Rudy Nielsen, RI Input, Spring 2013 Poets, theologians, and sensitive types might disagree, but we humans must eat to live. We have no choice. Unless you’re skinned in chlorophyll or are a successful “breatharian” (supposedly able to live solely on fresh air and sunlight), we all need grub, calories. There are a lot of us—seven billion plus with more to come. Global population growth is finally trending down, but the UN estimates that 2045 will see nine billion hungry humans, and by 2100 the global village will stabilize, sort of, at 10 billion. That’s a lot of mouths to feed.
Our future survival is literally rooted in the soil. Here in British Columbia, the future of food growing is already taking shape in the consolidation of our most valuable and irreplaceable food-growing soils—our agricultural lands.
National and International Real Estate Activity
In late 2013, Deutsche Bank AG released a comprehensive report on foreign investment in farmland, citing the World Bank, Land Matrix and others. It stated that between October 2008 and August 2009, private and multinational investors, hedge and pension funds, and foreign state-owned enterprises acquired 56 million hectares of farmland, mostly in Africa; acquisition spiked in 2009 (30 million hectares) and has since moderated (for now). In 2012, the Land Matrix project looked at the previous decade and determined the foreign-owned uptake was 83.3 million hectares, again mostly in Africa.(1)
The International Institute for Sustainable Development tags the United States and Canada as the world’s top two largest sources of foreign investment stock in agriculture, with competition from the People’s Republic of China, Saudi Arabia, and other cash-rich but food- and water-insecure nations who, fearing the specters of social discontent, seek long-term dependable sources of basic necessities. (2)
Canada is itself rich in farmland. With our crop prices now at what pundits call “near-historic” levels, our low interest rates and bearish stock market—combined with droughts in the United States and Australian breadbaskets—have led Canadian farmers to expand their operations and have prompted other domestic and international buyers and investors to get into the game.
Farm Credit Canada (FCC), this country’s leading financial lender to the domestic agricultural industry, reported in its latest semi-annual report that national farmland values rose by an average 8% per annum from 2006 onwards, balanced between the 2.1% low in first half 2011 and the 8.6% high of first half 2011.(3)
FCC put Ontario first in price gains, up 16.3% in first-half 2012, compared to its gain of 7.2% in second-half 2011. Manitoba gained 10.3%, up from 1.9%. Saskatchewan gained 9.1%, down from 10.1%. Quebec gained 6.7%, up from 4.3%, Alberta 5.7% (4.5%), Prince Edward Island 3.1% (1.5%), and Nova Scotia 2.8% (3.2%). New Brunswick and rocky Newfoundland-Labrador was basically dead flat, value wise.(4)
BC was the only province where overall agricultural land values dipped, reports FCC. BC prices dropped by 0.3% in first half 2012, on the heels of a paltry 0.2% gain in second-half 2011.(5)
It looks like pretty sad spuds for BC, but dig deeper and the longer-term figures show a far more dynamic trend. Although volume and total sales values are dropping, the average value of these fewer sales has been steadily rising. The data shows that BC agricultural land is undergoing rapid consolidation.
Tilling the Data
Here at Landcor Data Corporation, our practice uses continually updated BC Assessment and other information streams, winnowing them through complex, proprietary computer software and a hell of a lot of expertise and analytics. To reveal the true state of BC agricultural real estate, we tilled this province’s vast data and title fields from 2005 to 2012, winnowing the over 1.93 million property titles, pulling out everything designated as related to agriculture. From “grain/forage” to “poultry,” from “tree fruit” to “beef”, if that title grew food, it went into our data bin—which came to 51,647 property titles (for 2012).
The base year of 2005 saw 1,884 titles change hands, mostly to Canadian buyers (1,868 went to Canadian addresses, including 1,820 in BC; 14 went to US addresses; 2 went to Germany). Total value: $902.58 million at an average $479,044 per sale.
In 2007, sale values peaked at $1.04 billion on a falling volume of 1,647 sales (1,540 BC), with average sale value up more than 30% to $631,953.
In 2008, volume fell 30% to 1,146 sales (1,136 Canada with 1,104 BC; 6 US; 4 Germany). Total value: $775.24 million at an average value of $659,036.
In 2009, volume fell by 38% to 705 sales (701 Canada with 678 BC and 20 Alberta; 2 US; 2 Germany). Total value: $522.21 million at an average sale value of $740,722—more than 50% over the 2005 baseline.
Numbers fluctuated during the next years, but 2011 ended with volume was down to 600 sales (589 Canada with 565 BC, 22 Alberta, 1 Saskatchewan, 1 Yukon; 9 Germany; 1 Saudi Arabia; 1 China). Compared to the 2005 base year’s 1,884 sales, volume is down over 70%. Total 2012 value: $561.96 million or down more than 40 percent from the 2007 peak of $1.04 billion. However, the 2011 average sale value hit $981,863. Although average value slipped the next year, at $936,597 it is still almost double the 2005 comparable of $479,044.
Our conclusion? Far from being soft and moribund, BC agricultural land is undergoing rapid change and consolidation. In the last eight years, the average sale price of BC agricultural land has nearly doubled, even as total sales volume shrunk by almost two thirds.
BC currently has no restrictions on sales of agricultural land to foreigners, unlike certain other provinces in Western Canada. However, unlike the controversial alleged foreign investor activity in the Lower Mainland residential market, BC agricultural land hasn’t yet seen many foreign buyers. Most buyers have Canadian addresses, most of these are BC addresses, and these buyers are hungry. For example, in the last year or so, Landcor’s sister company LandQuest Realty has presented and sold a number of large cattle ranches to canny, globally aware BC investors looking to beef up their portfolios, literally, for the long term.
Why is Consolidation Happening?
Unlike the rest of Western Canada, agricultural land in BC is not flat, not widely fertile, and is not comparatively cheap. The fertile areas are relatively small and folded between barren mountains, high-country deserts, and mineralized soils. Adding to the challenge of farming such land, urbanization is putting on the squeeze. For example, rich alluvial farmlands outside and within the Agricultural Land Reserve (ALR) are being pressured by Metro Vancouver’s exorable march up the Fraser Valley, as is farmland in other growing regions of the province. The opposing forces of cultivation and urbanization are at play anywhere there is productive soil, and those who own agricultural land are realizing new values.
The September 2012 issue of Maclean’s, citing a recent Re/Max report, reported “bidding wars” in southern Ontario where in the last two years, select farm acreage prices jumped 70% to $15,000 an acre. In central Alberta, grain land (helpfully lying atop actual and potential oil/gas fields) is up 25% and “can sell virtually overnight.”
Closer to home, just up the hollow from Metro Vancouver, orchards in BC’s Fraser Valley now “command” $60,000 an acre. In BC’s Southern Interior wine country, competition is also intense.(6)
Maclean’s quoted Tom Eisenhauer, head of Bonnefield Financial, focused investor of Canadian farmland. Although private investors currently have just “a few hundred million” in Canada’s $280-billion pool of farmland, Eisenhauer believes the uptake will grow along with the realization that even if compared to gold, and certainly to the scary global stock markets, productive dirt is a solid hedge against inflation. Farmland traditionally seen as “boring and safe and non-volatile [now] looks pretty good.”
But tradition is yesterday and “boring” doesn’t fit the volatile times that await the world’s hunger for arable land. There are billions of us on this planet, and we’re blighting the land that feeds us: climate change, soil erosion, contaminated water, air pollution (tough luck, breatharians), shrinking aquifers, desertification, unchecked urbanization, herbicide and pesticide-resistant insects and plant diseases. Technological fixes are failing, and modern plagues are eroding the globe’s finite stock of arable land.
Today: bad. Tomorrow? Stock up on optimism, we’ll need it. With more mouths, less land, rising food prices, and increasing social and political discontent, decent farmland becomes a strategic necessity. But as the demand for agricultural land is ramping up, land prices are rising, and supply is shrinking as owners husband what they’ve got. Real estate activity is mostly all home grown…so far. The math is inescapable: buy in while and wherever you can.
Endnotes (1) Deutsche Bank AG. Foreign Investment in Farmland, November 13, 2012, www.dbresearch.com/PROD/DBR_INTERNET_EN-PROD/PROD0000000000296807/Foreign+investment+in+farmland%3A+No+low-hanging+fruit.PDF (accessed April 2013). (2) International Institute for Sustainable Development, Farmland and Water: China Invests Abroad, 2012, www.iisd.org/publications/pub.aspx?pno=1687 (accessed April 2013) (3) Farm Credit Canada, Fall 2012 Farmland Values Report, October 2012, www.fcc-fac.ca/en/Products/Property/FLV/Fall2012/index.asp (accessed April 2013) (4) Ibid (5) Ibid (6) Macleans.ca, “Real Estate: Today’s Bidding Wars Are for Farmland,” September 25, 2012, www2.macleans.ca/2012/09/25/high-yield-stalks/ (accessed April 2013) (7) Ibid