The following is an abbreviated version of a discussion paper prepared by Annette A. Desmarais, Darrin Qualman, André Magnan, and Nettie Wiebe:
In December 2013, the Canada Pension Plan Investment Board (CPPIB) purchased approximately 115,000 acres of farmland from an investment company, Assiniboia Capital LP., for $128 million. This was the single largest sale of farmland in Saskatchewan’s history. The transaction generated substantial media attention and touched off a public debate about the role of institutional investors in the farmland market.
The sale is only one example, however, of a larger trend whereby investors of different stripes have been purchasing Saskatchewan farmland in recent years. Farmland is considered a good store of wealth, an effective hedge against inflation, and a source of both capital gains and income from rent — referred to by some as being “like gold with yield” (Fairbairn 2014).
Saskatchewan is particularly attractive as a target for farmland investment because the province has a highly industrialized agricultural industry, well-developed infrastructure, a stable political environment, and relatively cheap land. Farmland prices increased by 128 per cent between 2007 and 2014… (which has) added to the interest in acquiring Saskatchewan farmland.
Until the end of 2002, the Farm Security Act restricted ownership of farmland to Saskatchewan residents (very small parcels exempted). The NDP government changed the act in 2002 to allow Canadian citizens, permanent residents, and 100 per cent Canadian-owned companies to acquire an unrestricted amount of farmland. Our analysis shows that investor ownership of Saskatchewan has increased very rapidly since 2002.
Between 2002 and 2014, the amount of Saskatchewan farmland owned by investors increased sixteenfold. Holdings by investors increased from 51,957 acres in 2002, to 837,019 acres in 2014.
Large-scale purchases of farmland by non-farmers raise important issues for rural communities, the agricultural sector, and for Saskatchewan citizens more generally.
Policy issues and options
We highlight the need to reconsider some fundamental and recurring land policy questions that have largely been neglected in the debate.
Land ownership continues to be an important determinant of economic and political power, despite economic diversification and urbanization. The legislation governing land both reflects and shapes how land is viewed and used, and also who gets to own and use it. As such, land legislation facilitates different models of agriculture.
The Dominion Lands Act privatized land, making it a marketable commodity. It also instituted patriarchal ownership patterns by excluding women, with very few exceptions, from eligibility for ‘homesteads.’ A major incentive drawing settlers into Saskatchewan was the promise of land ownership with the attendant security of tenure and the prospect of a more secure future.
By restricting farmland ownership to provincial residents, the Farm Security Act of 1974 seemed to affirm the value of the relationship between land ownership and security of tenure. As there were no restrictions on farm size or how much land an individual or corporate entity could own, however, the 1974 law did not prevent the ongoing process of farm concentration.
Yet, by restricting farmland ownership to residents of the province, the legislation weighted social investment — living in, and contributing to, Saskatchewan communities — over capital investment.
The 2002 policy change reflected a shift by giving priority to capital investment in farmland and broadening the residency/citizenship requirement for ownership to all Canadians.
In reflecting on the current review of farmland ownership rules, we propose the following fundamental questions: What are the key values farmland policies are meant to protect and enhance? What does a flourishing, economically competitive, ecologically sustainable, adequately capitalized, socially just and vibrant agriculture sector require? What objectives are the policy revisions supposed to meet?
Critical consideration of some policy objectives
Our research points to two very different policy directions that have different objectives and impact:
- Focusing on maximizing financial investment; or
- Prioritizing social investment in agriculture, farm families and rural communities.
A trade-off exists between these two policy directions. Prior to 2002, that trade-off was resolved largely in favour of social investment, via restrictions that limited farmland ownership to Saskatchewan residents.
After 2002, that trade-off was resolved differently, with an apparent focus on enlarging the potential farmland buyer pool with the aim of increasing land prices and investor activity. The current provincial consultations should take into consideration the trade-off between two types of investment.
- Prioritize attracting and maximizing financial investment: This could be accomplished by removing restrictions on foreign investors. The increase in land values would mean a better retirement package for those leaving farming. The added capital investment in land will likely result in higher concentration of ownership. However, would this advantage Saskatchewan agriculture and the people of the province significantly? Would this approach guarantee a much-needed new generation of young farmers in the province?
- Attract financial investment but restrict the origins/citizenship of the investors: The current policy, which restricts ownership to Canadians, facilitates the flow of out-of-province capital into farmland while intervening in the land market. Given the apparent current effects on land prices and local control, is the restriction to Canadian investors sufficient? Do Saskatchewan residents want to see more land transferred into the hands of non-farmer, out of province investors?
- Attract financial investment, but place added restrictions based on types of investors (i.e. pension funds, foreign-funded corporate entities, etc.): While focusing on increasing capital investment, such restrictions define which kinds of investors are acceptable. What should be the key criteria? Size of the investment fund? Disposition of its earnings? For example, much like the oil and gas industry, if investors are using our key land base for investment, should the legislation require that a certain percentage of earnings (i.e. a royalty) be invested back into the province?
- Support social investment in agriculture by restricting farmland ownership to Saskatchewan residents: This recognizes the social value of land. As farm families have demonstrated for generations, social investment in farms and communities (knowing and caring for the land and communities) is neither calculated nor paid in financial capital. The commitment to the farm which farm families demonstrate by dedicating off-farm income and long hours to it adds value, enhances social stability and may improve prospects for entering farmers. Can external capital that removes ownership from the farm operators compensate for this lost social capital? Would lower land prices undermine or enhance farming and the agricultural economy?
- Maximize efforts to build a social economy that values social enterprises: Institute more robust forms of public/collective/social ownership through new forms of land banking, land trusts, co-operatives and other ownership structures.
- Recognize and seek to integrate indigenous peoples’ relationships to land. Since indigenous peoples represent an increasing percentage of the population in Saskatchewan, this approach could open the possibility for sharing the land base and using it in ways that respect nature and cultures.
Other policy options that would indirectly affect land investment are regulations restricting the use of farmland to agricultural production only. Another would place a cap on how much land one can own. Also, policy interventions in the land rental market (rent controls) might be considered as more land is farmed through rental arrangements.
Our research indicates that policies that focus primarily on capital investment will only exacerbate the current situation whereby an increasing amount of farmland in Saskatchewan is owned by non-farmers and concentration of land continues to rise. We see much more potential for social and environmental well-being by following a policy direction that emphasizes social investment.