Speculation about farmland ownership is running hot

Western Producer | 4 April 2024

Speculation about farmland ownership is running hot

By Robert Arnason

WINNIPEG — Ted Cawkwell has been in the real estate business for 12 to 13 years, specializing in Saskatchewan farmland.

Back in the early 2010s, it was obvious to Cawkwell and others that shady and illegal purchases of farmland were taking place in the province.

“It was happening, and people knew it was happening,” said Cawkwell, who runs the Cawkwell Group and is the No. 1 Re/Max commercial realtor in Canada.

“At that time it was primarily Chinese money…. The main way was you (would) set up a corporation and the president and majority shareholder (would be) a local. And they (the locals) would be directors of the company.”

In effect, a Saskatchewan resident would have their name on the land title but someone from China, or elsewhere, was the actual investor in the land.

Such arrangements allegedly allowed foreigners to get around Saskatchewan’s restrictive farmland ownership rules.

“Individuals who are not Canadian citizens or are not permanent residents of Canada and entities totally or partly owned or controlled by non-Canadians are not eligible to own Saskatchewan farm land,” says the Saskatchewan Farm Land Security Board’s website.

In December 2015, the province announced changes to the Saskatchewan Farm Security Act, making it harder for non-Canadians to own agricultural land.

The amendments included:
-Making pension plans, administrators of pension fund assets and larger trusts ineligible to buy farmland.
-All financing to buy farmland must be through a financial institution registered to do business in Canada, or a Canadian citizen.

The changes did deter some foreign investors, but the rumours of out-of-country money flowing into Saskatchewan farmland have not abated.

If anything, rumours and speculation have only increased.

Over the last six months, the Western Producer has spoken with a number of producers — some who operate 10,000 to 15,000 acre farms — who are convinced that investors from Saudi Arabia, China, America, Europe and other nations are buying Saskatchewan farmland.

“I’ve heard 100 different rumours,” Cawkwell said from his office in Saskatoon.

It’s impossible to know if any of the chatter is based in fact, but Cawkwell has relationships with many farmers in the province, including folks with 50,000 acres or more.

He hasn’t seen evidence that foreign money is being used to purchase Saskatchewan farmland.

“If someone is sneaking through, it’s not very many people and you have to be pretty savvy to do it.”

Joelle Faulkner has heard the same rumours.

Faulkner is chief executive officer and co-founder of Area One Farms, an Ontario company that partners with farmers on land ownership. Area One has investments with 41 farmers and 180,000 acres across Canada, in which it helps producers expand their operations and improve their land.

Conversations about $100 million from China or $500 million from Dubai flowing into Saskatchewan farmland may be speculative, but the rumours go beyond the borders of Saskatchewan.

In March, a Manitoba producer said Saudi Arabian cash was being used to buy farmland in the province’s Parkland region.

At the root of most of these rumours is that landowners, farmers and others don’t understand how large farms are expanding so quickly on the Prairies, Faulkner said.

Small and medium-sized farmers say they can’t compete for available land in their region of Saskatchewan, or anywhere on the Prairies, because outside money is purchasing the majority of available land.

“(It’s) hard for anybody who wants to buy more … so their whole life can work (and) their kids can come back (to the farm),” Faulkner said, explaining why producers continue to believe that foreign money or large farms are driving up land prices.

”People don’t like that much shift…. People want their lives to work.”

The second reason for the persistent claims of foreign money is less emotional and more logical.

“These really big farms that are owning more and buying more, it’s hard to understand where they get money from,” Faulkner said.

“Usually, the simplest explanation wins. If there isn’t a simple explanation, then maybe something else is going on…. I’m as curious as everybody else. It is interesting.”

Another farmland investor told the Western Producer that the Saskatchewan Farm Land Security Board asks detailed questions if it suspects that foreign money is being used to purchase agricultural land.

Investors in farmland may be required to provide a list of partners who are participating in the purchase to confirm that all the money originates from Canadians.

Still, with the help of lawyers and accountants, there are always ways to get around regulations and rules.

Maybe an agent of the United Arab Emirates wealth fund contacts an 80,000-acre grain farmer in Saskatchewan with $400 million to purchase land in partnership with that producer.

That would be tempting and would help the farmer expand.

However, such an arrangement doesn’t make sense to Faulkner.

Why would someone with $400 million purchase an asset that they can’t legally own?

“In order to buy in Saskatchewan, you have to be Canadian. So the title has to live under somebody who is Canadian,” she said.

“You can’t be on the mortgage and you can’t be on title.… (Are) you going to let that name on title be some guy in Saskatchewan who you maybe met twice?”

A more probable scenario is where a large farm, in a country that doesn’t produce enough food for its population, would like to improve its food security by having a farm in Western Canada.

Maybe it’s a country that needs forage to feed domestic livestock.

“They’ll be buying land and they will expand their land base,” Faulkner said. “Maybe they produce a bunch of (forage) in the States…. I think that’s where you will see more interest (in Canada).”

Cawkwell does get calls and inquiries from people outside of Canada who would like to buy agricultural land in Saskatchewan.

Many are unaware that Saskatchewan prohibits foreign ownership, which is confusing because non-Canadians can purchase residential and commercial property.

Some of them may already own real estate in Saskatchewan.

“A lot of these people ask, ‘why farmland?…. Why can’t I own farmland?’ ” Cawkwell said.

With mortgage rates now sitting at six to seven percent, many investors have turned their attention away from Canadian farmland.

It’s become more attractive to put cash into money markets and short-term securities, where returns are now stronger and are highly secure.

“The investors (in farmland) have all run away,” Cawkwell said.

“The last six to nine months, they’re 95 per cent gone…. It just doesn’t work with these interest rates.”

The rumours around foreign investment in Saskatchewan farmland have almost become a provincial pastime — not as popular as talking about the Riders, but close.

Cawkwell understands the speculation.

However, even if some foreign money is “sneaking through the cracks,” it’s not influencing the farmland market.

Furthermore, Canadian investors from outside the province don’t move the market.

“The investors don’t change farmland values,” he said.

“What affects farmland values is the profitability of the farmers…. It all boils down to profitability.”
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