Creativity Key for Those Seeking New Acres to Farm

by | Nov 14, 2022

There are options available for those looking to get into farming or expand their acres.

Alberta’s 50 million acres of farmland are productive, beautiful…and increasingly pricey. For those who own their acres, land appreciation now often contributes more to the farm businesses’ overall value than any commodity those farms can produce. For farmers who would like to enter agriculture or expand farm businesses, however, the often out-of-reach price of land has become a major stumbling block.

Between 2010 and 2021, the cost of agricultural land in Alberta more than doubled, rising from an average of just over $1,500 per acre to nearly $3,200 per acre across the province, according to Statistics Canada. The increase is particularly impressive when framed on a provincial scale: across the entire province, farmland and buildings increased from a total value of $38.9 billion in 2001, to $118.3 billion in 2016, to a whopping $160.9 billion in 2021 — a quadrupling of value in two decades.

This past June, the University of Alberta’s Parkland Institute released a new report detailing how investors’ interest in farmland, which has increased dramatically since the 2008 financial crisis, is impacting rural Alberta and fundamentally changing how farmers farm. As the report’s author Katherine Aske explains, “The new reality is that many farmers purchasing land in Alberta cannot pay it off in their lifetimes just by farming it.”

In the report, Aske argues the high cost of land gives rise to tenant farming and, consequently, shorter-term thinking: “Tenant farming… leaves farmers in precarious economic positions, disconnects them from the long-term health of the land, limits their autonomy, and inhibits them from transitioning to regenerative practice.”

Others, however, see opportunity despite the high prices, so long as the agriculture industry is open to thinking outside the traditional real estate box.

“Land access is something we really have to think creatively about. If we want more farmers in the world, how can we make sure that everybody has land to grow food on and to learn on?” says Alex Pulwicki, Alberta land access and e-learning coordinator for a relatively new-to-Alberta organization called the Young Agrarians. “Rather than using the phrase ‘land acquisition’, we use the phrase ‘land access’ to more generally mean having the ability to use land for farming in any form. We’re really trying to expand what the possibilities might be for finding land.”

Young Agrarians started in British Columbia in 2011 as a grassroots organization to connect young farmers. Initially, the organization focused on events that allowed new farmers to connect and learn about agriculture, business planning and build relationships. The organization then expanded to include programs that focus on reducing barriers to entry and success including business mentorships, on-farm training, and land access support.

In B.C. and, more recently, in Alberta, Young Agrarians has been working to help young farmers connect in creative ways to access land. The B.C. Land Matching Program, which is funded by the provincial government, is a match-making service that connects land seekers and landholders and supports the development of land sharing/lease agreements. In Alberta, Young Agrarians offers land linking events and resources, including a database of land opportunities.

“There are people who own land as an investment who don’t actually farm it themselves. There are people who are retired farmers who would love to see their land being used for farming, but they don’t want to farm it themselves anymore,” explains Pulwicki.

Renting — either at a cash rate or via a crop share agreement — can be a way for farmers to expand operations when they don’t have the capital to purchase land. Farm Credit Canada (FCC) calculates the rent to price ratio (the rental rate per acre divided by the market value of farmland per acre) at two per cent in Alberta in 2021, slightly lower than the 2.5 per cent national average.

To avoid renting’s most common pitfalls, Pulwicki says would-be renters and landlords should communicate very clearly about their relationship.

“It’s not like renting a room in the city where any old lease template will do. You really need to think about who’s in charge of so many details: who’s responsible for road maintenance, for fixing fences, for irrigation, for end-of-season tasks, for a million and one different things. You need to be very clear about expectations and ensure there’s a very strong conflict resolution process as well.”

Young Agrarians hopes that, within the next couple of years, they’ll be able to provide comprehensive resources to help farmland renters and landlords better navigate the lease process.

Getting into agriculture in almost any form is a capital-intensive business. FCC offers several creative financing solutions to farmers looking to start or grow farm businesses.

FCC’s Young Farmer Loan offers loans up to $1.5 million with no fees and lower than standard interest rates.

Targeted at farmers under 40, the Young Farmers Loan is noteworthy in that it requires a minimum down payment of 20 per cent versus the industry standard 25 per cent. Recognizing that success in farming requires business management expertise, the Young Farmer Loan comes with a year of Ag Expert Premium, which is essentially QuickBooks for farms with embedded field management software.

FCC’s Starter Loan offers loans of up to $150,000. It mirrors the Young Farmers Loan in offering special interest rates but goes several steps further in making access as broad and simple as possible. Specifically, it requires no guarantor, no down payment, and even has relaxed requirements on security.

“This one is the most unique and helps producers the most. If you don’t have anyone to help guarantee, or you don’t have anything for a down payment, or you don’t have any security, none of those would stop you from being eligible for a Starter Loan,” says Curtis Grainger, FCC’s director of lending products. “It’s been around for a while, but we did a pretty significant refresh of the program last year…to help new people interested in agriculture gain access to capital to essentially help kickstart their journey.”

Supporting young farmers is critical, Pulwicki and Grainger agree, especially given recent demographic trends.

First, there’s the increasing age of Albertan farmers. The 2021 Census of Agriculture showed that Canada’s farmers continue to grey: in 2021, just over 62 per cent of Alberta’s farmers were 55 years of age or older, up nearly seven per cent from 2016. Over the same five-year period, the number of Albertan farmers in the 35 to 54 years of age category dropped by six per cent, or nearly 3,600 farmers.

Second, there’s a major and imminent shift in land management on agriculture’s horizon.

“There’s a huge, huge land transfer coming. Around 75 per cent of farms are going to be transitioning hands within the next 10 years,” explains Pulwicki. “Many of those farms don’t have succession plans, so there’s a lot of uncertainty ahead.”

Interestingly, tomorrow’s farmers aren’t necessarily today’s farm kids. In fact, a Canada-wide study of new farmers completed in 2015 showed that 68 per cent of survey respondents didn’t come from farming families, says Pulwicki.

While the rising cost of agricultural real estate may make succession feel out of reach, Pulwicki adds farmers – both those looking to get in and those looking to get out – should look for possibilities.

“Be open to different possibilities and, yes, be excited by the opportunities. A lot of the time it can be kind of doom and gloom when people are thinking about these really big challenges ahead for agriculture, but there’s actually so many different opportunities that – when you get to it – you’ll probably end up having a hard time choosing between the options available.”

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