Canada: Gov’t must address land investment deals

Western Producer | 20 November 2014

Gov’t must address land investment deals

by Dan Patterson


The aggressive attempts of investment concerns to acquire large tracts of Saskatchewan farmland should be among the issues addressed in the fall sitting of the Saskatchewan legislature.

Progressive Conservative leader Rick Swenson has been bringing this matter forward, but the two parties in control of the legislature seem oblivious to the threat this represents to rural Saskatchewan.

Saskatchewan’s farm ownership legislation was designed in the early 1970s to prevent investment entities, including pension plans, from deploying their vast financial re-sources in the acquisition of farmland.

However, the Farm Land Security Board is increasingly being challenged in its mandate to effectively enforce the provisions of the Saskatchewan Farm Security Act.

This reflects a worldwide agenda of farmland acquisition by sovereign wealth funds, investment management funds and pension plans.

Farmland has become a prime investment target for solid low risk capital gains, particularly since the last recession.

As well, there is a growing belief that a rapidly increasing world population and the effects of climate change will exacerbate food supply issues. Some high population, low resource nations are attempting to gain direct control over food production assets around the world.

Food security has arrived on the geo-political agenda.

The Farm Land Security Board is facing complex financial structures designed to thwart the statutory mechanisms that limit institutional land acquisitions.

For example, the board is currently in court defending its capacity to restrict a complicated entity built around land value derivatives rather than direct acquisition. If successful, the entity could employ large amounts of capital obtained through the stock market.

Canadian pension funds are also keen to invest in our farmland.

The announcement of the acquisition of the farmland assets of Assiniboia Farmland LLP by the Canada Pension Plan Investment Board last December initially drew little attention in the farm community, despite the comments of a CPPIB senior vice-president that it intends to invest $2 to $3 billion in farm land assets over the next five years.

The CPP farmland portfolio could easily grow to a million acres over time.

The Public Service Pension Plan, capitalized at more than $90 billion, is also determined to acquire a chunk of “the Last Best West.”

Other Canadian pension plans, which are structured as trusts and not eligible to acquire Saskatchewan farmland, are chafing over the evident disparity that is keeping them out of this acquisition race. One can expect a serious lobbying campaign to correct this perceived inequity.

Foremost in many young farmers’ minds is how these acquisition agendas will diminish their own modest aspirations to expand. Competing with pension funds and investment entities with access to hundreds of billions of dollars is a daunting and discouraging prospect.

However, the implications go beyond individual producers. Saskatchewan’s rural economic and social structure would be radically and irrevocably degraded.

For example, the CPP Investment Board is required by its enabling legislation to maximize returns on its assets. The Assiniboia entity, which continues to manage the land sold to the CPPIB, will also be pursuing the same imperative.

Managing the rental of a million acres would be an entirely different enterprise than 130,000 acres. The land would necessarily and inevitably be consolidated into large blocks operated by commercial scale corporate concerns. The result will be the beginning of the end of local family ownership as the basis of our farm ownership structure.

The deterioration of rural communities will accelerate.

Dan Patterson was general manager of Saskatchewan’s Farm Land Security Board for 20 years spanning three successive governments.

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