May 8, 2015

By Gerelyn Terzo

Saskatchewan farmland ownership has reached a crossroads. Saskatchewan Minister of Agriculture Lyle Stewart is currently reviewing The Saskatchewan Farm Security Act to determine the future role of foreigners and institutional investors including Canadian pensions in owning provincial farmland. A temporary ban is being enforced on those two groups in the interim.

Under Saskatchewan law, foreign investors face a cap of 10 acres for owning or leasing Saskatchewan farmland while institutional investors including Canadian pensions are not eligible to invest. The law is not without exceptions, evidenced by the Canadian Pension Plan Investment Board’s (CPPIB’s) CAD 128m acquisition of 115,000 acres of Saskatchewan farmland from Assiniboia Farmland LP at year-end 2013. The CPPIB oversees assets on behalf of the Canadian Pension Plan.

“It’s always been assumed [pensions] are not eligible, but they’ve been purchasing [land.] This is an earnest attempt to find some kind of consensus,” Ag Minister Stewart told Global AgInvesting News. Indeed the issue catapulted itself to his desk amid chatter among the locals combined with both industry and political pressure, sources say.

“In the last couple of years, we’ve had a lot of input from the agriculture sector about foreigners and more recently institutional investors purchasing land,” said Stewart, adding that opinions span both sides of the issue.

“We don’t know if people want the Act strengthened so we can enforce it or if they want it liberalized so it won’t be against the law for institutions to invest in Saskatchewan land,” he said. “We need to find a consensus here, and that’s what this consultation is all about,” adding that the review will continue to unfold over the summer months.

Farmland ownership cuts to the core of Saskatchewan residents, as farmland in the province comprises some 43 percent of Canada’s total farm acreage. “It’s an emotional issue with strong, heartfelt opinions,” Ag Minister Stewart noted. Now with farmland values on the rise and owners prepared to either take a payday or take on the investor competition, the issue has reached a boiling point.

Among the views, locals are not keen about foreigners scooping land up but not taking up residence in the country or farming the acres themselves. “We welcome legitimate farmers from other countries to purchase here as long as they support the farm and get Canadian citizen status,” Stewart said. A similar standard holds true for pension funds in which the issue of producers having to rent out acreage to farm has become controversial, sources suggest.

Meanwhile, Saskatchewan farmers cannot ignore property values, which have become an increasingly attractive investment of late. Farmland property prices, which historically have trailed neighboring regions, have skyrocketed, evidenced by the 18 percent-plus increase in values over the past year.

Norm Hall, Agricultural Producers Association of Saskatchewan (APAS) President, points out that while the province’s farmland is inexpensive compared to other parts of the world – from Alberta, to Manitoba to the Great Lakes region — there’s still money to be made.

“The opportunity to make money is also huge. The average land price in Saskatchewan is jumping 10-20 percent per year, so when they sell they should do OK,” Hall said.

He went on to point out that there are more retiring Saskatchewan farmers then there are guys coming up, with the average farmer age in the province at 56 years. Nonetheless the opinions on foreign and pension investment restrictions cross lines and generations.

“There’s a fuzzy line there,” Hall noted. “There are some guys that want to sell to ‘young farmers’ just to ensure the industry continues. And then there are some young guys that believe the opposite and that ‘the doors need to be thrown open to all buyers.’”

Capital restrictions among the next generation of farmers further limit the industry. “The capital is not readily available to young farmers who don’t have a lot of equity yet; it has always been that way, but as land prices rise more equity is needed just to get a foot in the door,” according to Hall.

Open for Investment

Whether or not Minister of Agriculture Stewart decides to open the doors wider to foreigners and institutional investors remains to be seen. In the interim, he points investors to other segments of the economy. “We’re a province that encourages investment in every area. This farmland is a slightly different issue in the hearts and minds of Saskatchewan people. But [regardless of how] this consultation goes, we want to continue putting out the message we are open for investment, even if there are some restrictions on farmland.”

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