A claim about the forces driving up land prices emanating from a major accounting firm has stirred a debate.
Yves Millette, CEO of Farm Business Consultants with 20,000 farm customers, said investors in farmland are driving up prices and making it difficult for young farmers to get a toe hold in the sector.
Certainly, farmland has been an excellent investment, outperforming the Toronto Stock Exchange. The price of Saskatchewan farmland has doubled in the last 15 years.
High prices make buying land by young farmers unaffordable and threaten the viability of rural life, says Millette.
He estimated between nine and 15 per cent of land is owned by investors.
Farm Credit Canada’s 2024 land values report notes Saskatchewan farm land increased in value by 13.1 per cent in 2024 — highest move of any province.
Land investor Robert Andjelic, who owns 250,000 acres, to acquire one million acres, denies this claim.
Andjelic referred to an older study finding only two per cent of farm land was owned by investors. What Andjelic didn’t understand, or ignored, is the tight farmland market on the Prairies and in Saskatchewan.
The supply is so limited that buyers have little choice but to meet the higher prices or lose the deal.
Demand is driven by farmers willing to pay unviable prices just to add parcels to their land empire. The land will never pay for itself, but the existing empire will subsidize land payments.
Adding a few investors to this tight market drives prices even higher.
And buyers with large land holdings, or just investing, can afford to pay unrealistic prices.
That puts the young farmer starting at a major disadvantage.
Good farmland prices currently range around $4,000 an acre.
Besides needing a hefty down payment on land, new farmers will have to pay $200 an acre interest at these prices.
Saskatchewan farm land average return in 2022 amounted to a range from $152 an acre to $400 an acre.
Obviously, paying $200 an acre interest on the loan and fuel, fertilizer and chemical costs make it impossible for a young farmer to break even.
Given that he or she will need at least $5 million in used equipment, starting out is a non-starter.
Some farm programs exist to help the young farmers, but the business remains risky. Operators face a lifetime debt partnership with financial institutions.
Ron Walter can be reached at [email protected]
