By Kate Jackman-Atkinson, myWestman
In the late 1800s, waves of immigrants flowed into western Canada in the hopes of a better life. In 1872, the Dominion Lands Act came into effect and it granted a quarter section of land to any settler 21 years of age or older who met some basic criteria.
In 1872, Canada was home to about 3,754,000 people and by 1902, that number had grown to 5,494,000. Millions of immigrants from across Europe were drawn to this offer of free land– they dreamt of owning their own land, something nearly impossible as tenant farmers and manual labourers in Europe. Canadian agriculture was built on the dream of land ownership.
Fast forward to today and the reality is reversing, but maybe not in Saskatchewan. On April 13, the Province of Saskatchewan announced that while it is reviewing provincial farmland ownership rules, institutional investors, such as pension plans and trusts, will not be able to purchase farm land in the province.
Saskatchewan’s farmland ownership rules are already the country’s most restrictive and depending on the ongoing consultations, may become more so. The Saskatchewan Farm Security Act restricts foreign buyers from owning more than 10 acres of farmland, meaning that all farmland is owned by either individual Canadians or 100 percent Canadian-owned corporations.
The debate over who can buy Saskatchewan’s farmland is raging and depending on where you sit, opening the market to large investors is either the cause of, or the solution to the challenges facing the province’s farmers.
The demographic and financial changes in the agricultural sector show an industry characterized by fewer, larger farms and more operators over 55 years of age than under. As many producers look to retire, they want to sell their land and with fewer farm operators, the pool of potential buyers is shrinking. The pool of buyers is further reduced by rising land values– the challenge becomes finding not just a buyer, but one with access to the capital needed to buy additional land.
Across Canada, the value of Canadian farmland is increasing and nowhere have the gains been as dramatic as in Saskatchewan. Last year, the value of Canadian farmland increased by 14.3 per cent, according to Farm Credit Canada. Saskatchewan led those gains, with the value of farmland increasing by 18.7 per cent. Last year’s gains weren’t isolated, they came after three years of double digit growth, averaging 24 per cent a year, in the province.
These rising prices have attracted the attention of larger investors looking for stable returns in a time of low interest rates. Canadian farmland is attractive, it’s a stable asset with reliable cash flows and an appreciating value. In 2013, the issue came to the forefront when the Canadian Pension Plan Investment Board (CPPIB) purchased 115,000 acres for $128 million. While pension plans aren’t permitted to buy Saskatchewan farmland, CPPIB manages the contributions of the 18 million Canadians that support the Canada Pension Plan and a legal opinion ruled that its structure was unique and the sale complied with the law.
While another buyer, especially a well financed investment fund, is good for sellers, there are also advantages for those looking for more land to farm. Corporate ownership of farmland allows operators to expand their operation using rented land, which is preferable for some operators. The land purchased by CPPIB is rented to about 100 farmers, many of them younger. CPPIB says that they can partner with young farmers to reduce the debt they carry from land ownership. They argue that they have been met with little resistance from farmers.
For a country that was built on the promise of land ownership for all, the prospect of farming for large corporate owners is a bit unsettling. But it may prove to be the only viable solution. The reality is that many farmers will want to retire in the coming years and many want to sell, not keep their land and rent it to others. Unless some mechanism can be established to make rental arrangements between individual retiring farmers and renters more attractive, the only solution might be corporate land ownership.