If you want to buy farmland, you’re up against some tough competition, the National Farmers Union says in a new report highlighting the presence of offshore investors in Canadian farmland.
“Farmland investment companies are shifting ownership of Canadian farmland from the hands of actual farmers into those of absentee landlords, thus recreating the tenant farmer model that many of Canada’s early immigrants were trying to escape,” the NFU says in its report titled “Losing Our Grip — 2015 Update.”
The report makes eight recommendations (see sidebar), including enacting laws to restrict farmland ownership to individuals and incorporated farming operations and co-operatives to those who live in the province the land is in.
It also suggests provincial governments consider restricting the amount of farmland farmers can own, as Prince Edward Island does.
“We know that land is the foundation of our culture and social fabric and here in Prince Edward Island we’ve been able to limit the amount of land owned by big Canadian companies and offshore bargain hunters,” NFU Region 1 (Maritimes) board member Reg Phelan said in a news release.
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The report profiles several companies that have been buying farmland in Canada since 2010, including Bonnefield Financial, Agcapita, Walton International, AGInvest Canada and Assiniboia Capital. Assiniboia was formed in 2010, stating it intended to assemble 400,000 acres. In 2014 it sold all of its holdings of 128,000 acres to the Canada Pension Plan Investment Board.
The companies operate as limited partnerships, so are not required to disclose financial information. The NFU report says some claim to be eligible as RRSP investments, though that is hard to verify.
The report highlights the credit crunch facing farmers as a result of high land values, which offshore investors can use to their advantage by buying land to farmers and then leasing it back.
The report also explains a new form of farm debt called “canola streaming” used by AgStream Inc., an offshoot of Assiniboia Capital.
“The company provides an upfront sum to the farmer in return for a specified volume of canola from each of the next five to seven years’ crops at a fixed price (which may be zero dollars),” the report states. “Input Capital then turns around and sells the contracted canola to elevators and canola crushers at market prices.”
Farmers must take out crop insurance and AgStream requires a general security agreement on the farm’s assets, which in some cases is a second mortgage on the land, the report says.
According to the NFU, farmland investment companies will soon be able to use the cash advance program, saving money “to fund further land purchases, thus unfairly competing with bona fide farmers.”
In 2013 farmers received $8.3 billion in credit from input suppliers to buy their products, up $800 million from 2010. That diminishes farmers’ independence, the report says.
The NFU also says it has heard input suppliers are giving farmers who have used their credit preferential grain delivery opportunities.
The report summarizes provincial farmland ownership laws. It notes there has been progress in Quebec and setbacks in British Columbia and that Saskatchewan is reviewing its law in light of public concern about investment company purchases.
“The current policy environment promotes unaffordable land prices, ever higher farm debt loads and concentration of land ownership in fewer hands, thereby systematically pushing farmers out of business,” the report says.
The full report is available at nfu.ca.