Real Estate - Farmland
The Ultimate Real Asset
This final of three blogs on real estate will tackle farmland. While it is a type of real estate, farmland is so much more. Farmland is foundational for civil society as the place where our food is grown and harvested. And, unlike all the other types of real estate, it is a limited resource. ‘They aren’t making any more of it!’ my Mom used to say.
Here’s some food for thought on the ultimate real asset:
Farmland Value and Availability
For order of magnitude, a quarter (160 acres) of land can easily cost $250,000 in Saskatchewan where a farmer typically operates 10, 25, 50 or more quarters. It’s very different in Ontario where the cost is 5x higher, while a farm is typically only 1 or 2 quarters in size.
Farmland prices continue to rise across Canada, as they have since the 1990s. Canadian farmland prices rose another ±10% in each of 2023 and 2024. (1) In addition, it continues to deliver ± 4% yield from per year from rent and productivity.
Farmers expand their operation and grow their net worth through the acquisition of new farmland. They are, and should be, the primary ‘first choice’ owners of farmable land. As such, Canadian farmland ownership is not available through the stock market, and farmland is relatively (but not absolutely) unavailable to the public.
Direct Ownership
Farmers and a few private investors are the direct owners of farmland. This ownership covers about 98% of all farmland in Canada (2). Farmers, beyond what they own, commonly rent a significant portion of the land they farm. Owning land and renting to a farmer is the entry point for us in the public to become an investor in the ultimate real asset.
A small number of our blog readers group are direct farmland owners. Congrats!
Investment Funds
If you are an Accredited Investor in Canada, there are a handful of Trusts (like REITs) which own and rent about 2% of Canadian farmland. These generally provide a relatively good return on investment over time. However, they have become a competitor to farmers. As such I am not a fan.
What Can You Do?
I believe farmland ownership is the best long-term investment diversity available – better than stocks, bonds, gold, typical real estate or anything else. The best way to Be Prepared.
I would recommend – if you want some diversity and security – seek out a way to become a direct owner. If not with family, maybe with a friend who farms or a friend of a friend. You won’t regret it.
1. www.fcc-fac.ca/en/knowledge/economics/2024-farmland-values-mid-year-update
2. https://www.theglobeandmail.com/business/industry-news/property-report/article-growing-farmland-values-seed-transition-to-non-farmer-investment/