[UPDATE: Oct. 24, 2019] Ranchers are deriding what they say are half-measures when it comes to fixing new Crown lands regulations.
The changes, announced in September 2018, and outlined this fall, drop the old points system in favour of open auction, extend eligibility to Canadian residents outside Manitoba, drop lease length from 50 years to 15 or less, do away with unit transfers that don’t involve family and introduce a ‘market-based’ rent formula, among other changes.
The government will also step away from purchasing land improvements at the end of a lease, attendees heard during a public meeting in Ste. Rose du Lac Oct. 15.
Why it matters: The province has responded to irate leaseholders, but those ranchers say there are still a lot of negative consequences that need to be addressed.
Ranchers initially argued that the system put their whole operations at risk, since they would have to compete for their leases in an open auction every 15 years. Some ranches owe over 90 per cent of their land base to leases.
Ranchers immediately called for the province to add a first right of refusal to the regulations. That change would allow producers to roll over a lease without the threat of an open auction and restore certainty and the ability to secure financing, despite the shorter terms, they argued.
The province now says those producers will get their wish, but only for existing leases.
The province says it will add a “first right of renewal” for legacy leases Oct. 11, pending another round of regulatory changes.
“We never, ever intended to hurt any existing producers or take land away from them who are still in the business,” former Agriculture Minister Ralph Eichler said. *Blaine Pedersen was named the province’s new Minister of Agriculture and Resource Development in a cabinet shuffle on Oct. 23.
The beef sector made renewals its main request when it met with the province in early October, Eichler said.
New leases, however, will still go ahead under the original regulations announced in September.
“The next generation of farmers, they’ll know that in 15 years they’ll have to go and bid against the general public again,” Eichler said. “They won’t necessarily have first right of refusal, but they’ll certainly know that piece of land and whether it’s worth another 15 years or not.”
The province argues the new system will be more transparent than the points system, which it argues was difficult to understand and did not utilize Crown lands to their best ability.
Wait and see
Manitoba Beef Producers general manager Carson Callum says his organization is waiting to see what amendments will look like before taking a stance.
“That 15-year term is definitely considered short in some perspectives, but if you were to have that first right of renewal for those particular leases, that could kind of alleviate some of that 15-year investment, so that’s why we really pushed that,” he said.
Manitoba Beef Producers met with the province after a heated last-minute leaseholders’ meeting Oct. 2. The government has been open to discussions and MBP will continue to push for its identified priorities, Callum said.
The announcement addresses farmer concerns, “to an extent,” Dakota Sorensen of Eddystone said. His own ranch is about 86 per cent Crown lands.
“It helps the people already with a foot in the door — so, taking over a farm, it’s good,” he said, although he said new leases will be on considerably bleaker terms.
“Trying to get into it, you’ve capped your number of young people getting into it, basically. It will ever only go down. There is no potential for a young producer to get in,” he said.
Those concerns conflict with the province’s stated rationale for the changes. The province argues that 50-year terms tied up underutilized Crown lands, and that shorter terms keep those leases circulating and accessible for young farmers.
Young producers such as the 25-year-old Sorensen, however, argue that it will have the opposite effect.
The new rental formula and open auction will make those leases unaffordable for young producers, Sorensen said, while the short lease length on any new leases makes financing difficult.
“At 15 years, you can’t borrow the amounts of money you need to borrow in order to use this Crown land,” he said. “They’re in too large of chunks.
“It’s a lot of cost at one time. It’s having to come up with the money to buy the lease, to take over the improvements or to build your own, to come up with a down payment for the cows and to make your lease payment all in the same year,” he said.
More changes requested
Producers welcomed the promise of renewals on legacy leases, but are asking for that to be extended to all leases, existing and new. Rate increases and unit transfers are also still very controversial.
The province has argued that some producers were using unit transfers to inflate the value of their farms, one of the reasons why new regulations dropped them, with the exception of family transfers.
Producers, however, argue that their farms have little value without that transfer.
“I think the unit transfer will be the next big issue because if you can’t transfer a farm as a unit, the private land goes down in value so badly that farmers won’t be able to retire,” Brent Benson of Lake Winnipegosis said. “They’ll barely be able to pay off their mortgages and move to town and get a job at 65 or 70.”
Existing leases still have the option of a unit transfer until their expiration date, according to provincial staff. A grandfather clause also allows producers to renew an existing lease until 2034 if it expires before that year. In those cases, the extended leases will also have the option of a unit transfer until 2034, provincial staff say.
But producers argue that legacy unit transfer will only go so far in preserving the value of their farms.
The new leaseholder would not have the advantage of a unit transfer, they say, and the prospect of a looming countdown to auction may cool enthusiasm for potential buyers.
“One fear I have is that it’s going to turn into a race to the door,” Dane Guignion of Pine River said.
He argued that farm values would decrease as the lease term draws on and there is less and less time to transfer to a potential buyer.
“I think there’s going to be a very easy to calculate linear progression on the decrease of a farm’s value based on how much is left in the term of the lease,” Benson echoed.
“The further along in the lease it goes, the less value will be left in that whole operation, so the private land will go down too, as well as the improvements. And the attractiveness to buy it with five years’ lease (left) will be nothing. No one will want to buy that and then have a chance of losing most of it in five years’ time.”
Caught in the crossfire
Shelly Dyck is among the producers worried about the lack of unit transfers. Dyck recently moved to Manitoba from Alberta, but ran into issues when a unit transfer for 27 quarters of leased land failed to materialize.
She will likely have to sell her newly bought ranch without that lease, she said. She estimates that the farm’s capacity will drop from an expected 350-head capacity to 100 head without Crown lands.
Manitoba was, “the land of opportunity,” for incoming ranchers, she said, although she now says that the purchase, made at a time when unit transfers were frozen, was a mistake.
“Land (was) still affordable,” she said. “Now, I think that’s over.”
New rental formula criticized
Ranchers are also decrying a new rental formula, which they say will drastically increase rent by 2021.
Rent will be calculated using a formula that encompasses the last three years of prices for 500- to 600-pound heifers and steers, the forage capacity and the provincial rate of return, which accounts for the value of the tax burden, farmer improvement costs and environmental goods and services.
The province expects rent costs to jump from $2.13 per animal unit month to over $7, with the 2020 rate being halfway between the current and new rental rate.
Producers at the Oct. 15 meeting argued that the rate increases do not reflect their economics. Others argued that they have been already paying rent on leases that they were unable to use due to flooding for several years.
“The way I look at things, the province has built a Frankenstein, bits and pieces from different jurisdictions,” Dane Guignion of Pine River said.
The province, meanwhile, argues that the rental rate has been frozen since 2014 and that an increase is necessary to recoup costs.
An unfrozen rate under the old formula would have resulted in a similar rent increase, provincial staff said Oct. 15.
A plan to move up the billing date to November has also sparked worry, with producers saying they’d need to pay twice in the transition year, once in January and once in November.
That’s a hard sell after two years of feed shortages and a year that has been distinctly unfriendly to agriculture, producers argued Oct. 15.
UPDATE: Blaine Pedersen was appointed the province’s new agriculture minister on Oct. 23.