Foreign investors pay significantly more per acre than those in farm successions do, says a new report
By Jennifer Jackson
Saskatchewan farmland is in high demand – but not necessarily just with farmers. Some of the province’s 58 million acres of farmland is viewed as an investment asset, as opposed to a resource for the family farm or community, according to a March 14 study about Saskatchewan’s farmland investment patterns.
The report, titled Who is Buying the Farm?, was co-authored by André Magnan, associate professor in the Department of Sociology and Social Studies at the University of Regina, and Annette Aurélie Desmarais, Canada research chair in human rights, social justice and food sovereignty at the University of Manitoba.
Background:
The ownership of Saskatchewan farmland has been a hot topic amongst farmers and other province residents in the past few years. In 2003, the Province weakened its regulations that stated only Saskatchewan residents could acquire over 10 acres of farmland. After this change, companies and investors began purchasing large quantities of farmland, the report says.
It wasn’t until 2014 that the stockpiling of land became a controversial issue amongst farmers. That year, the Canada Pension Plan Investment Board (CPPIB) bought some 115,000 acres of land from Assinboia Capital Corp., a Saskatchewan-based investment company.
The agricultural industry began to question the fairness of farmers competing for farmland with million-dollar investors that were foreign to the province.
To address these issues and loopholes in the system, the Province passed legislation in 2015 to limit large trusts and pension plans from buying farmland and to provide stronger penalties for those who violated the rules.
This new legislation did little to settle resident’s debates regarding foreign farmland investments. Some farmers argue land prices are inflated, which makes it hard to expand or start up in the industry. They also believe these prices can threaten the strength of small, local communities. On the other hand, some farmers welcome foreign investors for the chance for a stronger market in which to sell their land or retire from farming.
Findings:
From 2002 forward – the year before the Province weakened farmland ownership rules – investor ownership began to grow significantly, the report says. Following a spike in foreign land ownership in 2007, 37 investors that Magnan and Desmarais identified owned a total of 837,019 acres, in 2014.
“In the year of peak activity, 2012, investors accounted for nearly 10 per cent of all arm’s length transactions in the province,” according to the report. “In other words, investors purchased one in 10 acres of farmland sold in transactions involving independent parties.”
To further examine investor purchases, Magnan and Desmarais examined 16 rural Saskatchewan municipalities where investor farmland purchases represented over 5 per cent of arm’s length sales.
“In (these 16 rural municipalities), investors paid more per acre of farmland, on average, than other buyers in all but two years,” according to the report.
“Between 2007 and 2014, the years of increased investment activity, investors paid on average $882 per acre versus $633 per acre for other arm’s length buyers and $513 for buyers in family transactions.
“In other words, investors paid on average 39 per cent more than other arm’s length buyers and 72 per cent more than intra-family buyers for farmland in the 16 (rural municipalities) we examined.
These investor sale trends between 2007 and 2014 (less the two off trend years of 2009 and 2010) seem to directly follow Saskatchewan’s rising farmland values.
“The fact that investors have paid significantly more than other buyers, … lends support to concerns about the speculative nature of investor activity.”
Reflection:
Although investors only own what may seem like a small portion of the province’s farmland, increasing land values and sales suggest investors may very well have a significant influence on the farmland market, according to the report.
Currently, since the strengthening of foreign land ownership regulations in 2015, private investors can still purchase Saskatchewan farmland.
Magnan and Desmarais believe that, although the farmland market is seemingly cooling off, data in their report may help add a new angle to the Province’s discussion about farmland investors.
Notable Saskatchewan farmland investors (as of 2014), as mentioned in the report:
- Private investor Robert Andjelic of Andjelic Land Inc. owned 160,858 acres of Saskatchewan farmland spanning across 78 rural municipalities. Andjelic currently resides in Alberta.
- Private investor HCI Ventures Ltd., a family managed investment company, owned 8,010 acres in 2002. The company’s holdings increased to 113,723 acres in 2014.
- The Canada Pension Plan Investment Board owned 113,867 acres in 2014.
- Cor Van Raay with Van Raay Land Inc., a farmer and investor partnership and prairie feedlot owner, had 33,730 acres as of 2014.
The full report and list of farmland investors is available for free on the Canadian Centre for Policy Alternatives website.