Larry Spratt was combining with his father on their grain farm near Melfort, Sask., last November when a car pulled up along a nearby highway.
Out jumped Wally Johnston, a former Ontario farmer and now a vice-president at Bonnefield Financial, a Toronto-based investment firm. Mr. Johnston waved the Spratts over for a chat. “He said he was touring around Saskatchewan trying to meet farmers and we talked to him for a while,” Mr. Spratt recalls.
Mr. Johnston explained that Bonnefield was looking to buy farmland for investors and then lease it back to farmers to operate. The Spratts had heard the pitch before. They knew several farmers who had signed up with other investment companies and land prices in the area had been soaring as a result. Some farms were going for as much as $1,200 an acre, more than double the price in other parts of the province.
Mr. Johnston lucked out. It just so happened the Spratts rented a piece of land that was coming up for sale. Mr. Spratt and his father wanted to keep farming the acreage but they couldn't afford to buy it. So he put Mr. Johnston in touch with the owner and they struck a deal. A few weeks later Mr. Spratt negotiated a rental arrangement with Bonnefield, a private firm that invests on behalf of wealthy Canadian investors. “It worked out well,” Mr. Spratt says from his home on the 8,000-acre farm.
Similar deals are being struck around the world in what has become an unprecedented rush by global investment funds to buy farmland. By some estimates these funds have sunk as much as $20-billion (U.S.) into these acquisitions. Last year alone they bought 111 million acres of farmland, a tenfold increase from previous years.
Saskatchewan has become one of the new frontiers in this global trend. The province has some of the most productive, and least expensive, farmland in the world. But restrictive ownership rules have largely kept out foreigners, pension funds and publicly traded companies. Pressure is mounting inside and outside Canada to change the rules and open up the province.
“There are people that are dying to invest large sums of money to acquire farmland in Canada that aren't Canadian citizens,” says Jan Kaminski, founder of Bonnefield. “These people are absolutely open for business in Saskatchewan.”
Mr. Kaminski and others say investors provide badly needed capital to farmers that helps them become more productive. But critics worry about the implications of so many outsider landowners.
“We believe that family farmers should be the food producers in this country,” says Terry Boehm, president of the National Farmers Union Canada. “When you shift land ownership, you move into a new feudalism where those that work on the land become labourers. In the Prairie region and many parts of Canada, we have land resources that other countries can't imagine having. Who do people want producing their food and under what kind of methods do they want it done?”
It's easy to see what's driving the interest in farmland. Food security concerns – global agricultural productivity will have to increase 70 per cent by 2050 to feed the world, according to projections by the United Nations – and the 2008 surge in agricultural commodity prices are leading investors to look at agriculture as a promising new asset class. The returns haven't hurt either. According to a U.S. farmland index, investments in agricultural land have significantly outperformed the stock market, generating annualized returns of 13.9 per cent in the last decade.
Today, investment funds at places as diverse as the Mormon Church, Manulife Financial Corp. and the Dallas police department are pouring billions of dollars into farmland. In Canada, the CPP Investment Board is looking at investing in farmland and four companies are already snapping up thousands of acres in Saskatchewan – Bonnefield, Pike Management, AgCapital Partners and Assiniboia Capital. A subsidiary of Toronto-based Sprott Resource Corp., called One Earth Farms, is also working with first nations to manage up to one million acres of farmland in Saskatchewan, Alberta and Manitoba.
