Saskatchewan is clamping down on the sale of the province's farmland to Canadian pension funds and other large institutional investors, restricting deep-pocketed groups at a time when land prices are climbing.
Agriculture Minister Lyle Stewart said Monday that Saskatchewan will review provincial farmland ownership rules. In the meantime, pension plans, administrators of pension fund assets and trusts will not be allowed to purchase land.
Saskatchewan has long had some of the toughest farmland ownership rules in the country, generally allowing only individual Canadians and 100-per-cent Canadian-owned companies to buy land. But as the price of farmland has risen in recent years, pension funds and other investors have been eager to snap up acres.
The value of Canadian farmland rose by 14.3 per cent in 2014, according to a report from Farm Credit Canada, the country's largest agricultural lender. Saskatchewan posted an average increase of 18.7 per cent, the highest of any province.
Two years ago, the Canada Pension Plan Investment Board, which manages investments for the Canada Pension Plan, paid $128-million for 115,000 acres of land that produces wheat, barley, canola and other crops. The board indicated it planned to buy more acres, fuelling fears that these types of purchases would inflate farm prices. But others have argued that as the average age of farmers rises, having more buyers benefit those who want to sell their property. The debate has raged amid increased interest from foreign owners in finding ways to buy land.
"Our goal is not to limit investment, but to ensure the long-term success of Saskatchewan's agriculture industry and economy," said Mr. Stewart in a statement Monday. More details about the government's review and consultation process will be released later this spring.
The Canada Pension Plan Investment Board raised alarms about the government's decision. The pension fund said it had alerted provincial officials about its plans to buy land in advance of the 2013 deal, and "did not receive any indication at the time that its investments in farmland were not welcome."
"CPPIB has long been a proud investor in Saskatchewan businesses, and we trust that the government will ensure that the province remains open to Canadian investors," said Michel Leduc, a board spokesman. "We are confident that our farmland investments will generate returns for the CPP Fund while doing no harm to Saskatchewan, its farmland market or the farmers. If anything, they will benefit."
Many institutional investors have been looking to alternative assets such as agriculture in the hunt for stable, long-term investments amid current low interest rates. Manulife Financial Corp.'s Hancock Agricultural Investment Group has a portfolio of more than $2-billion in farmland. Its holdings grow crops such as macadamia nuts and cranberries in several countries. Other pension plans, such as Caisse de dépôt et placement du Québec and British Columbia Investment Management Corp., have also made investments in agriculture in recent years.
The CPPIB acquired its stake by buying a portfolio of assets called Assiniboia Farmland LP. The pension fund invested some capital upfront to clear away waste and old infrastructure, before renting the land to farmers and profiting from the cash flow and gains in land prices.
Farmland ownership rules vary across the country. Unlike Saskatchewan, British Columbia and Ontario have no restrictions on foreign ownership. Alberta and Manitoba have caps on the number of acres foreigners can own.
Many farmers will favour the new restrictions, said Norm Hall, president of the Agricultural Producers Association of Saskatchewan. He was particularly encouraged by another new regulation introduced Monday that said farmland purchases must be made through a financial institution registered to do business in Canada. That will stop foreign lenders from indirectly amassing a stake through Canadian citizens.
While having pension fund investments in farmland could make rented land more accessible, Mr. Hall said he would rather see farmers work together to find rental and sale agreements.