Investing In Farmland

Canadian farmland is C$ 660/acre currently compared to C$1,100/acre in 1981. Corn is US$ 5/bushel currently compared to US$16/bushel in 1974, and wheat is US$ 7/bushel currently compared …

Canadian farmland is C$ 660/acre currently compared to C$1,100/acre in 1981. Corn is US$ 5/bushel currently compared to US$16/bushel in 1974, and wheat is US$ 7/bushel currently compared to US$27/bushel in 1974 (Source: Agcapita Farmland Investment Partnership)

Canada is the third largest wheat exporter in the world and in aggregate one of the largest agricultural producers in the world. The three western Canadian provinces alone have approximately 135 million acres of farmland and produce approximately 20 million tons of wheat a year.

With an average price of $390 per acre, Saskatchewan farmland is some of the least expensive in the world. The prices in Alberta are almost 3 times higher than Saskatchewan at an average of $1,100.

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Unlike investing in farmland in emerging markets such as Argentina, Brazil or Russia, Canadian farmland is supported by first world storage, processing, and shipping infrastructure. This infrastructure is extremely costly to reproduce.

Unlike emerging markets, Canada lacks significant political risk. Canadian farmland owners benefit from a transparent and enforceable title system with no material risk of de jure or, worse yet, de facto expropriation. See recent agriculture export tariffs in Argentina.

For an idea of the magnitude of the difference in the inflation adjusted returns from farmland versus stock and cash during a high inflation period – refer to the graph below which plots returns from those three asset classes during the 1970s.

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