So this is why Im wrong and Canada is the best place to buy up our land from under us and make us wo

[SASKFARMER3]

Investing in agriculture has been one of
the most popular investments over the
last two years due to multi-decade low
global grain supplies and growing demand
from emerging markets. Grain prices and
farmland values have risen substantially
as capital has been attracted to
agriculture’s rapid growth. The demand
for agricultural assets has made
attractive investment opportunities in
agriculture harder and harder to find.

We recommend investors start looking
farther north for compelling investment
opportunities. Canada, the world’s
seventh largest grain producer, is home
to some of the world’s best farmland and
agribusinesses. Despite Canada’s strong
agricultural qualities, farmland
valuations lag substantially behind the
rest of the world.

For investor’s looking for investment
opportunities in farmland, we see Canada
as a compelling investment opportunity
due to its attractive valuation,
potential for substantial increases in
production, and improving profitability.
Investing in Canadian farmland today
could turn out to be equivalent to
investing in Midwestern U.S. farmland in
2009.

Attractive Valuations

Capitalization rates (rental
income/price) in Canada are very
attractive compared to the U.S. and the
rest of the world. With proper sourcing
and due diligence, farmland in Canada
can be obtained at 6-7% cap rates. This
compares to farmland cap rates of 5-5.5%
in the U.S. Corn Belt, 4% in Argentina,
and only 2-2.5% in the U.K. There are
many reasons for the difference in cap
rates across countries, but we believe
the primary factor for the above average
cap rates in Canada is the lag in
appreciation compared to the rest of the
world.
Cash Rent Cap Rates
Cash Rent Cap Rates

Canadian farmland values have performed
well over the past 12 months, but not as
fast as the U.S. Corn Belt. Saskatchewan
farmland values increased by 14.3% year
over year, according to Farm Credit
Canada, while prime U.S. farmland
increased by 31% in Iowa, according to
The Federal Reserve Bank of Chicago.
Alberta farmland increased in value by
5.5% year over year and Manitoba by
3.7%.

Dissolution of Canadian Wheat Board

For 76 years, the government operated
Canadian Wheat Board (CWB) has
maintained a monopoly on purchasing and
selling wheat and barley in Manitoba,
Saskatchewan, Alberta, and parts of
British Columbia. The grain market
monopoly will come to an end in August
of 2012 as Canada's Conservative Party
passed a bill in 2011 to strip the board
of its control.

Many farmers, investors, and businesses
alike are excited to participate in a
free market and benefit from market
prices. Businesses will have more reason
to build facilities and infrastructure
if they can buy grain directly from
farmers, rather than paying a premium
through the CWB. Farmers will have the
ability to turn a larger profit margin
as they will be able to better time the
market and sell grain at more
opportunistic points throughout the
year.

Higher revenues for farmers will
directly affect the underlying farmland
values. Farmers will be incentivized to
increase production through planting
more acres and investing in innovation
to increase efficiency. Increased
profitability, infrastructure, and
efficiency are all tremendous
ingredients to attract investors.
Canadian grain will finally be free at
last.

Rising Production

Weather in the southern plains of Canada
is very similar to the U.S. Corn Belt
with two major exceptions. The first
difference is the length of the growing
season. On average, the growing season
is 52 days shorter, which requires
shorter maturity seeds that result in
substantially lower yields than the Corn
Belt. The second difference is the
amount of precipitation. Cedar Rapids,
Iowa receives an average of 34.7 inches
of precipitation per year, according to
The Weather Channel, while Regina,
Saskatchewan receives under half as much
precipitation at 14.3 inches annually.

Canadian farmland does feature an
extremely cold winter frost that will
naturally deter insects, plant disease,
and soil compaction. Even less pesticide
is needed in Canada than in the U.S.
which should help farmer input costs
remain relatively lower.

Global demand for corn is rising
substantially each year. As a result,
more acres are being allocated to corn
production in the Midwest and soon the
trend of planting corn will be spreading
into Canada. Cold tolerance is an issue
in Canada as the growing season is
shorter than that of the Corn Belt. Seed
companies invest millions of dollars
each year into research and development
for new and improved cold and drought
tolerant hybrids. Due to advances in
biotechnology, scientists have been able
to produce cold tolerant hybrid seeds
that are able to be planted earlier in
the spring season. These cold tolerant
seeds have allowed corn to be planted in
regions of Canada where we never thought
possible and the area will continue to
spread.

Seed varieties are expanding into
shorter maturity dates as well. 120 day
corn grows well in central Illinois, but
much shorter maturity is needed moving
north as the growing season shortens.
Companies such as Monsanto, DuPont, and
Croplan Genetics continually shorten the
maturity dates of field corn allowing
for such expansion of the traditional
Corn Belt.

Strategic Location

Emerging markets of China and India will
continue to demand an ever increasing
amount of corn and soybeans, which will
need to be shipped through the Pacific
Northwest ports of North America.
Canadian farmland poses an excellent
competitive advantage over U.S. farmland
as Canadian farmland is located
substantially closer to the ports in the
Pacific Northwest.

Rail lines, including Canadian National
and Canadian Pacific, will help
transport valuable grain grown in the
southern plains of Canada to the western
seaboard for export to China and other
emerging markets in Asia.
Canadian Pacific
Canadian Pacific

Due to the expanding grain logistics
along the current rail lines in British
Columbia, Alberta, Saskatchewan, and
Manitoba, grain offtakes such as
elevators and ethanol plants will
compete for grain and drive the local
commodity prices higher, translating to
higher farm income and farmland values
over time.

Excellent Soil Quality

The southern plains of Canada are
comprised of the same top quality
Mollisol soil types as the Midwestern
U.S. Mollisol soils are only found in
four areas in the world; central North
America, the Pampas region of Argentina,
the Steepes of Ukraine, and the Yellow
River Valley of China. These soils are
thick, contain excellent top soil, and
have large amounts of organic material
which efficiently hold moisture and
fertilizers. These characteristics make
Mollisols ideal for producing row crops
like corn and soybeans.

There is variance across Mollisols, but
strong yielding corn and soybean crops
will grow on all Mollisol soils leaving
climate as the limiting factor in
Canada. High quality soil in the
southern plains of Canada is very
similar to 200 bushel an acre corn soil
in Iowa and Illinois, yet currently
valued at a 75% discount.

Crop Diversification

The variety of crops grown in the
southern provinces of Canada provides
diversification for farmers as upwards
of 14 major crops are grown annually.
Chiefly canola, wheat, oats, and rye are
grown on the ancient tall grass prairies
of Canada stretching from Alberta to
Manitoba.

These key crops are in high demand for
the manufacturing of food products for
animal and human consumption worldwide
and domestically. Saskatchewan, in
particular, produces the most of these
crops, as 44% of Canada's total
cultivated farmland is located inside
the province. In addition to crops being
used for food, there is an increasing
demand for Canadian grains to be used in
biofuel production.

The U.S. has a goal to produce 36
billion gallons of renewable energy by
the year 2022. In 2011, the U.S.
produced 13.5 billion gallons of
ethanol. In order to meet their goal,
the U.S. is going to have to look
elsewhere, and Canada is a prime
candidate neighboring to the north. In
September of 2011, the Environmental
Protection Agency approved the use of
Canadian crops in U.S. biofuels. Canada
became the first country, outside the
U.S., to gain such approval. The biofuel
approval will generate a new demand for
Canadian grains primarily driven by the
U.S., to serve as a safe and local back-
up.

Conclusion

We believe that growing demand for
agriculture is going to create a
substantial amount of wealth across the
globe. The popularity of agriculture
over the last two years has made it more
difficult to identify attractive
investment opportunities and we believe
investors need to be selective.

We see Canadian farmland as the next
frontier for investors as valuations on
a relative basis to the U.S. and the
rest of the world are very attractive.
Improving technologies driving the
expansion of the Corn Belt and better
pricing due to the dissolution of the
CWB, will continue to drive farmland
values higher in Canada.
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[SASKFARMER3]

Bring it on I want to be a
SERF!!!!!!!!!!!!!!!or is that SMURF!!

[SASKFARMER3]

Is it only me that sees we are all in
danger of loosing what our grandfathers
worked so hard to build for a few pennies.

[SASKFARMER3]

My biggest Competition IMHO just sold out
last weekend. Their falling like flys.

[SASKFARMER3]

Here is something else to think about.
Who dont these new land companies need.
1. Sales man for equipment chemical
grain etc. Deal with company or the
company buys shares in farm.
2.RM administrators or Council why only
few farmers control all. Sorry
Companies.
3. Farm advisors they have their own.
4. Hutts dont even have a chance but
they are key to all this cheap labour
and lots of it.
5.Auction companies. No farmer no sales.
6. Bin sales etc. THey deal direct so
gone are all the smaller companies that
started in Sask Alb and Man.
7. Farm shows who needs to go if the
farmer is gone a CEO from Toronto.
8. Fuel dealers only have one company
dealing with Coop or Petro can.
9. Every small town rink school curling
etc, BYE BYE.

10 What will you and I do we are their
Workers who one by one will fall prey to
the end or change in farming that is
coming some will last longer than others
but in the end all will work for the
Land companies.
WHy because we let this shit happen!

[agstar77]

Future of farming : Large landholding corp with foreign workers and remote controlled machinery. No small communities. The only question is how fast it will happen. The average age of farmers will speed up the process along with our corporate first government.

[SASKFARMER3]

I know its not George Orwell but shit its
happening and happening fast. Our area is
crumbling. Guys are bailing every day.
Short term gain for long long long term
pain.

[charliep]

One of the most interesting newsletters I get is one about succession planning and thinking about how you want your farm to carry on into the future.

Assuming your of my age (55 plus), you have spent years building your business into the success it is today. If you don't have farm family involved in taking over your business operation, who will be the next owner? Do you have someone in mind or will it be whoever offers you the biggest dollar in a land sale? Do you want government telling you who qualifies and who doesn't?

Just human but we want to impact what others do but we want freedom to enjoy our lives/property including the ability to sell for the best price.

[agstar77]

The signs have been all around us for years. Take for example the consolidation of the ag equipment dealerships.

[Daylate]

Investors don't hold on to investments that have little return. I believe that because of low interest rates, and the rent return off the land, mixed with shitty returns on markets have created the perfect storm. Values of land will never be back to where they were but at least land is being bought by people who will sell again when the going gets tough.
WE just have to be ready for it. Make a plan and try to allocate cash towards it in the "good times" and u might just get that piece of dirt u thought would never be sold that investors got.

[freewheat]

I have said it before, and I will say it
yet again... We as farmers are at least
as much to blame for the current
situation. We live in this more, more,
more mindset, grow our farms to a size
beyond the purchase price of most
farmers, and we wonder why this
happens???

We discourage our kids, send them away
for 5 years, and wonder why they decide
not to come back. We live for money, for
more land, for fancy machines, and our
kids think this is what matters most in
life. And then a rough patch comes
along, and we moan and groan, and swear
at farming. Our kids see this.

We get this mindset that we are all in a
big competition for land. We buy more
land, need more machinery, rent more
land to pay for it. Sure our farms need
to prosper and grow, but at what cost,
at what price? Every magazine exhorts
the amazing qualities of super farmers.
If you farm 10 000 acres or more, you
have a great chance to win farmer of the
year! If you only farm 2000, well you
have not done enough to be a great
farmer.

And then we marvel at the situation
today??? Wow!

Of course investment companies are going
to come in when there are no little guys
left. Who can buy 10 000 acres in a pop?
Especially at todays prices? SF3 has
stated some of the latest land prices
are in the 250 a quarter range in his
area. Do the math.

I am all for growth and prosperity, but
this fake competition, you know, the one
made up by the land hungry guys, who
"need" more land to compete against
their neighbors, have made this thing
occur. More rapidly than it should have.

We as farmers, need to take a deep
breath, and say, how much is enough? How
much do I actually "need", before we
start bashing the land investment firms
for coming here, when the locals can not
afford to buy out their 10 000 acre
neighbors.

Trouble is, 10 year old machinery isn't
good enough, a new half, ahem 3/4 ton
diesel is a must. We just can not drive
something more than a few years old
anymore, cuz we are too smug. Our
grandparents, who sacrificed so much,
did with so little, and lived a simple
life, are rolling in their graves.
Shh... Listen. I can hear the earth
rumbling. Can you??

[burnt]

Good post freewheat.

Ain't no going back either.

My Amish neighbors are barely able to make it farmng their 100 acre plots but they are looking smarter all the time. They have almost ZERO exposure to whatever goes down in the rest of society. Oil can go to $200/bbl and they won't care - the horse still just eats a bale a day.

[bucket]

Saskfarmer3

A question.

If you had to sell would you sell off in pieces or would it be an all or nothing deal?

I marvel at farmers who built a farm piece by piece thanks to neighbors but have to sell all or nothing. It basically puts anyone young or smaller out.

[sumdumguy]

Think they can run the tractors and combines
remotely from China? Good help is hard and
getting much more expensive to find. Managers
for $100 an hour. Oops, where's the promised
profit margin?

[riders2010]

When you have X billion people and only enough food grown in your own country for a fraction of those billions, a hundred bucks, a thousand bucks is nothing. We are being led like sheep into believing that we are the ones that need them. On the contrary if we had half more balls and brains and price our resources and not allow our land to foreign control we will be the ones dictating to the world a few decades from now. The path we are on we are being told what a good deal we are getting when realistically we are selling our country's future for a song.