Saskatchewan farmers split on allowing pension funds to buy land
The Globe and Mail | 19 April 2015
Jim Zinkham and his wife Heather Holowka stand among some old implements on the edge of a field near the farm yard where Zinkham grew up near Regina, Saskatchewan. (Photo: Michael Bell/The Globe and Mail)
Saskatchewan farmers split on allowing pension funds to buy land
by JACCQUELINE NELSON
Saskatchewan’s move to freeze purchases of farmland by pension plans and foreign investors has ignited a debate over what’s best for the future of Canada’s bread basket.
The province has launched a public consultation to clarify the existing Farm Security Act, but in the meantime it banned purchases of farmland through lenders not registered in Canada and by institutional investors such as pension plans.
There are two key questions the government will pose to the province: “We want to know, should we allow pension plans, administrators of pension plans and trusts to own farmland? And the other question we want to know is whether we should allow foreigners to own farmland,” said Agriculture Minister Lyle Stewart in an interview.
The government says controversy erupted in 2013 after the Canada Pension Plan Investment Board, which manages investments for the Canada Pension Plan’s 18 million contributors and beneficiaries, paid $128-million for 115,000 acres of land growing wheat, barley and canola. The pension fund sought required approvals, including from the Farm Land Security Board, and discussed plans to use this as a platform for further investments. But then farmers, particularly in rural Saskatchewan, took issue with the deal, Mr. Stewart said, adding he got the impression the board also didn’t want to approve the CPPIB’s bid. “They got a legal opinion that they really didn’t have any choice,” he said of the process. “I don’t know if the legal opinion was broad enough, but that’s what we’re going to let people talk about in the consultation.”
CPPIB counters it has scarcely met resistance from farmers. It has about 100 tenants – many of them younger farmers – and turnover rates have been low.
Jim Zinkhan, 70, is among Saskatchewan’s farmers who want new investors. His family began tending its land in 1893 and now owns eight quarter sections of grain farmland outside of Regina, the equivalent of about 1,280 acres. They currently rent their land, but want to sell some.
“There’s a saying in the farming community that farmers are poor all their lives and they die rich, because that’s when the land gets sold,” Mr. Zinkhan said. “I want to sell some of mine now because I could use that money. The more competition there is for land, the better the prices are going to be.”
But many other farmers want fewer competitors and oppose outside investment, according to Norm Hall, president of the Agricultural Producers Association of Saskatchewan. He noted ownership restrictions could help maintain the existing farm culture.
Running alongside this debate is a worry that foreign buyers, who currently aren’t allowed to own more than 10 acres of farmland, have been looking for ways to invest indirectly – either through backing the purchases of a Canadian resident or using complex financial instruments. Provincial farmland prices in Saskatchewan have been rising on average, and there are worries foreign investment could contribute to that trend.
Saskatchewan tried to investigate purchases where the Farm Land Security Board believed financing came from overseas. “Our special investigator that we hired to do it was unsuccessful in really being able to complete an investigation in a foreign country. And so that’s part of the problem with the foreign ownership piece,” Mr. Stewart said. The government said during its review all financing must be done through a financial institution registered to do business in Canada, and the definition of “having an interest in farmland” has been tightened. Mr. Stewart said the government could crack down further.
Farmland ownership rules vary across the country, and Saskatchewan is among the stricter provinces. British Columbia and Ontario allow foreign investment.
Canada has grown increasingly wary of foreign takeovers in recent years, with Ottawa recently lengthening the time it can take to study proposed deals. In Saskatchewan, Premier Brad Wall emerged as an adversary to BHP Billiton Inc.’s $39-billion (U.S.) hostile takeover bid for Potash Corp. in 2010, which was later struck down by the federal government for not providing enough benefits for Canada. However, other deals have cleared, such as Glencore International PLC’s $6.1-billion deal for grain handler Viterra Inc. in 2012.
“We’re very much open to investment in general terms. Farmland is a little bit exceptional – I know farmers feel, rightly or wrongly, that institutions and foreign investors that are well-heeled are not necessarily always fair competition,” Mr. Stewart said. “Whether that’s right or not, that’s a strong feeling out in farm country.”
The CPPIB says the Saskatchewan farming industry is rapidly changing and could benefit from new capital.
“You have an aging farming population and no real succession plan in place,” said Angus Selby, who heads CPPIB’s global agriculture investment initiative. “In the Saskatchewan context, 70 per cent of the registered operators right now are over 50 years old. At least half will retire in 10 to 15 years.”
On top of these changes, the profile of crops being grown in the Prairies has evolved in recent years, adding soybeans and corn to the cereal grains for which the province is best known. And new technology and improvements in machinery, such as very large seeders, spraying machines and combine harvesters, are making farming more efficient, Mr. Selby said. “That changes the capital intensiveness of the business; it’s not just unique to Saskatchewan. Machinery is getting bigger and more expensive and it’s difficult for young farmers to start up on their own. If we can partner with those guys and take some of the land exposure off their balance sheets – they don’t have to use as much debt to get going—that’s a positive force for everyone.”
Mr. Zinkhan, who doesn’t have any heirs to take over his farm, says foreign investors or so-called mega farms won’t ruin the culture or opportunities in Saskatchewan.
“They’re yapping about institutional farmers coming in and all this, but what happens in the farming community is that it tends to level itself out,” Mr. Zinkhan said. Seven years ago he began renting out farmland to corporate farm groups Broadacre Agriculture Inc. and Wigmore Farms Ltd. While he said they were excellent tenants, the businesses are both now in bankruptcy protection. Mr. Zinkhan said he has reverted back to local farmers as tenants this season.
CPPIB is optimistic its own investments will be allowed after the consultation, given it’s long-term investment plans and Canadian leadership. “At the end of the day, we’re confident that a review is going to educate on some of these transitional questions we’re talking about, and demographic issues,” Mr. Selby said.
The details of the consultation will be available in late spring, with e-mail or written responses accepted until the end of the summer. The government will then see if it has a consensus, during what Mr. Stewart characterized as a “short decision process.”
Mr. Stewart says time will tell what farmers want. “We still have 43 per cent of all arable farmland in Canada and we’re the largest agriculture exporter in the country,” he said adding that the slip in oil prices could make it the province’s biggest industry. “It’s a part of who we are and people take it pretty seriously. It’s different here.”
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