase at 5.9 per cent.

Rémi Lemoine, senior vice-president of portfolio and credit risk for FCC, said the report shows the market for farmland is evolving and producers are reacting to market dynamics.

"Low interest rates, favourable grain prices and high yields generated continued demand for Canada's high quality farmland, Lemoine said. "These factors, in addition to the limited availability of quality farmland for sale, are some of the reasons farmland values continue to increase," he said.

In the last three semi-annual reporting periods, farmland values in Canada increased by an average of 5.6 per cent in spring 2009, 2.9 per cent in fall 2009 and 3.6 per cent in spring 2010.

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