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Over the past 30 years, the average price per acre of farmland in Canada has soared by more than 800%. According to FarmCredit Canada, the value of farmland increased by about 8% in 2023.Jinfeng/Getty Images
After 30 consecutive years of growth, Canadian farmland values are expected to rise again in 2023 and rise again in 2024, say experts at Farm Credit Canada, a Crown corporation that monitors land sales. talk.
“Prices will continue to rise in 2024 due to limited agricultural land for sale and growing demand for what we grow in Canada,” said FCC Vice Chairman and Chief Economist JP Gervais. Probably.”
Farmland values across Canada rose by about 8 per cent in 2023, compared to 12.8 per cent in 2022, according to FCC statistics.
While next year’s growth may not be as robust as previous years, “the outlook for the industry remains very positive,” Gervais said. “I am confident that demand for land will continue to be strong.”
Over the past 30 years, the average price per acre of farmland in Canada has increased by 827%, from $547 to $4,527.
Ontario farmland, Canada’s most expensive, rose from $3,248 to $17,962 an acre, but the CBC report puts the average price at nearly $30,000.
Gervais says the availability of farmland is “the worst” he has ever seen.
“Farmers purchasing land must already have the land, or the capital base, to purchase.”
In southwestern Ontario, analysts agree it would take 1,000 acres of farmland to feed farmers. Setting this up from scratch could cost him $20 million to $30 million.
A 2020 analysis by the Canadian Center for Policy Alternatives found that “increasingly difficult access to farmland” has led to “concentrated ownership of land, thereby reducing the possibility of farming as a career choice for young Canadians.” Sexuality is effectively suppressed.”
But the next generation of farmers isn’t necessarily missing out.
Over the past decade, there has been a 15% increase in the number of non-farm investors, such as private equity firms, who finance farmland deals and lease land to farmer “partners,” Gervais said. . They are sometimes referred to as people who otherwise could not afford to become farmers.
Thanks to technology, we can now produce more on the same acre of land each year. It’s like if you buy a five-story building, the next year he’ll have six.
— Kent Wilmore, Founder and President of AGinvest
In the United States, it is more common for non-farm investors to own about 20 percent of U.S. farmland, while in Canada, agricultural funds are less established and less than 2 percent of land is owned by non-farm investors. It is.
Investment companies focused on Canadian farmland include AGinvest Farmland Properties in Chatham, Ont., Area One Farms in Toronto, Veripath in Calgary, and Bonnefield based in Ottawa and Toronto. The latter, Canada’s first and largest agricultural fund manager, manages $1 billion in assets, a significant amount compared to Canada’s net farmland value of almost $707 billion. .
Currently, most of these companies’ websites boast fund returns of 8-14%.
AGinvest, which owns 6,000 acres of farmland in Ontario with a $120 million portfolio, says it has returned about 18 per cent since launching its first public fund in 2018.
Kent Wilmore, founder and president of AGinvest, says the key to his company’s success is “buying well,” increasing farm productivity and increasing equity “with every farm we acquire.”
“We are in the early stages of a new era of investment in Canadian agriculture,” said the former longtime farmer.
Comparing agricultural land and commercial real estate 30 to 40 years ago, when investor interest was minimal, “we’re at the top of the table” in investment potential, he said.
Former farmer Kent Willmore said AGinvest generated returns of about 18 percent by “buying well,” increasing farm productivity and increasing capital “with every farm we acquired.” There is.A invest
There are countless factors that drive a fund manager’s passion for an asset. Underlying this is a growing global demand for agricultural products, including food and fuel, coupled with increasing land constraints, a dynamic that has produced returns that have outperformed stock and bond markets since the turn of the century. likely to continue.
“Agricultural land, especially in Ontario, has some unique advantages,” Willmore asserts. “The most important thing is access to water. Many other agricultural regions around the world are losing water.”
Additionally, Wilmore notes that only health sciences receives more global investment in research and development than food production. So even though Canada has lost 8% of its farmland since 2001, innovations in biogenetics, smart machines and big data have increased production levels.
“Technology has allowed us to produce more on the same acre of land,” Wilmore says. “It’s like if you buy a five-story building, the next year he’ll have six.
“Farmers can make more money per acre because one, they can produce more bushels of corn, and two, each bushel of corn has a higher value.”
Brennan Carson, a partner at Oakville, Ont.-based Equate Asset Management, says it’s important for clients to know that investing in farmland is for land development and “not a speculative play.” That’s what he says.
“This is about farmland to feed people.”
Carson says farmland funds like AGinvest are “filling a gap” created by the agricultural sector.
“There’s a very fragmented market of individual farms that have been held by families for two or three generations. They’re not monetizing, they’re not exiting,” he says, adding that “natural buyers” are He added that there was a shortage.
“Someone has to fill that void,” he continues.
Carson said Equate’s 85-customer, $250 million portfolio is heavy on traditional real estate and renewable energy assets.
“There is an emphasis on sustainability in the way we invest our clients’ money,” he says.
“Farmland fits well into that theme,” but until recently “that just wasn’t an option” for the company.
But in recent years, he says, “we’ve gone from having one or two seed investors initially to now having access to farmland for 20 percent of our customers.” “And that number will only continue to grow.”
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