by JIM ALGIE
Unified, nation-wide restrictions on foreign and corporate ownership of farmland can help stop the continuing decline in Canada’s family farms, a new National Farmers Union (NFU) report says.
The report documents a growing “corporate farmland buy-up” and blames uneven farmland ownership restrictions among Canadian provinces and territories. That, together with rising farmland values and mounting farm debt has led to “increasing consolidation of land holdings” by investment funds and corporate ownership, the report says.
In an interview from his central Alberta dairy farm, today, NFU president Jan Slomp said a dramatic rise in direct, institutional investment in farmland over the past six years represents a significant threat to Canadian traditions of ownership by individual family farmers.
“Monetizing of farmland is the biggest impediment for the next generation getting access,” Slomp said. “That is a huge problem,” he added.
“Even if we have interest, a lot of young people simply don’t have the means to start farming,” Slomp said, referring particularly to dramatically higher farmland values since 2008.
Corporate investors, including the Canada pension fund, “are seeking greater control over Canadian agriculture and a bigger share of the wealth that farmers produce,” the report says. It provides detailed analysis of farmland acquisition activity in Ontario and Western provinces by a variety of investment funds including: Bonnefield Financial Inc., Assiniboia Capital Corp., Agcapita Partners LP, Walton International Group Inc. and AGInvest Properties Canada Inc.
In an interview, today, Bonnefield President Tom Eisenhauer described the NFU report as “well-intentioned but ill-considered.” A frequent defender in public forums of the relatively new business of institutional investments in agriculture, Eisenhauer said institutions provide a logical source of funds for a variety of challenges facing farmers, even those cited in the NFU report. His six-year-old company owns more than $300 million in Canadian farmland leased back to farm operators.
“If the objective here is to reduce debt load on farmers then the absolute best possible partner you could have is somebody who’s willing to put up equity and helps you grow your business,” Eisenhauer said from his Toronto office. “Believe me, there is no pension fund guy on Bay Street who’s ever going to pick up a pitch fork and go and compete against the farmer,” he said.
“The land is absolutely no good . . . without a really good quality farmer there with him to partner to farm it,” Eisenhauer said. He also rejects arguments that institutional interest in farmland helped drive up land prices in recent years.
“By definition we could never buy a piece of land for an uneconomic price,” he said. “We are actually serving to keep a lid on the market . . . I have to earn an attractive return on very nickel I put out the door or else I’m out of business,” Eisenhauer said.
Farm debt has risen along with Canadian farmland values, the report says. It cites Statistics Canada data on the average value of land and buildings which has almost doubled since 2008. Meanwhile, the number of farms and farmers and the amount of farmland in production continues to drop.
The 36-page report, together with a collection of supporting documents, updates an NFU report issued in 2010. Since then – and despite relatively low interest rates and “a short period of better crop prices” – agricultural debt has continued to grow, the report says.
It estimates mid-2013 farm debt at $78 billion, up $14 billion over the previous two and a half years even as the number of family farms and farmers continues to drop. The NFU report also warns against a trend of farm input suppliers linking credit to crop delivery contracts. Farm debt to private individuals and supply companies has risen from $7.5 billion in 2010 to $8.3 billion in 2013, the report says.
In Ontario, farmland values in the four counties of Huron, Simcoe, Middlesex and Essex have far outstripped provincial and national averages, the report said, citing 2013 sales as high as $20,000 an acre in the four counties. Even the average values have grown dramatically.
The report estimates the average value of land and buildings in Saskatchewan has gone from $435 per acre in 2008 to $881 per acre currently. In Ontario, the average value per acre is $8,417, up from $4,593, the report says.
The appreciation of land value “doesn’t do any good for our bottom line but it does for the investor,” Slomp said. He was comparing farm production interests with those of financially-motivated investors seeking long-term returns on the initial capital investment.
“We need regulation to address that unless we don’t see a problem with family farmers vacating the land and having an industrial agriculture taking its place,” the NFU president said.
The report includes eight recommendations it describes as “necessary steps to move the country towards food sovereignty.” They include a “unified set of land ownership restrictions” among federal and provincial governments to allow ownership only by individuals or incorporated farming operations owned by residents of the province where the land is located.
As well, the report recommends provinces report annually on foreign land ownership and offer tax breaks and incentives to encourage farmland ownership by farming families. Governments must “find ways for young and new farmers to gain secure access to farmland that does not require massive indebtedness,” the report says. BF