FarmInvestor.com

Investing in farmland can be a good decision for several reasons:

1. Diversification: Farmland investing is an alternative asset class that doesn’t closely correlate with traditional investments like stocks and bonds. This helps investors diversify their portfolios and potentially reduce risk.
2. Inflation Hedge: Historically, farmland and other real assets have provided a good hedge against inflation. The price of farmland tends to increase with inflation, which can protect the investor’s purchasing power.
3. Stable Returns: Farmland often provides more stable returns than many other types of investments, thanks to the constant global demand for food. Even in economic downturns, people still need to eat.
4. Increasing Demand: With a growing global population and a finite amount of arable land, the demand for farmland is likely to increase. This could drive up the value of farmland investments over time.
5. Sustainability and Environmental Impact: There is a growing interest in sustainable and responsible investing. Investments in farmland, especially when paired with sustainable agricultural practices, can align with these interests.
6. Potential for Direct Control: If you’re directly owning and operating the farm, you have a higher level of control over your investment compared to stocks or bonds.
7. Tax Benefits: Depending on your jurisdiction, investing in farmland can offer certain tax advantages.
8. Consider starting your own investment in farms or land call for a conversation about how to get started, how do I manage/operate my land or expand my holdings with considering all options for locations, returns, and tax implications with our farm consultants that specialize in agriculture: Ben Van Dyk 1.403.393.4040 call or text /benvandyk@me.com

Recent announcements from potato processors that include the largest global investment made by McCain worldwide https://www.mccain.com/information-centre/news/mccain-foods-coaldale/ Other potato processors in Alberta are also in expansion mode for french fries and potato chips with large projects in existing and new players in the industry. The large expansion will certainly put pressure on the available irrigated land suitable for potatoes. Land prices and rental values will certainly be affected by the higher demand for potato crops that are typical only grown once every four years on the same parcel . Seed stock growers for potatoes will need to expand or new growers need to supply the market expansion, shortages might stall some anticipated growth.

The near future certainly looks promising for the French Fries / potato industry future market expansion with new innovative use of potatoes can certainly be leading to explosive growth for the simple potato.

Potato processors in Europe are developing products from potatoes for the quickly expanding vegan markets with products such as, beef, cheese, eggs all made from potatoes rich in vitamins & proteins. Source: https://www.rtvnoord.nl/nieuws/1009852/voor-avebe-is-de-aardappel-niet-langer-het-enige-klompje-goud

Farming is certain of change and that is also thru for the demand for land

Call Real Estate Agent : Ben Van Dyk / Real Estate Centre for information on land values, buying or selling to be informed of current market conditions. benvandyk@me.com 403.393.4040 call or text

Farm loan interest has gone up substantial in the last few month’s, purchasing land has become a lot more expensive if you need to finance your land purchase.
Buying land stays very affordable with the current crop prices however alternative financing options become more attractive.
Considering farm transition loans, vendor financing, lease to own, custom farming,
equity financing or active partnership with vendor to transit to an complete sale over time.

Other options would be fractional equity investors that can facility additional equity farm expansion, web platforms : farmtogether.com or farmfundr.com are great examples how alternative money can be used for expansion

Ensuring stable debt & cash flow is critical for any farm operation at any time, higher interest rates maybe short lived, with recessions forecast in the near future. The economy might slow down substantial and interest rates dropping to lower levels to stimulate the economy.

Farming is unpredictable together with the weather, markets, yields, labor and government it is important to plan for success.

Land values are so much more that statistics & numbers, large price differentials exist even between regions or area’s of provinces, Knowing the market if you are buying or selling can make all the difference in getting a fair market price and getting a fair purchase price.

Licensed farm real estate agents can assist property owners to fairly assess values that land may sell for in competitive  marketing and create the desired outcome of an successful sale.

Purchasers competing in a competitive market place might want to consult Licensed farm real estate agents to know the latest sale values the demand for properties they are interested in.

Selling or buying assets or share sale it can make great difference how much is left after taxes or how much the purchaser can save by purchasing shares. We have great specialized Accountants & Lawyers that partner with us to create the right solution for buying and selling.

Initial consulting is free and cost can vary by the tasks undertaken from our menu of services that include: basic consulting, marketing, bid sales/tender, Auctions, Buyers agencies with or without full marketing services.

For free consultations :

Ben Van Dyk,

benvandyk@me.com , 403.393.4040 , benvandyk.ca

Real Estate Centre, 403.345.5100

The new FCC farmland values report for 2022 has just been posted. Overall farmland prices went up 8.3% across Canada, with some provinces posting gains over 22% year over year
https://www.fcc-fac.ca/en/knowledge/economics/farmland-values-report.html

The last few months of the year is a time to reflect on farming , food production, cost of food & world hunger.

In the fall we tend to reflect back on the year of farming and the struggles that farmers and their families are facing to produce the high-quality food they produce in abundance.

The lack of appreciation from consumers, governments, public service workers, and many other sectors rely every day on the high quality of products being brought to the tables around the world.

At this time of the year that many farmers make up the balance of profit & loss, the challenges that they faced with draughts, floods, storms, hail, increased cost, higher taxes in all their inputs (Carbon taxes), unreliable part supplies, and crop inputs it truly has been an extremely challenging year for farmers and their families continuing supplying food for the whole world.
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Now we see world leaders meeting to discuss how to save the world, maybe they can meet how they can support the farmers in their struggles to provide high-quality affordable food for the population with reliable supplies. For many in the farm & ranch industry, it seems that there is a disconnect from government and consumers where food comes from, “food comes from the store” the question is how did it get there and who produced it for the store. 

Let’s make sure that people understand that food production begins at the farm and the cost of production is directly related to inputs, taxes, regulations, and the commitment from farm families to shoulder the challenges they face every year to produce high-quality food. 

Around the world, more than enough food is produced to feed the global population, but as many as 811 million people still go hungry. 
After steadily declining for a decade, world hunger is on the rise, affecting 9.9 percent of people globally.

Let us remember the hard work the farm & farm families contribute to keeping food affordable despite the lack of Government commitment to stabilize operating and input costs

2021 mid-year farmland values update: Uncertainty doesn’t weaken demand

Despite a drought in Western Canada and bumps in the economic recovery, robust commodity prices in late 2020 combined with low interest rates continued to support strong demand for farmland and elevated land prices.

Across the country, farmland values increased by an average of 3.8% in the first half of 2021 (Table 1). During the first half of 2021, the largest increases were in Ontario (11.5%), British Columbia (8.8%), and Quebec (8.1%). The remaining provinces recorded increases of less than 5%. The overall 12-month pace of increase between July 2020 and the end of June 2021 shows a 6.1% gain in average farmland values at the national level.

1.    It’s a Farm /land, that is one reason that you should buy farmland, is because it’s a farm. Whether you’re retiring, starting on a farm or escaping the rat race, a farm can be your own special oasis. The hard work will be well worth it when you’re earning income off crops and self-sustaining your family. Eliminating the unnecessary stressors of life such as daily commutes, an inbox that simply won’t hit zero, and living in cramped indoor spaces, can lead to a much higher quality of life.

2.    Property /land/real estate has been the primary wealth investment for the greatest value creation for investors/owner’s for generations and can be a great investment or lifestyle choice.  Land has been the best performing overall investment in modern history. 

3.    There is no land created anymore and every year productive land is lost due to urbanization, poor farming practices, roads, infrastructure and urban sprawl. (1000’s acres productive farmland every year)

4.    Investing in land is a “simple” process of purchasing property and creating value through: revenue, appreciation, or tax benefits. Investing in land can yield better results than RRSP, TFSA and other investment strategies or could be combined to accelerate savings. 

5.    You know the opportunities are ripe when savvy investors begin seeking out the opportunity. There has been an increased investment from investors looking for land that can not only appreciate in value but also generate a supplementary income from production farms. Investors like Bill Gates, Jeff Bezos, Brett Wilson; the Aquilini family, who own the Vancouver Canucks; and Lulu Lemon founder Chip Wilson and investment corporations Manulife, Bonnefield together with pension plans are investing large amounts of capital in land.

6.    Farmers can today sell directly to consumer’s on large scale with online direct marketing and be very successful with internet, online stores, drop shipping and consumer acceptance for change, the future of farm success is here.

7.    Demand for food will increase due to population growth (75 Million annual increase), increased world average income and food trends that lead to higher demand for farm products.

8.    Farms & land ownership can provide a multitude of benefits to being able to walk the land, check the crops, weed (s), enjoy wildlife, nature, recreation, natural habitat, attractions (corn maze, sunflower tours, farm tours, others) solitude, or just taking care of animals.

9.    Farm owners/operators are the smartest people in the world, they purchase all goods and services retail, sell wholesale and make a profit. 

10. You can love the land, you can love more than 1 parcel, acre, ha or ¼ section at any time there is no guilt.

Ben Van Dyk

Real Estate Centre

Farmrealestate.com

Source : FCC Leigh AndersonSenior Agricultural Economist

Demand for Canadian farmland remains strong; however, tighter farm profitability contributed to a slower appreciation rate in all provinces but Alberta and Saskatchewan. Through the first six-month of 2020, Canadian farmland values increased by 3.7% on average. Plenty of factors explain the strong demand for farmland: healthy balance sheets and historically strong returns on farmland, low interest rates, and grains, oilseeds and pulse receipts that increased 6.3% in the first six months of 2020 despite several challenges including trade restrictions, weather challenges, a rail strike and COVID-19.

With the growth in grains, oilseeds, and pulse receipts outpacing the appreciation in farmland values, the affordability of land improved for Canadian farm operations. However, this trend is not consistent across all provinces. One tool to gauge farmland’s affordability is to compare the average per acre land value divided by average expected returns per acre (price to revenue ratio). The 2020 price-to-revenue ratio estimate assumes the mid-year increase is reflective of the entire year. To forecast revenue, we use actual producer prices through August as well as futures market prices and industry yield expectations.

In Saskatchewan (Figure 1), strong increases in farmland values are matched with equally strong projected yields and prices, resulting in the price to revenue ratio expected to remain stable in 2020. In Ontario (Figure 2), the price to revenue is expected to trend down because of stronger crop revenues. Overall, affordability is expected to improve or remain flat in all provinces. The exception is Alberta, where farmland values increased 4.9% through the first 6 months and revenue is projected to increase by 3.8% based on current market prices and production estimates.

Figure 1. Average expected 2020 price-to-revenue ratio in Saskatchewan

Source: FCC calculations.

Figure 2. Average expected 2020 price-to-revenue ratio in Ontario

Source: FCC calculations.

Expectations for the remainder of 2020:

1.  Interest rates will remain near record lows

The Bank of Canada will not raise its key interest rate until unemployment approaches pre-COVID-19 levels, and inflation returns sustainably to its 2% target. So, rate increases and removing quantitative easing are not options for the foreseeable future. Historically low interest rates are a key reason the price-to-revenue ratio is expected to remain elevated in 2020 and will possibly remain so over the next couple of years. When interest rates begin to increase, the Bank of Canada will likely move cautiously and borrowing costs will remain supportive of the farmland market.

2. Strength in crop receipts

Strong export demand for Canadian grains, oilseeds, and pulses will continue to create marketing opportunities for producers through the remainder of 2020. Timely rains in Eastern Canada and generally good growing conditions in Western Canada are expected to support higher production volumes, while weather challenges in the U.S. and strong global demand will be supportive of prices.

3. Robust demand for farmland

Demand for farmland remains stronger than supply as producers continue to grow their operation, striving for greater economies of scale by expanding their cropland acreage. The pandemic created liquidity challenges for several operations, especially in the livestock sector. This could weaken the demand for land in areas with a strong concentration of livestock activities. It is important to note that different regional trends exist. In markets that have experienced strong growth in recent years, we expect land values to remain flat.

Farmland is expected to stay relatively expensive when compared to gross farm revenues. Higher prices of grains, oilseeds and pulses, as well as strong export demand, could alleviate some of this pressure.

In a Forbes.com article published recently it compares land investment to gold investments.

Founder & CEO of AcreTrader, an online farmland investment platform. 

Farmland and gold are two of the world’s oldest and most valuable asset classes, and they share many similar benefits that investors still find attractive today. Unfortunately, as those of us in the industry know, investing in farmland has been largely overlooked in recent decades.

However, both assets can provide investors with much-needed diversification, though each offers specific advantages. If you’re looking to invest in one of these alternatives, here are some important areas to consider when choosing between the two.

Returns And Volatility

While gold has appreciated in value over time, it can have considerable volatility, which has resulted in losses as high as 32% in a single year. On the other hand,farmland has generated positive combined annual returns every year for the last 20-plus years. This is because investors in farmland typically make money from a) rent checks paid by tenant farmers every year and b) appreciation in land values. 

As a result, farmland has produced greater returns with far less volatility than gold. Farmland prices have little or no correlation with the stock market, thus adding diversification to a standard investment portfolio. 

Inflation Hedging

For many people, hedging against inflation has been one of the primary reasons for investing in gold. If you are not familiar with the term, an inflation hedge is an investment used as protection against the decreasing purchasing power of currency as the prices of goods rise. 

For example, if the value of the U.S. dollar decreases, the dollar value of each ounce of gold typically rises as investors tend to flock toward more stable assets (this is often true during times of economic instability and recessions, as well). 

While gold has proven as an effective hedge against inflation, farmland has historically tracked inflation slightly better.

Importantly, rising food prices often play a large role in inflation. Higher food commodity prices typically mean crops are worth more, thus the farmer is able to pay higher rent rates for land. Additionally, the supply of farmland has been decreasing while the demand for food continues to grow. For both of these reasons, farmland has offered consistent historical returns while proving a highly effective hedge against inflation.

Recurring Income

With farmland investments, you not only stand to gain from the appreciation of the land itself, but you can also earn additional income because it produces valuable commodities. This is a unique advantage of farmland investments compared to investments in gold.

Since gold is a non-producing hard asset, it doesn’t generate income throughout the holding period. You only stand to gain what someone else is willing to pay for it at selling time.

Entry Demands

Farmland is often viewed as “gold with yield,” but it can require greater industry knowledge to invest. To maximize returns from farmland investments, you must identify the right opportunities, ensure it is managed properly, and build relationships with great farmers and operators to farm it. While companies such as ours are working to democratize farmland investing via online platforms, gold is currently an easier and more common investment via gold-related equities, exchange-traded funds or even physical ownership. 

Supply

While the supply of gold is by no means increasing at a rapid rate, it has continued to rise by just over 1% annually. According to the World Gold Council, worldwide gold mining annually adds about 2,500-3,000 tons to the above-ground stock of gold.

As the demand for gold increases, you will typically see that gold production increases, as well, due to the improved profitability of mining operations. As the supply of gold increases, the value of each ounce can be diluted.

Comparatively, farmland has been decreasing in supply at a rather alarming rate as more land continues to be developed for human use. Although there could be the potential for arable land expansion in some areas, the overall global and U.S. trend of decreasing farmland supply per capita is expected to continue. 

Diversifying Your Portfolio

What is clear is that alternative assets, such as gold and farmland, provide another opportunity for investors to diversify their portfolios. Gold can be invested in with ease and helps with diversification, while farmland can provide extra income, favorable supply and demand dynamics, and the potential for greater risk-adjusted returns over time. While each has distinct advantages and disadvantages, they’re both worthy of consideration for investors looking for assets with inflation hedging and appreciation potential.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.