# Farmland Investing?



## Ethan (Aug 8, 2010)

Is anyone in here involved in farmland investing? ie AgCapita Partners LP, Bonnefield, Assiniboia Capital Corp. etc. What have your experiences been?


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## m3s (Apr 3, 2010)

It's a good asset to have I think. Not only is food a basic requirement as the population increases, but it can be used for many different things in the future during urban expansion, population displacement or for resources under the ground etc

I'm looking for CRESY and/or to own physical Cdn farmland


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## clovis8 (Dec 7, 2010)

mode3sour said:


> or for resources under the ground etc


In Canada land owners do not have mineral rights.


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## Karen (Jul 24, 2010)

clovis8 said:


> In Canada land owners do not have mineral rights.


In the majority of cases, this is correct, but there are exceptions. My grandparents owned the freehold mineral rights to their farm in Alberta and when they sold the farm, they were smart enough to retain the mineral rights. I know that because my brother and I have been collecting royalties on natural gas being producted from that property for the past four years, and the production company told me recently that they expect the well to last for another few years.

The following is a brief explanation of mineral rights in Alberta that I found in a google search:

_Most land in Alberta has two owners and two sets of rights. The owner of the surface rights (the landowner) has control of the land’s surface and the right to work it, in addition to any sand, gravel, peat, clay or marl which can be excavated by surface operations. The owner of the mineral rights has the right to explore for and produce oil, gas and other minerals. The mineral rights for approximately 81 per cent of the province are owned by the Alberta Crown and managed by Alberta Energy. The remaining 19 per cent of the mineral rights in the province are referred to as freehold minerals or non-Crown rights and are owned privately by individuals, companies, national parks or First Nations reserves. _


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## sags (May 15, 2010)

We had some advice that we should obtain a GST number, because of some farmland that we will inherit once probate is complete.

Any idea why we should get a GST number?

How long does probate usually take?

The area is surrounded by natural gas, but to our knowledge there are no wells on the property. How do you calculate royalties?

Thanks for any info.


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## m3s (Apr 3, 2010)

And the chances of your land being mined without you making some $$? They need right of way, space for equipment etc unless they're tunneling in

Where I grew up farming the neighbors demanded compensation just from noise pollution of trucks hauling material in from Irving pulp and paper plants, I can't imagine a mine under your land without some form of compensation.. I also know farmers with Nat gas under their land in NB, they certainly weren't too upset about it

There are many things you can do with open land if the opportunity comes up some day. I think it's underrated


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## clovis8 (Dec 7, 2010)

Karen said:


> In the majority of cases, this is correct, but there are exceptions. My grandparents owned the freehold mineral rights to their farm in Alberta and when they sold the farm, they were smart enough to retain the mineral rights. I know that because my brother and I have been collecting royalties on natural gas being producted from that property for the past four years, and the production company told me recently that they expect the well to last for another few years.
> 
> The following is a brief explanation of mineral rights in Alberta that I found in a google search:
> 
> _Most land in Alberta has two owners and two sets of rights. The owner of the surface rights (the landowner) has control of the land’s surface and the right to work it, in addition to any sand, gravel, peat, clay or marl which can be excavated by surface operations. The owner of the mineral rights has the right to explore for and produce oil, gas and other minerals. The mineral rights for approximately 81 per cent of the province are owned by the Alberta Crown and managed by Alberta Energy. The remaining 19 per cent of the mineral rights in the province are referred to as freehold minerals or non-Crown rights and are owned privately by individuals, companies, national parks or First Nations reserves. _


True some mineral rights were grandfathered in but nearly always they are separate.


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## clovis8 (Dec 7, 2010)

mode3sour said:


> And the chances of your land being mined without you making some $$? They need right of way, space for equipment etc unless they're tunneling in
> 
> Where I grew up farming the neighbors demanded compensation just from noise pollution of trucks hauling material in from Irving pulp and paper plants, I can't imagine a mine under your land without some form of compensation.. I also know farmers with Nat gas under their land in NB, they certainly weren't too upset about it
> 
> There are many things you can do with open land if the opportunity comes up some day. I think it's underrated


Yes the extraction on mineral rights always means some compensation for the landowner but for the average well/pipeline we are normally talking about 20-50k and sometimes much less.


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## Cold_one (Mar 23, 2011)

*farmland investing*

If I may, the topic has shifted from farmland investing, i.e. AgCapita to ownership of mineral rights. 

I too have been looking into AgCapita and they don't have mineral rights; they buy land, rent the land, take 2% for management expenses, invest the surplus rental income into other land (if any available), hold the land until a predetermined date and then sell (try to sell) for a capital gain, 80% goes to the investors and 20% to the partners. 

Farmland likely will increase, but how and when it does sell and then will it sell at the date they want to sell it by are considerations. Your investment is tied up for 4 years with a plan on capital gain - no guarantee.


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## OhGreatGuru (May 24, 2009)

That's all we need - more speculators driving up the price of farmland and driving up pressures to develop the ever-shrinking supply of arable land.


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## m3s (Apr 3, 2010)

Farmland is like gold in that it hedges inflation and holds its value well during a financial crisis, but instead of paying to store it you receive rent as bonus.



> You could take all the gold that's ever been mined, and it would fill a cube 67 feet in each direction. For what that's worth at current gold prices, you could buy all -- not some -- all of the farmland in the United States. Plus, you could buy 10 Exxon Mobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?


Warren Buffett


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## Ethan (Aug 8, 2010)

Cold_one said:


> If I may, the topic has shifted from farmland investing, i.e. AgCapita to ownership of mineral rights.
> 
> I too have been looking into AgCapita and they don't have mineral rights; they buy land, rent the land, take 2% for management expenses, invest the surplus rental income into other land (if any available), hold the land until a predetermined date and then sell (try to sell) for a capital gain, 80% goes to the investors and 20% to the partners.
> 
> Farmland likely will increase, but how and when it does sell and then will it sell at the date they want to sell it by are considerations. Your investment is tied up for 4 years with a plan on capital gain - no guarantee.


Thanks for your response.

AgCapita is appealing to me, because most of the farmland investments require you to be an accredited investor and make a large investment ($100,000). AgCapita will take on smaller investors. I asked for their investor package today, mainly looking for their MER (looks 2% annually plus 20% of profits from your response) and for their historical returns. There are some pretty appealing reasons to get into farmland given the price/acre in Saskatchewan relative to other jurisdictions.


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## Argonaut (Dec 7, 2010)

Like I said before, I'd rather have the gold. My family has some arable ranch land and you can't even give it away. The only way to make money on it is to develop it.


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## humble_pie (Jun 7, 2009)

indeed this thread has divided into the original topic - which is farmland as an investment - and the vaguely-related issue of surface vs mineral rights.

the latter is an extremely complicated matter which varies in canada from province to province. Could we perhaps leave this topic out of this thread & concentrate instead on the OP's subject, which is farmland as an investment.

this is an interesting alternative investment & i for one am happy to see it discussed.

here is a concern i would have. As economic/financial booms mature, all sorts of fuzzy promotions usually appear. (imho the current fad for rare earths is an example, since rare earth promotion often appears towards the end of a metals cycle.)

so what i am thinking is that first-rate arable land doesn't get sold to these aggie promoters/partnership vendors. No, the best land probably goes to Big Ag & maybe a bunch of longtime farm operating families & corporations from the region. Who knows, maybe the best farmland in canada already belongs to chinese investors ...

ie what i am getting at is that these smaller aggie partnerships may be dealing in less desirable land, ie land with considerably less chance of appreciating over, say, 4 or 5 years' time.

argo is on record here as saying his family has some ranch land that could not even be given away ...

of course we could address this issue by setting up an aggie partnership review board here at cmf forum ... with mode as general manager to suss out what is prime land & what is scrap land ... & ethan as chairman of the board ...


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## the-royal-mail (Dec 11, 2009)

OhGreatGuru said:


> That's all we need - more speculators driving up the price of farmland and driving up pressures to develop the ever-shrinking supply of arable land.


100% agreed. The other consequence is the price of food will be driven up as a result.


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## Greyhound86 (Feb 21, 2010)

the-royal-mail said:


> 100% agreed. The other consequence is the price of food will be driven up as a result.


In a loaf of bread only 5% of the grocery store price is for the wheat grown by the farmer on his farmland. The rest is for the miller, distributor, packaging, advertising, retail store costs and so on. For oatmeal it is something like 2%. 

The fact that land prices have risen does not necessarily mean that food prices will rise any significant amount. If Wheat prices doubled the price of bread should only go up about 5%. 

In addition the prices, say for wheat, that a farmer receives is not directly linked to the price of farmland. Wheat prices are set by supply and demand on a worldwide basis. However the price of land is influenced by the price of wheat (or canola or corn etc). 

Usually land prices rise after grain prices have risen and will go down if grain prices go down. 

The quality of farmland varies so much and can change within a mile. Any non-farmer investing in farm land should ensure that whomever is buying the land really knows what they are buying. When the farming economy is looking non-profitable the poorer land goes down in value the most and is hard to sell or rent out. 

I saw an interview on BNN a few months ago on this topic. Several of the companies that are in the ag land business were on. They appeared to know what they were doing.


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## mudman (Mar 23, 2011)

I believe farmland is a good investment for the long term, but in the short term I think it's over valued and in bubble territory. I bought 2 1/4's of farm land in Alberta 6 and 2 years ago and it has done ok, land rent and Surface lease revenue makes the payments. Saskatchewan land is cheap compared to Alberta but your pretty much guaranteed 1 out of 4 years in most places there will be crop failure do to weather, it's also doubled in price in the last 5 years and there is a ton for sale.

Remember the average age of a farmer is 50+. Could well be lots of land for sale over the next 10 years + interest rates will most likely rise increasing carrying costs. Historically stocks have outperformed farm land. There is also a lot of land in developing countries that is under utilized, that could produce a whole lot of crops.

I hope to buy more one day, but not at these prices.


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## el oro (Jun 16, 2009)

Considered AgCapita a while ago but decided against it due to the 2% fee, 20% profit taking and I believe they sell the land you bought into after 4 or 5 years no matter what. I'd rather they hold onto the land. Could be wrong about the last point but was turned off enough fromt he first two. I'd rather buy my own land, which I also looked into but will be patient as I learn the ins and outs of the biz.

Argo please message me if you're trying to give away land 

On a side note, speculators are a good thing.


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## Argonaut (Dec 7, 2010)

$1600 Gold by 2011 said:


> Argo please message me if you're trying to give away land


Well it's a figure of speech but you know what I mean. When you can't sell 2000+ acres of mixed hayfields, forest, and grassland on a lakefront with multiple residences for the same price as a house in Vancouver you know something is wrong.

Farmers just don't make any money so a lot of it is getting subdivided into residential, at least in BC. I remember several years back there was a giant ginseng craze and countless hayfields got converted to ginseng over here. I suspect more and more of our food will be coming from overseas.

Of course you could get lucky and be bought out by someone super rich. Like Douglas Lake Ranch was by the (Walmart) Waltons. They probably run it as a tax loss.


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## andrewf (Mar 1, 2010)

Their site shows generic returns for farmland, but doesn't seem to say anything about the returns under their management. 2% MER might be reasonable, given that the fund isn't very big yet and it is actively managed. Not sure about the 20% take of the gain, but I suppose it aligns management interests with the investors. I'd like to see some more information about after-cost yield on the investment.


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## Ethan (Aug 8, 2010)

andrewf said:


> Their site shows generic returns for farmland, but doesn't seem to say anything about the returns under their management. 2% MER might be reasonable, given that the fund isn't very big yet and it is actively managed. Not sure about the 20% take of the gain, but I suppose it aligns management interests with the investors. I'd like to see some more information about after-cost yield on the investment.


I asked for an investor package from AgCapita. They responded with an e-mail saying one of their dealers would be in touch with me and provide me with the information I require. I'll share what knowledge I get.

Personally I like the 2% annually plus 20% of profits. As you said, this aligns management interests with the investors interests. I think 2/20 is pretty common for hedge funds.


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## andrewf (Mar 1, 2010)

Any update?


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## bgies (Jul 15, 2012)

Yes, very involved . It is a major part of my life  



Ethan said:


> Is anyone in here involved in farmland investing? ie AgCapita Partners LP, Bonnefield, Assiniboia Capital Corp. etc. What have your experiences been?


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## lonewolf (Jun 12, 2012)

According to a guy on the radio a year or so ago.The profesion with the highest suicide rate was farming. Cant remenber if it was a canadian or American station


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## ddkay (Nov 20, 2010)

Unless this farmland is less than 30km from a city centre, the city centre is undesirable & sprawling fast, its unlikely to produce a significant return in your lifetime. Buying farmland to farm on is a different story and will probably give a better return over the short term.


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## Eclectic12 (Oct 20, 2010)

Greyhound86 said:


> In a loaf of bread only 5% of the grocery store price is for the wheat grown by the farmer on his farmland. The rest is for the miller, distributor, packaging, advertising, retail store costs and so on. For oatmeal it is something like 2%.
> 
> The fact that land prices have risen does not necessarily mean that food prices will rise any significant amount. If Wheat prices doubled the price of bread should only go up about 5%....


Agreed ... but then again - when have the middle layers and last in line missed the opportunity to raise prices for *any* reason if they think the market will bear it?
I can remember a week apart the oil industry spokesman saying "the consumer can't benefit from the current lower world oil prices as it takes three months for the oil to work through the refining system" and "gas prices are up *today* as world oil prices went up yesterday".

Funny how cheaper supplies take three months to work through the system but more expensive supplies jump the queue somehow!


Cheers


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## HaroldCrump (Jun 10, 2009)

ddkay said:


> Unless this farmland is less than 30km from a city centre, the city centre is undesirable & sprawling fast, its unlikely to produce a significant return in your lifetime. Buying farmland to farm on is a different story and will probably give a better return over the short term.


There is a family finances profile in the Money Sense magazine November issue about a family farm in North Hatley, Quebec - 117 acres, growing corn, soybeans, wheat, and some dairy/meat.
They are making $25K a year, before taxes.
The farmland is worth $1.2M.
The cap rate is therefore, quite low (about 1.7%)

I also recall reading that "smart money" has already been piling into Canadian agricultural land for several years now.
Private investors like Jim Rogers have been recommending farmland as alternative investments since at least 2008.

My point is that the easy money has probably been made in this already; going in at this time could mean a long, slow wait.


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## andrewf (Mar 1, 2010)

Apparently the cheap land is in Saskatchewan. Cap rates are pretty low in Ontario/Quebec.


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## sags (May 15, 2010)

Land prices in Saskatchewan have been held artificially low because ownership is restricted to Canadians.

The cost of machinery means that farmers have to spread the costs over more acreage..........therefore they are among the mix of people interested in buying their neighbor's land if it comes up for sale. They couldn't survive on 100 acre farm.

Among those seeking land........Hutterite colonies, neigbour farmers, young farmers, Canadian investment firms, and foreigners who arrive in Canada......get their citizenship.......pay cash for land......and rent it out. The suspicion is that the new Canadians are buying with investor money from China, but the Saskatchewan government only tracks the owner's name and not where the money is coming from.

Saskatchewan says they will be opening up the sale of land to foreigners in the future.

The cost of that 112 acres is 1.2 million in Quebec but only 120,000 in Saskatchewan.

We own 160 acres in Saskatchewan, near the Alberta border, and we could only wish the land was worth what it would be worth in Ontario........or even Alberta a few miles away.

There is a long, long ways to go up for Saskatchewan land........even to match the price of land in other provinces.

The value of land has gone up every year since 2002, and was up over 20% last year, but it started at a very, very low base value initially...........partly because at one time only residents of Saskatchewan could buy land there.

It is true that it can be very erratic though.

I remember back in the 1980's when all the farmers in the area around my father in laws farm, were buying new machinery, recreation vehicles and building big new homes. I remarked they must be making a lot of money farming and he said they borrowed it against the "equity" in their land (mostly inherited from their parents and paid off) because land was "worth" $1000 per acre. He said if they sat down with a sharp pencil, they would soon figure out they couldn't pay the loans with normal commodity prices and yields. He predicted they would all lose their farms to the banks...........and they did. The father in law stayed in their old home and just continued on as normal. Their land was paid off........and there were times in future years that having no debt was the only thing that enabled them to stay in farming.

Land prices plummeted to less than $300 an acre and have been working their way up ever since.


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## sags (May 15, 2010)

A little off topic...........but I have a friend who was an teacher and principal for many years, with 2 Masters Degrees.

She sent me a link to an old schoolbook that was used by teachers living on the Prairies in days gone by.

It contained very complex questions regarding "input" costs, acreage, yields, acreage for feeding cattle,........all to do with the business of farming.

She told me that many of today's high school graduates wouldn't be able to figure it out...........and this was Grade 5 math back then.

Maybe when our actual survival depends on it..........we tend to learn more.

That would have been the parents of the farmers who got themselves over indebted to the banks. They knew what debt the farm would support and paid off their mortgages. Their kids got the new education........borrowed up to their eyeballs because the bank was giving it away........and lost everything........decades of sacrifice and hard work by their parents.......gone for a pocketful of mumbles.


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## Ethan (Aug 8, 2010)

I agree with the positive comments in this thread regarding Saskatchewan farm land prices, but I can't get enough information out of Ag Capita to make an informed decision on whether I should invest with them. I want to see financials or a prospectus, not sales brochures, before I invest my money.

Another option are these guys, I can find their financials on SEDAR:

http://www.assiniboiacapital.com/


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