Canada’s agricultural future is facing a critical inflection point as the country continues to lose its limited arable land to unchecked urban development and spiralling land costs, with new research painting a stark picture of mounting economic and environmental pressures on farmers.With only about 7 per cent of Canada’s total land area used for agriculture, preserving the remaining farmland has become more than just an economic issue—it is increasingly being recognised as a national imperative.
According to fresh findings by the Canadian Agri-Food Policy Institute (CAPI), the decline in actively farmed land is accelerating, largely due to urban sprawl and rising real estate values that push agricultural activity to the margins.Half of all farmland loss in Canada can be directly attributed to city expansion—land that, once paved, is permanently removed from production. “It’s nearly impossible to undo asphalt and convert it back into farmland,” said a senior research fellow from CAPI, highlighting the irreversible nature of land-use conversion.
The remaining losses stem from previously cultivated farmland now lying idle, due to factors ranging from land speculation to operational challenges and policy inertia. Alarmingly, rental costs for farmland have surged to unsustainable levels. Across much of the country, rental rates now consume nearly 90 per cent of a farmer’s average net operating income per acre, leaving very little financial room to manage production, labour, and risk.
This economic imbalance is exacerbated in provinces like Ontario and British Columbia, where high population densities and booming real estate markets have driven up farmland valuations, while reducing viable farming returns. In contrast, provinces with lower densities have higher capitalisation rates, but limited alternative land uses, presenting different—but equally complex—policy challenges.Researchers caution against relying solely on land appreciation as a justification for investment, noting that while the capital value of farmland has risen sharply in recent years, the actual return on investment for active farming remains underwhelming. The result is a market environment where land becomes a speculative asset rather than a productive agricultural resource.
Beyond economics, the study delves into the environmental and sustainability trade-offs that Canadian farmers face. Soil conservation and sustainable farming practices, such as cover cropping and crop rotation, are often costly and complex to implement. Some practices are complementary, while others act as substitutes, making it difficult for farmers to adopt them without clear long-term incentives or support.Additionally, succession planning plays an unexpected role in shaping sustainability choices. Farms with generational continuity tend to favour high-value crops that offer better short-term profits but can have adverse impacts on soil health and ecological sustainability over time.
Climate volatility further complicates operational decision-making. Under normal weather conditions, Canadian farmers often specialise in high-return crops. However, when faced with extreme weather—droughts, floods, or temperature shocks—they are forced to diversify their crop portfolios, which helps mitigate risk but often results in lower overall productivity.Crop insurance has served as a key stabiliser in this volatile environment. Yet, as extreme weather events become more frequent and severe, the financial burden of payouts is growing. Direct compensation through Canada’s business risk management programmes has jumped from $2 billion to $5.4 billion in recent years, raising concerns over the long-term viability of the current system.
Importantly, the study calls for differentiated policy measures. Large-scale farms typically have better access to credit, insurance, and market linkages, allowing them to absorb shocks more easily. Small and medium-sized farmers, however, struggle with thin profit margins and limited institutional support. Experts recommend simplified insurance procedures, targeted subsidies, and performance-linked incentives to bridge this gap.At the heart of the issue lies a data challenge. Much of Canada’s agricultural policy still relies on census data that is up to five years old, severely limiting the ability of decision-makers to respond in real time to emerging land use, economic, and climate trends.
As cities grow and the climate crisis intensifies, the need for a strategic rethink on land use and agricultural policy in Canada has never been more urgent. Protecting what little farmland remains—and making it economically and environmentally viable for farmers—will be key to sustaining food security, rural livelihoods, and ecological balance in the years ahead.
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