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Is anyone in here involved in farmland investing? ie AgCapita Partners LP, Bonnefield, Assiniboia Capital Corp. etc. What have your experiences been?
 

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It's a good asset to have I think. Not only is food a basic requirement as the population increases, but it can be used for many different things in the future during urban expansion, population displacement or for resources under the ground etc

I'm looking for CRESY and/or to own physical Cdn farmland
 

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In Canada land owners do not have mineral rights.
In the majority of cases, this is correct, but there are exceptions. My grandparents owned the freehold mineral rights to their farm in Alberta and when they sold the farm, they were smart enough to retain the mineral rights. I know that because my brother and I have been collecting royalties on natural gas being producted from that property for the past four years, and the production company told me recently that they expect the well to last for another few years.

The following is a brief explanation of mineral rights in Alberta that I found in a google search:

Most land in Alberta has two owners and two sets of rights. The owner of the surface rights (the landowner) has control of the land’s surface and the right to work it, in addition to any sand, gravel, peat, clay or marl which can be excavated by surface operations. The owner of the mineral rights has the right to explore for and produce oil, gas and other minerals. The mineral rights for approximately 81 per cent of the province are owned by the Alberta Crown and managed by Alberta Energy. The remaining 19 per cent of the mineral rights in the province are referred to as freehold minerals or non-Crown rights and are owned privately by individuals, companies, national parks or First Nations reserves.
 

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We had some advice that we should obtain a GST number, because of some farmland that we will inherit once probate is complete.

Any idea why we should get a GST number?

How long does probate usually take?

The area is surrounded by natural gas, but to our knowledge there are no wells on the property. How do you calculate royalties?

Thanks for any info.
 

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And the chances of your land being mined without you making some $$? They need right of way, space for equipment etc unless they're tunneling in

Where I grew up farming the neighbors demanded compensation just from noise pollution of trucks hauling material in from Irving pulp and paper plants, I can't imagine a mine under your land without some form of compensation.. I also know farmers with Nat gas under their land in NB, they certainly weren't too upset about it

There are many things you can do with open land if the opportunity comes up some day. I think it's underrated
 

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In the majority of cases, this is correct, but there are exceptions. My grandparents owned the freehold mineral rights to their farm in Alberta and when they sold the farm, they were smart enough to retain the mineral rights. I know that because my brother and I have been collecting royalties on natural gas being producted from that property for the past four years, and the production company told me recently that they expect the well to last for another few years.

The following is a brief explanation of mineral rights in Alberta that I found in a google search:

Most land in Alberta has two owners and two sets of rights. The owner of the surface rights (the landowner) has control of the land’s surface and the right to work it, in addition to any sand, gravel, peat, clay or marl which can be excavated by surface operations. The owner of the mineral rights has the right to explore for and produce oil, gas and other minerals. The mineral rights for approximately 81 per cent of the province are owned by the Alberta Crown and managed by Alberta Energy. The remaining 19 per cent of the mineral rights in the province are referred to as freehold minerals or non-Crown rights and are owned privately by individuals, companies, national parks or First Nations reserves.
True some mineral rights were grandfathered in but nearly always they are separate.
 

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And the chances of your land being mined without you making some $$? They need right of way, space for equipment etc unless they're tunneling in

Where I grew up farming the neighbors demanded compensation just from noise pollution of trucks hauling material in from Irving pulp and paper plants, I can't imagine a mine under your land without some form of compensation.. I also know farmers with Nat gas under their land in NB, they certainly weren't too upset about it

There are many things you can do with open land if the opportunity comes up some day. I think it's underrated
Yes the extraction on mineral rights always means some compensation for the landowner but for the average well/pipeline we are normally talking about 20-50k and sometimes much less.
 

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farmland investing

If I may, the topic has shifted from farmland investing, i.e. AgCapita to ownership of mineral rights.

I too have been looking into AgCapita and they don't have mineral rights; they buy land, rent the land, take 2% for management expenses, invest the surplus rental income into other land (if any available), hold the land until a predetermined date and then sell (try to sell) for a capital gain, 80% goes to the investors and 20% to the partners.

Farmland likely will increase, but how and when it does sell and then will it sell at the date they want to sell it by are considerations. Your investment is tied up for 4 years with a plan on capital gain - no guarantee.
 

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That's all we need - more speculators driving up the price of farmland and driving up pressures to develop the ever-shrinking supply of arable land.
 

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Farmland is like gold in that it hedges inflation and holds its value well during a financial crisis, but instead of paying to store it you receive rent as bonus.

You could take all the gold that's ever been mined, and it would fill a cube 67 feet in each direction. For what that's worth at current gold prices, you could buy all -- not some -- all of the farmland in the United States. Plus, you could buy 10 Exxon Mobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?
Warren Buffett
 

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Discussion Starter #12
If I may, the topic has shifted from farmland investing, i.e. AgCapita to ownership of mineral rights.

I too have been looking into AgCapita and they don't have mineral rights; they buy land, rent the land, take 2% for management expenses, invest the surplus rental income into other land (if any available), hold the land until a predetermined date and then sell (try to sell) for a capital gain, 80% goes to the investors and 20% to the partners.

Farmland likely will increase, but how and when it does sell and then will it sell at the date they want to sell it by are considerations. Your investment is tied up for 4 years with a plan on capital gain - no guarantee.
Thanks for your response.

AgCapita is appealing to me, because most of the farmland investments require you to be an accredited investor and make a large investment ($100,000). AgCapita will take on smaller investors. I asked for their investor package today, mainly looking for their MER (looks 2% annually plus 20% of profits from your response) and for their historical returns. There are some pretty appealing reasons to get into farmland given the price/acre in Saskatchewan relative to other jurisdictions.
 

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Like I said before, I'd rather have the gold. My family has some arable ranch land and you can't even give it away. The only way to make money on it is to develop it.
 

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indeed this thread has divided into the original topic - which is farmland as an investment - and the vaguely-related issue of surface vs mineral rights.

the latter is an extremely complicated matter which varies in canada from province to province. Could we perhaps leave this topic out of this thread & concentrate instead on the OP's subject, which is farmland as an investment.

this is an interesting alternative investment & i for one am happy to see it discussed.

here is a concern i would have. As economic/financial booms mature, all sorts of fuzzy promotions usually appear. (imho the current fad for rare earths is an example, since rare earth promotion often appears towards the end of a metals cycle.)

so what i am thinking is that first-rate arable land doesn't get sold to these aggie promoters/partnership vendors. No, the best land probably goes to Big Ag & maybe a bunch of longtime farm operating families & corporations from the region. Who knows, maybe the best farmland in canada already belongs to chinese investors ...

ie what i am getting at is that these smaller aggie partnerships may be dealing in less desirable land, ie land with considerably less chance of appreciating over, say, 4 or 5 years' time.

argo is on record here as saying his family has some ranch land that could not even be given away ...

of course we could address this issue by setting up an aggie partnership review board here at cmf forum ... with mode as general manager to suss out what is prime land & what is scrap land ... & ethan as chairman of the board ...
 

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100% agreed. The other consequence is the price of food will be driven up as a result.
In a loaf of bread only 5% of the grocery store price is for the wheat grown by the farmer on his farmland. The rest is for the miller, distributor, packaging, advertising, retail store costs and so on. For oatmeal it is something like 2%.

The fact that land prices have risen does not necessarily mean that food prices will rise any significant amount. If Wheat prices doubled the price of bread should only go up about 5%.

In addition the prices, say for wheat, that a farmer receives is not directly linked to the price of farmland. Wheat prices are set by supply and demand on a worldwide basis. However the price of land is influenced by the price of wheat (or canola or corn etc).

Usually land prices rise after grain prices have risen and will go down if grain prices go down.

The quality of farmland varies so much and can change within a mile. Any non-farmer investing in farm land should ensure that whomever is buying the land really knows what they are buying. When the farming economy is looking non-profitable the poorer land goes down in value the most and is hard to sell or rent out.

I saw an interview on BNN a few months ago on this topic. Several of the companies that are in the ag land business were on. They appeared to know what they were doing.
 

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I believe farmland is a good investment for the long term, but in the short term I think it's over valued and in bubble territory. I bought 2 1/4's of farm land in Alberta 6 and 2 years ago and it has done ok, land rent and Surface lease revenue makes the payments. Saskatchewan land is cheap compared to Alberta but your pretty much guaranteed 1 out of 4 years in most places there will be crop failure do to weather, it's also doubled in price in the last 5 years and there is a ton for sale.

Remember the average age of a farmer is 50+. Could well be lots of land for sale over the next 10 years + interest rates will most likely rise increasing carrying costs. Historically stocks have outperformed farm land. There is also a lot of land in developing countries that is under utilized, that could produce a whole lot of crops.

I hope to buy more one day, but not at these prices.
 

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Considered AgCapita a while ago but decided against it due to the 2% fee, 20% profit taking and I believe they sell the land you bought into after 4 or 5 years no matter what. I'd rather they hold onto the land. Could be wrong about the last point but was turned off enough fromt he first two. I'd rather buy my own land, which I also looked into but will be patient as I learn the ins and outs of the biz.

Argo please message me if you're trying to give away land :D

On a side note, speculators are a good thing.
 

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Argo please message me if you're trying to give away land :D
Well it's a figure of speech but you know what I mean. When you can't sell 2000+ acres of mixed hayfields, forest, and grassland on a lakefront with multiple residences for the same price as a house in Vancouver you know something is wrong.

Farmers just don't make any money so a lot of it is getting subdivided into residential, at least in BC. I remember several years back there was a giant ginseng craze and countless hayfields got converted to ginseng over here. I suspect more and more of our food will be coming from overseas.

Of course you could get lucky and be bought out by someone super rich. Like Douglas Lake Ranch was by the (Walmart) Waltons. They probably run it as a tax loss.
 

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Their site shows generic returns for farmland, but doesn't seem to say anything about the returns under their management. 2% MER might be reasonable, given that the fund isn't very big yet and it is actively managed. Not sure about the 20% take of the gain, but I suppose it aligns management interests with the investors. I'd like to see some more information about after-cost yield on the investment.
 
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