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A Primer for Investing in Canadian Farmland

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Primer for Investing in Canadian Farmland [A while back, our good friend Tom McCafferty argued here that few investments are likely to outperform Canadian farmland over time. In the essay below, he explains how you can invest in Canadian farmland yourself.  Besides being a former farm realtor, Tom is the author of numerous acclaimed books on trading. His Options Demystified is a how-to primer we enthusiastically recommend to all who would seek to profit from puts and calls.  RA]

“Put your money in land, because they aren’t making any more of it!” This is the most famous of the Will Rogers quotes on land or real estate.  When I think about burying some serious money for the long run, I think of farmland.  In a recent op-ed for Rick’s Picks, I was very bullish on Canadian farmland.  My reasons: 1) Canadian farmland is very productive; 2) low cost on a global basis; 3) Canada is a stable country with a very adequate supply of water, energy and fertilizer; and 4) even the weather is cooperative as its growing season gets a little longer each year.

a-primer-for-investing-in-canadian-farmland

Some of Rick’s readers ask for more details. When ever you invest in land as a non-resident, you need to check the local laws.  For example, when I was a farm realtor I had a group of Italians interested in buying a 2000-acre farm in Illinois.  Now Illinois has a law prohibiting non-resident aliens from owning farmland.  But it doesn’t prohibit corporations from buying farmland.  So, we created a corporation and bought the farm.

How does this apply to buying a Canadian farm?  First, does Canada have any restrictions on how much land can be owned by non-residence aliens?  The answer varies by province, as it does in the United States by state jurisdictions.  Here’s a summary of provincial land ownership laws in Canada:

  • British Columbia:  No restrictions on non-farmer, out-of-province or non-Canadian ownership.
  • Alberta:  Limits foreign ownership to 2 parcels with a limit of 10 acres.
  • Saskatchewan:  It also has the 10-acre limit for non-resident aliens, but there is a lot of talk about opening land purchases to anyone.
  • Manitoba:  Non-Canadians can purchase no more than 40 acres.
  • Ontario: No restrictions.

Next question is, how do you buy and farm the land if you are not a farmer?  Just as in most countries, there are farm realtors and farm management companies.  But most investors would probably prefer to buy into a limited partnership or acquire shares of a company that owns and manages its farmland.   Here are a few places to start if you’re looking for farmland investment firms:

  • Hancock Agricultural Investment Group:  It is a Boston-based unit of Toronto’s Manulife Financial Corporation and one of the largest owners and managers of U.S. farmland.  It first entered the Canadian farmland market in 2009 with the purchase of 1,100-acre cranberry farm in Quebec.  It manages almost 200,000 acres of farmland in the U. S.
  • Assiniboia Capital Corp.:  It is the largest farmland investment/management firm in Canada.  It manages over 100,000 acres.
  • Westchester/Cozad Asset Management:  This Illinois-based corporation manages approximately 70,000 acres in 11 states with a value of approximately $400,000,000.00.  It has plans for an office in Saskatchewan.
  • Bonnefield Financial Inc.:  It is Canada’s first national farmland asset and farmland property management company.  It has private limited partnerships available and larger programs for institutions.

‘No Problem’ Selling to Aliens

The Canadian national government does not seem to have a problem with non-resident aliens owning, working and investing in its farmland.  It has participated in providing funding for some of the larger purchases and has provided technical assistance.

All of these companies have websites for more information.

Food, feed, fuel—that’s what the world needs now and will need even more and more as the world’s population grows and as new middle classes emerges in developing countries, working their way up the food/fuel chain.  There has to be some serious money in farmland in the decades ahead.

***

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  • mike February 20, 2012, 2:31 pm

    Hi
    just looking for some ideas
    a registered investor ( has $1000000 plus and income is 200000 minimum ) are allowed to invest in farmland (along with corporations, investment groups etc..)
    but the individuals who do not meet these criteria is not.
    How else can you invest in farm land without actually buying a farm?
    if anybody has an idea i would appreciate it
    thanks

    • j February 20, 2012, 9:13 pm

      Hi Mike, I know of an old farmer in Ont Canada who was no longer able to tend his crops so he subdivided off his acreage and rented the land allowing several apartment renters a space to produce a garden big enough for their needs. The farmer wasn’t the first to do so by any means, renting acreages is one way for city wannabe farmers to enjoy a decent size garden….I know its not investing in land….but one can’t knock the results.

      Only problem is the raiding of your crops….seems one can leave golf clubs unattended at your local course but food is a whole other story…

  • mario cavolo February 19, 2012, 3:19 pm

    Speaking of owning and living on farmland, since there are 600 million people doing so here in China, including close friends and family, I thought I might throw in some interesting comparisons and observations…

    Robert talked about being “broke” and what “broke” actually is? Well, in the case of China’s farm families, they are by all means flat “broke” , but there lives are STABLE; interesting paradox.

    1. My wife’s cousins have an animal farm up in the northern China, cows, goats, chickens…its a hell hole by everyone’s reckonning here, its like “roughing it” and working your ass off, but they NEVER worry about things like having the rug pulled out from under their lives. They have a roof, heat in the winter from a big ass coal stone heating bed, they have plenty of food every single day; fresh animal meat and vegetables and flour. What more I ask? They are 30 minutes on the outskirts of the city.

    2. A close friend’s wife’s family lives on their farm out side of Nanjing…they live in a stone/concrete building, the windows are always open, they have no A/C in the summer, not too bad, they have no heat in the winter, they freeze their asses off, but its like researchers in the antarctic, it dont’ matter what the temp is if you’re wearing an inch thick worth of clothese to keep warm along with hot water footbaths to warm the body a couple times day…simple country life. No future prospects, but no worries either; plenty of fresh food and a roof over your head every single day… the local village rural schools for the tots…what more?

    3. On rural tropical Hainan Island,where we lived and explored for three years, its tropical weather; with the rise of business and real estate on the island, the farmers became relatively rich, all the dirt roads in the countryside between the farms were paved over; they built their 2000sqm 3 story brick/block/tile homes themselves for $15/sq ft and live simple, comfortable, country farmer lives. Enough to be jealous by many standards…

    Urban midde class Americans can’t go backwards to comfortably live at a bare minimum, as a response to what’s happening to them, that’s the biggest problem America faces, its a place where you can’t afford to be broke. If George and Suzie need to become more entrepreneurial and market mercantilist; to start selling lemonade or homemade bread or their famous family chili beef stew to feed their family at the local street market, they CAN”T because its against the law. If they want to go off the electricity grid they can’t…the “modern” society and asinine laws and incredible corruption in big biz and big govt in the society has them trapped with far less freedom and rights than our chinese country farmers and entrepreneurs who can make a go of it and survive tough times much more easily and cheaply….interesting observations, and that’s all they are intended to be…

    My wife and I agree with the idea to go countryside for the future, but its tough in China and other emerging country environments because the countryside is not safe from thievery, leave for a month and while you’re gone, folks will come and take your stuff, also rural electricity may be non-existent or unreliable, etc…I suspect those kinds of issues are much less important regarding country/farm living in the U.S. or Canada…

    Cheers, Mario

    • Mark Uzick February 20, 2012, 7:16 pm

      Mario, your perspective and insights are priceless. I can’t think of any other source for the kind of observations you just presented; I’ve gotten less from whole books than your few short paragraphs. – Thank You.

    • Cam Fitzgerald February 20, 2012, 11:51 pm

      Did he pay you to say that?

    • Mark Uzick February 21, 2012, 5:55 am

      Cam, I often enjoy reading your comments too, even if I usually disagree with many of your opinions – well at least when you don’t forget that this isn’t a Stockhouse or Yahoo Finance message board.

      And – yes – he paid me and everyone here in advance by writing that remarkable essay from his unique perspective.

  • Paul February 18, 2012, 9:03 am

    One should bet or sell the farm before an economic collapse in order to make your life less difficult … if you really desire life on a farm and growing your own food for your family and for income then simply lease it back.

    This way in the event the government falls apart and millions of uncontrolled people now living in big cities begin to swarm into the countryside in search of food you won’t have to become a mass murderer trying to keep them off the farm (because the farm belongs to someone else) … and you will save yourself a fortune in ammunition that you can better use to buy some gold.

    I know some don’t like saving gold … well then save some other tradable commodity you can use in barter if the government loses control over the masses and can’t enforce the use of its fiat paper as money anymore.

    Some may want to save cigarettes, cans of tuna, some other metal like copper pennies, etc., etc. … however saving the above items only provides a “short term” solution for saving your wealth for trade and barter because the cigarettes can become stale, the tuna has an expiration date and the copper pennies can corrode and turn green.

    Using gold avoids the corruption of your savings over “very long” time periods (Roman or Spanish gold coins found today are as good for barter in todays fiat as when they were first minted hundreds or even thousands of years ago.

    History clearly shows that gold retains its barter value even in the fiat paper of the “New Governments that Arise” after the old (Roman, Spanish, etc.) Empires have fallen.

    • gary leibowitz February 18, 2012, 7:33 pm

      You are betting on a cataclysmic event. The odds are against you. Do you really think the world will fall into chaos?

      The last depression didn’t cause such an event. Hardships and adaptation to a dramatically scaled down life style is more likely.

      The more logical expectation is one of moderation. Will gold do well in either a deflationary depression or inflationary recession? I know it will do well if the world economies start picking up, but as of today those odds are a long shot.

      Fear of the unknown will result in more gold purchase but that can very well be offset by short covering for losses in other assets.

    • mario cavolo February 19, 2012, 2:45 pm

      I’ll stick with you on the moderate view Gary, there are far too many variables of unthinkable, random consequence and interrelationship to let me believe that system can actually evaporate into ash. Which leads back to that “hyperinflation” idea…it continues to be my understanding that hyperinflation is an “event” not a trend, brought on by a specific govt/banking intervention / set of decisions. ie, you wake up one morning to find that your govt/banking system has announced a freeze on “x”, the transfer of “y” and the issuance of “z” or something like that. In that kind of situation, such as occurred in Argentina a few years back. We have friends with an apt in Buenos Aires and a farm in Mendoza, they know that the whole population down there is used to one crazy govt announcement after another to shake up their lives… similar happens here in China, serious policy decisions get made which everyone has to swallow and live with, it ain’t a committee!…and there’s nothing anyone can say to me that having the committee is the better way as the U.S. system of govt has proven…what a bunch of self-serving turds…

  • gary leibowitz February 18, 2012, 6:29 am

    Bet the farm that commodities and the land that is used for growing this stuff will do well. In fact it is looking like almost everything and everyone will do well this year, no matter what you invest in. My worse fears might be realized. I stated many months ago that if the market doesn’t break by the end of last year we will most likely not do so till early 2013. It is also looking like a great set-up for some impressive up moves to come.

    A financial newsletter I recently reviewed suggested we could be in a 12 year megaphone pattern. Higher highs and lower lows. If true it suggests a terminal move of the Dow at around 15,000. I will not bet the farm on it but it is a possibility given the recent unexpected continuation of this rally. Too early to say but my money is off the table for any sort of major crash this year.

    Food for thought.

  • Paul February 18, 2012, 2:18 am

    Someone tell me … what use will farmland have when millions of hungry locusts from the big cities begin to migrate outward looking for food? …

    How many guns and how much ammunition will a farmland owner need to protect his crops? … and what happens when he run out of ammunition?.

    I can’t see this farmland owner being able to sell his overrun farmland except for some worthless fiat paper.

    Probably the safest location to hide is probably directly in the middle of one an empty big city … however to survive you will need to own “something of value” to bargain with for food stolen off the surrounding farmland by some thieves.

    That “something” could be paper fiat or gold … but remember paper fiat will only be taken by a thief (who stole extra food off the farmland) only if there is still a functioning government around that can enforce the use of paper fiat as money.

    What gold bugs inately assume is that there will be no government around to enforce the use of fiat paper as money … and that is why they buy gold and other things that may have barter value in a collapsed society.

    In a total collapse of the social order the only good use for owning farmland would be to have a place to bury your gold.

    • SD1 February 19, 2012, 3:11 am

      Oh my Lord, get off the internet and get a life!

  • johnseattle February 18, 2012, 1:46 am

    Just remember Canada was hit and continues to be exposed to high radiation. IT’S ACCUMLATIVE!

  • ROGER, Canadian Libertarian February 17, 2012, 8:53 pm

    I have a 10.6 acre parcel in Timmins, Ontario, CANADA and several 240 acre parcels in Paraguay, SouthAmerica for anyone interested: http://www.angelfire.com/wv/timmins
    http://www/angelfire.com/wv2/wildernessacreage

  • JJ February 17, 2012, 8:22 pm

    Back in the 70s we saw lawyers and doctors buying up farmland as an investment and you know what happened to them? they got their hat handed to them when commodity prices tanked and rents fell or land couldn’t be rented out. Same thing is going to happen again.

    Farmers are resilient people and can tough out weather disasters and commodity crashes, but the average investor can’t.

    • Cam Fitzgerald February 17, 2012, 11:35 pm

      JJ, do you also think we will see a commodity crash? We need to consider seriously how gold would be impacted then. I think Ehrich had it about right yesterday. Nothing will be immune in the end and cash may be the last man standing.

      If I did not say so already Ehrich, that was a terrific article.

  • Brian February 17, 2012, 6:55 pm

    I wouldn’t count on the growing season getting longer each year. If I recall correctly, the Russian Academy of Science thinks we are entering a cooling period, not a period of global warming. It sure is unseasonably warm and dry here in Minnesota, though.

  • negvex February 17, 2012, 5:33 pm

    The rules in Saskatchewan also stipulate that a “public company” cannot hold an interest in Saskatchewan or Manitoba farmland. In Saskatchewan it is also the case that a corp or LP cannot have a single non-resident legal or beneficial interest holder. Agcapita Farmland Investment Partnership owns approximately 40,000 acres in Saskatchewan, is the only RRSP eligible fund in Canada, and has one of the longest operating track records in the Canadian market – Fund III is currently raising capital in Canada.

  • RichardB February 17, 2012, 5:01 pm

    I buy scp on the tsx from time to time. Do your own due diligence. If you believe that money is toast, then real assets and gold may help out.

  • FSabbagh February 17, 2012, 2:55 pm

    I would think twice about buying farmland in the Western portion of North America. The Fukushima fallout levels there are high. They’re not great anywhere in the Northern Hemisphere but higher out west.

  • JosephC February 17, 2012, 7:06 am

    Robert, Baja,,you are a genius,,,forget farmland, unless you are obsessed about getting up at 5:00 AM, and work after supper till sun goes down . In winter,,try that , going out feeding and milking the cows in -20F. trust me I have tried both. I love fish, the sea of Cortez should provide me enough to feed me for another 30-40 years. And if I need to “farm”, I can grow all the cukes and tomatoes in the sands of the Baja. the great thing about “farming”, is that you do not have to worry about your weight problem , nor about what to wear to the gym.

    • BDTR February 17, 2012, 1:39 pm

      Yeah, JC, Baja is amazing and the Sea of Cortez a fisherman’s, sailor’s and photographer’s paradise, …at least for those lucky enough to avoid a inevitable downside that now pervades Mexico.

      In Bahia de Los Angeles a few years back I was fueling at the one remaining station, after Pemex abandoned theirs, owned by one Jose Luis Ortiz. As often happens in Mexico, complete strangers engage in conversation that can last for hours, as was the case here with Jose.

      He described a continual cat and mouse scenario between Federales and drug smugglers that effectively left the tiny population of this dreamlike fishing village totally victimized. In essence, the same degree of criminality was imposed on the villagers by the opposing sides which included everything from the theft of outboard motors that fishermen depended on for their very existence, to the abduction and raping of women and, sometimes, children.

      Like a black tide, one side would move in for a day, the other the next, and take or do whatever they pleased with autonomy.

      If ever there was a comparative hellish example of a systemically exploited citizen/peasant population, it exists amid the visual splendor and lovely people of instantly lawless Baja.

    • Robert February 17, 2012, 7:24 pm

      I spend a lot of time in Mexico, and I agree that the oppression of a naturally peaceful citizenry (by both criminals, and the Western influenced governement thugs being manufactured to counteract the criminals) is tough to witness.

      In fact, I think (I know) it is my travels abroad that make me so intolerant of oppressive gov’t bureacracy in all forms.

      When you see first hand, and come to understand that uniformed agents, put in place to ensure “the preservation of safety and security” is really nothing but oppression, you begin to understand why people eventually choose violent reaction over passive submission.

      Harken back to the video of the “calm, peaceful” dog being put up for adoption a few weeks back that bit the news anchor’s face off on live TV … That dog was perfectly cool with his surroundings until he felt immediately threatened, and then his attitude changed, his posture went defensive, and that
      news chick was probably wishing that the dog had simply chosen to exercise his right to vote for a different news anchor instead of taking the violent path he chose instead…

  • JosephC February 17, 2012, 6:59 am

    I am a Canadian farm boy, boobah to anyone who thinks buying farmland, without the dubious benifit of having born to it, and worked it, is the answer to long term future security, let alone wealth. Anyone interested,,,line up. I will gladly sell you “farmland” , manage for you, you hold the land , I will own the crop. Think about it. Then forget about it. Buy Monsanto, if your moral fiber is of sufficient vacuity..

    • John Jay February 17, 2012, 3:56 pm

      JosephC,
      What are property taxes like in Canada on farmland ?

  • steve4 February 17, 2012, 6:31 am

    are the Hidden Pivot Scholarship training sessions completed? was looking forward to seeing a few more of them.

    • Rick Ackerman February 17, 2012, 9:58 am

      In lieu of formal, scheduled sessions, I’ve asked each of the three scholarship students to call me at any time with their individual questions and concerns. I will record these sessions when they take place, and the recordings will be made available soon thereafter.

  • Robert February 17, 2012, 4:33 am

    Great article Tom!

    A topic I must admit I am fascinated (and actually personally conflicted) by…

    Why conflicted?

    Simply because when the two halves of my brain engage each other on conversation regarding real estate investment, my analytical left brain heads for lush green pastures best suited for sustaining a productive, self sufficient lifestyle; while my romantic right brain heads for the quiet serenity of a secluded beach in Baja.

    🙂

  • j February 17, 2012, 3:52 am

    Being a Canadian I’ll tip my hat to an excellent article for those non-Canadians looking for farmland.

    Timing wise I wouldn’t rush to buy as we didn’t have the real estate sell off the US did from the 2007 highs as our govies jacked up the available Canadian Mortgage and Housing lending pool just in time as interest rates were slashed as the worlds credit markets melted….made for a perfect injection of cheap easy money preventing a big % drop in real estate values. Many are now calling for Canada to rollover from crazy high pricing anywhere from 10-30%….so no need to buy anytime soon imo…or search the web many articles regarding Canada’s high debt levels and over priced real estate.

    I know of many Canadian’s who have purchased land not for investment reasons but to be self sufficient growing their own chemical free food beating inflation off even better than gold some are living off the grid…but thats a whole other mindset…..

    Oh and winter, it happens everywhere in Canada to a lesser degree in southern regions of BC, but to suggest the growing season is year round is misleading.

    j

    • Cam fitzgerald February 17, 2012, 7:46 am

      We did not really see excessive price escalation in farmland up here though J. Certainly not like the US. There is not a bubble in farmland (Fraser Valley and regions lying near Toronto excepted) like still exists in some of the States where an acre can fetch an ungodly 10,000 dollars. Nobody can farm profitably at those prices and so I only assume that the US property bubble still continues on in some rural areas and in some classes of land. Up here meanwhile, acreage prices are high but are nowhere near overpriced yet. I therefore agree with Tom McCafferty that Canadian farmland still represents a very good investment opportunity. You sure as hell don’t need to actually raise chickens or get up at 4:00 am to own it and profit from it. All you need is your cheque book and the desire to take advantage of opportunities presented by lands that are productive and feed into export markets.

    • Kevin February 17, 2012, 7:35 pm

      Jeez, if you thought $10K/acre was expensive how about $0.5 million per acre? Nah, were not in a bubble…… how high can prices go and how much are people willing to pay…… ???

      http://www.yorkregion.com/news/news/article/1028937

    • j February 17, 2012, 7:49 pm

      Hi Cam, its a tuff one because a 100 acre property will be priced on two values the land and the home….land may not see the downtrend in value many now here in Canada see unfolding…but the home value will be effected.

      I don’t think Tom was suggesting anyone drop their normal life/career to become a farmer…its doable but not easy by any measure….investing in pure farmland is a bit of a no-brainer as yes we humans will always need to eat…sort of up there with lake front property=always in demand….yet we’ve seen some great value % move both up and down as the economic background dictates value.

      Is there any investment out there today thats a no-brainer investment, me thinks not

      j

    • Cam Fitzgerald February 17, 2012, 11:30 pm

      True enough J. The home quarter is fetching some outrageous prices when they are within commuting distance of the major burbs. Like Kevin pointed out, idiocy knows no bounds when speculators start buying up farms for subdivisions and prices rocket into the millions for grain land. But that chicken is coming home to roost. There was an article carried by Bloomberg today quoting a professor from the Richard Ivey School of business. He says Canada is headed for a severe drop in home prices based on the relationship between GDP growth and housing investment. That ratio has gone bad to make a short point. Really bad. Have a look at the chart for yourself. It was a new one for me and adds another layer of evidence that we are seriously in overbought territory up here.
      http://www.bloomberg.com/news/2012-02-17/canada-housing-poised-for-severe-drop.html

    • j February 18, 2012, 12:22 am

      Thanks for the link Cam, I’d say most here are chart watchers and the Macd-blueline is rather toppish (obviously not a Macd indicator) only hole in the artivle imo is the uptic date in real estate values from 2006 to 2009 is where I live topped out, Banff Alberta

      Enjoy the loooong weekend all!

      j

  • Henry Hub February 17, 2012, 3:41 am

    I have a lot of friends who are seriously contemplating buying farm land. You know, when the SHTF sort of thing. I have to laugh, these are guys who don’t even cut their own grass. I can just see them behind a horse and plow. LOL, Very funny!

    • Doug March 6, 2012, 4:45 pm

      With the world being flattened (http://mitworld.mit.edu/video/519 ) moving to a location with internet capabilities makes it possible for your city folk friends to keep their day job and give it a go on a farm part time. This article was all about investing in farmland not becoming a farmer. But I agree with you @Henry Hub, I have a lot a friends looking for a more rural lifestyle as well. But then again, I bought a farm so maybe I’m a little biased.