Money in Bank vs Owning land? I think the tides have turned.

[farmaholic]

Jazz, Like... Good responses.

[redbull81]

You may want to check your math again.

Well its sort of a best of both worlds. You want to keep your land, but you want to increase your return or diversify your holdings. There are a number of ETFs offering covered calls on banks which basically doubles their dividends but gives up long term increases. Great for cashflow, but not appreciation.

Couple things about stocks though, the move sometimes a lot based on nothing. You have to ignore the day to day stuff.

Second thing, stocks can compound. There is no more powerful investment on the planet. SK3 $650k invested at 5% return would just about triple in 10 yrs. Your land wont triple again in your lifetime.

A 5% annual return would not even double in 10 years let alone triple.
Check out the Rule of 72 for quick way to figure out amount of time needed to double your investment with a given % return.

[AlbertaFarmer5]

A 5% annual return would not even double in 10 years let alone triple.
Check out the Rule of 72 for quick way to figure out amount of time needed to double your investment with a given % return.

5% annually compounded would yield 62% after 10 years.

Would need 11.6% to triple in 10 years.

In this environment, there are no guaranteed return no-risk investments that will yield close to that.

[SASKFARMER3]

And you guys believe Alberta and Sask land will double by 2027. To 1.6 mill and 1 mill in Sask. Fm. Like that will happen.

The whole example is why would a investor put money into land if they can make 100 a acre return selling the property.

[jazz]

Sorry, not triple, but a close double before taxes.

Land in my area has tripled in 10 yrs but is that sustainable? Its build on low interest rates and speculative demand, not really profits. The equities market reflects real revenues much closer although there is speculation in there too. I'm not talking buying Tesla or anything.

I am a strong believer in diversified income especially for a certain size of farmer. Trying to set my my place up with fixed income (rent), investment income (stocks) and business income (farming). 3 legs of the income "stool". I am way to dependent on mother nature and fickle markets and CN/CP to have all my eggs in one basket.

[jazz]

There is one guaranteed investment return - paying off debt.

[bucket]

Jazz

Dumb question....but once you start earning money from rent or other investments ...what is the incentive to farm?

[Klause]

Anyone can go buy dirt.


There's millions of acres of it works wide and lots comming into production.


Lots of places where you can own land...

And that's something to keep in mind.


Dirt will feed your family in tough times. But in Canada you don't own dirt. You own a tenure from the crown...


Thats why expropriation works so easily.


Successive social justice governments will erode land rights more and more. The aboriginals don't need direct title. They just need to stop all development or slow it to the point where it doesn't pay anymoere to develop anything - sound familiar?


Land is a great physical thing to hold. But in 5 years buying it will be more fun than today.

[AlbertaFarmer5]

Land is a great physical thing to hold. But in 5 years buying it will be more fun than today.

But will it really be more fun? If events conspire to drive the price of land down so far that it is "fun" to buy, that likely be a combination of higher interest rates, banks reluctant to lend without large down payments and substantial equity, and low or negative profitability in not only ag, but all the other commodities which make our economy hum, and helps prop up the price of land in many markets. I think it would be more fun to buy at the peak of the euphoria than at the depth of the depression, although the fun might not last as long buying the highs.

I started buying land in the second half of the nineties, and have been promised that prices will drop and interest rates will rise ever since, someday I will regret not listening, but if I'd listened, my most ambitious years would be long since behind me by the time I ever got to take advantage of the cheap land. Bought a piece in 2012 from a local farmer who was convinced that was the peak, and it was time to get out.

[jazz]

Jazz

Dumb question....but once you start earning money from rent or other investments ...what is the incentive to farm?

Well because, sometimes events conspire and you do make a profit. At the very least you are paying down an asset that might be more valuable in the future. While you are paying it down, its positive cashflow ability should be increasing...technically.

I assume klause is referring to land coming into production from the old soviet bloc countries. Thats the probably only place where land can be brought online unless you think we are going to knock down amazon forests. If there is new land coming online, its being farmed by much less efficient farmers than us and its probably in politically unstable areas or places much more susceptible to weather. Its not a threat, but I agree the threat from our own govt is much bigger.

[jamesb]

I would agree that the best opportunities come when things are the bleakest. In those times it is very hard to have a good return and a good plan is one to survive till things improve. In the 90's land could be on the market for years as no one could see that things would improve. We rented some neighbours land for taxes for a few years. They just wanted out. The lowest land prices we paid in the 90's was $65000 for a half section. Neighbouring land to this sold for $160000 per quarter this past year.
Yes I know we have entered an era where the "land investor" is competing with the farmers for the control of the land but as a farmer my desire that the land value goes up is of far less consequence that the need to generate a profit on the land to provide a living. We have gone through a decade of strong land values and I feel that the investors today are going to be disappointed for the next 10 years. The reality is that most farmers are willing to accept a extremely low return on investment. Investors simply will not stand for low returns for any length of time. We are starting to see the investor sell the land back to the traditional family farm in this area.

[Klause]

Well because, sometimes events conspire and you do make a profit. At the very least you are paying down an asset that might be more valuable in the future. While you are paying it down, its positive cashflow ability should be increasing...technically.

I assume klause is referring to land coming into production from the old soviet bloc countries. Thats the probably only place where land can be brought online unless you think we are going to knock down amazon forests. If there is new land coming online, its being farmed by much less efficient farmers than us and its probably in politically unstable areas or places much more susceptible to weather. Its not a threat, but I agree the threat from our own govt is much bigger.

4 million acres - Ontario due to climate change.

Kazakhstan - 10 million acres
Russia - 22 million acres.
Argentina - 2.2 million acres

Less efficient? Are you kidding? Kz, Argentina, Russia are half as expensive to grow crops here and their yields surpassed ours long ago.


Canada is the highest cost lowest return production area in the world. If you can't see or believe that you need an education in geography and politics.

Efficiency needs to be measured in dollar in = dollars out. Bot how many acres one person can farm.


Sebody had that chart of cost per but of wheat to produce for the major production areas... They should post it here again .



Oh, and none of those areas are rainforests.


We didn't even talk about the massive ag development happening in Africa thanks to Chinese investment or Chinese technology that's turning baren deserts into farmland.

[jazz]

klause, I suggest you read some Peter Zeihan on why the north american ag system will dominate in to the future. That doesnt mean that land values cant fluctuate, but I am not going to fear a country where the average life expectancy is 60 and declining demographically, nor another who is teetering toward a full socialist state with its neighbors, nor another that has to cross 5 other countries to get its wheat to port.

If there is all this magical land in Ontario I never heard about, then they will grow corn and soya there. Thats not a threat to us.

The china investment model will fail. They have invested in the most unstable places in the world. Good luck to them trying to operate businesses in Pakistan or South Africa.

Its easy to get caught up in the doomer mentality, but perspective is in order. These places are 3rd world countries operating in other 3rd world countries. They pose no threat.

[Klause]

klause, I suggest you read some Peter Zeihan on why the north american ag system will dominate in to the future. That doesnt mean that land values cant fluctuate, but I am not going to fear a country where the average life expectancy is 60 and declining demographically, nor another who is teetering toward a full socialist state with its neighbors, nor another that has to cross 5 other countries to get its wheat to port.

If there is all this magical land in Ontario I never heard about, then they will grow corn and soya there. Thats not a threat to us.

The china investment model will fail. They have invested in the most unstable places in the world. Good luck to them trying to operate businesses in Pakistan or South Africa.

Its easy to get caught up in the doomer mentality, but perspective is in order. These places are 3rd world countries operating in other 3rd world countries. They pose no threat.

You really are dillusional.


First of all go research the "Great clay belt of Ontario"


They grow barley wheat canola and some soy. 60bpa+ canola yields have been attained.

Land that has infrastructure and market access (Toronto is 5-7 hours away).


Argentina started double cropping ten years ago... Effectively doubling productive capacity.
Russia managed to double their export capacity inside of 4 years.

The amount they increased by last year is our ENTIRE EXPORT PROGRAM.


Farmers here that we're too shortsighted didn't see coming what happened to our pulse industry. It's gone. Done. It isn't coming back for a long time.


Ignorance of the world, incompetence, and a lack of vision will bring Canada to the status of a 3rd world nation so quick nobody will know what happened.



You can operate anywhere in the world if you know how to.


Look where most of our oil comes from.

Don't think it's possible? Research a few companies like Olam.

Coincidentally they operate in every productive area of the world except Canada.


Wonder why that is...


And for the love of all things good in Canada quit insulting the Chinese. Right now China is the only reason we even have reasonable canola market.



We are a declining civilization, or haven't you noticed that? We care about stupid social justice crap. Can't even get a piece of steel pipe in the ground to export oil.


By the way, the average life expectancy in Russia is just over 70 years. Quit reading fake news CBC.

If you think Canada's media is open and unbiased... LOL. It's all propaganda, you just live inside of it so don't see "truth." The irony of accusing other nations of the same.

And the arrogance of somehow thinking we're better than the entire world simply because ?????? Commenters on here want to build old folk's homes instead of high speed transit. Infrastructure for decline vs. infrastructure for expansion.

Meanwhile those "third world $hitholes" are building entire cities in decades.

They're building arctic export terminals that we never got off paper.


They're putting in new railways.

They move more production into an export position in a week than we do in a month.

So please, give me a list of advantages.


Then explain why for almost a hundred years, Canadian farmland was the cheapest of any of the productive areas of the world...?

I don't understand why we aren't screaming at the top of our lungs as a nation.... that we need more modern cities, more modern highway systems, passenger trains, better connectivity, better cellular networks, more social infrastructure. All of this costs money, brings jobs, jobs brings people, people bring industry, industry brings money.

Yet instead we go galavanting around the world telling them how much better we are. As our markets get taken away, our competitiveness eroded, and quality of life drops.

[lnjr]

Klause you are always stating how much better it is to farm in a number of countries. So why are you farming in canada?