British Columbia led all provinces with a 14.5 percent increase. Alberta came in second and led the prairie region with a 10.3 percent increase, up from 6.4 percent during the first half of the year.

As with all the prairie provinces, Alberta benefited from higher grain and oilseed prices and a growing interest in biofuel production. But there was another factor at work.

"Due to urban and industrial pressure for more land, many Alberta farms are being sold at high prices," the FCC said in a report.

"Producers who are being bought out are relocating to other areas within the province, which is further increasing the demand for land in outlying areas."

Saskatchewan was next in line with a 7.8 percent increase in values, up from three percent during the first half of 2007. The increase was reminiscent of what happened to farmland in the province in the late 1970s.

Farmland in Saskatchewan is still attractively priced compared to farmland in other provinces. Demand is stemming from investors, local farmers and out-of-province buyers.

"Much of the out-of-province interest is coming from Alberta, which has experienced significant land value increases over the last 10 years," the report said.

Manitoba saw the fourth largest increase in land values with a 7.3 percent surge, up from 1.7 percent during the first half of the year.

Most of the increases were seen in the predominant cash crop and specialty crop areas of the province, including the Red River Valley, southwestern Manitoba between Manitou and Killarney and the area around Portage la Prairie.