Cheap Farmland Lures Foreign Buyers

[bellson]

http://www.farms.com/FarmsPages/ENews/NewsDetails/tabid/189/Default.aspx?NewsID=23186

This can't be good...

The renowned cranberry harvest in southern Quebec has long attracted tourists to the picturesque region. But the cranberry bogs sprinkled throughout the countryside near Victoriaville attracted a different type of sightseer earlier this summer - a billion-dollar, U.S.-based agriculture fund hungry for cheap Canadian farmland.

Attracted by the Canada's low political risk and fertile fields, Hancock Agricultural Investment Group, a Boston-based unit of Toronto's Manulife Financial Corp., decided its first Canadian purchase would be an 1,100-acre (450-hectare) patch of land that it called "one of the most highly productive properties in the industry."

The company will not disclose how much it paid, or even the exact location of the farm. But president Jeff Conrad said the company is in Canada to stay, and the fund plans to seek more land.

"A lot of people get uncomfortable because they don't know us and they don't know how we operate," he said. "We aren't in this to flip properties, and we're not fast money. Our clients are long-term, institutional firms - pension funds - and they have a place in their asset allocation for farmland."

[liberty]

I don't know why anyone should think this is a big deal. If these funds can hire decent managers, maybe they can make a go of venture like this. However, most institutional and foreign investors in farmland tend to lose money over the long term, not make it.

I recall hordes of foreigners flocking to Canada in the 1970's to buy up "cheap" farmland. They quickly found out it was only cheap compared to what they would pay back home. Most of these buyers eventually left.

The Italian that bought our land sold it twenty years later for exactly what he paid us for it. He took a bath on his capital investment when you factor in inflation.

In general, unless you are willing to engage in hands-on, intensive, personal management of a farm, your chances of making money are slim.

[Hopperbin]

A bit of a conundrum here, if the farmer worker cannot invest in the land how can an investor that is not intending to do any work make a go of it?

[may-be]

In my area if I had cash to by land and rent it I would get a 7% return after land taxes on my investment. W ith the opertunity it might goe higher in value. Only goes up not down, worst case it stays flat for awhile. To me this is a pretty safe investment. The guy renting it is doing the gambling imo. Sold a special crop once and the broker enjoyed the money in another country. Put money in mutual funds for a few years, years ago. Got next to 0% return after 4 years. Funny though if you were looking to by some the finacial adviser would show you average returns between 10 to 15% at the time.

[countryguy]

The law of supply and demand tells me that land is only going to go down in value starting in about 10 years time.With the age of the majority of farmers now who is going to be around to farm all this land? I think I am going to take some healthy profits and run.My worst fear is to farm all my life and then have to beg someone to buy it when I retire for half of what I paid for it.

[Kathy]

Electronic copy of the Scotia Bank Terms and Conditions for UFA customers can be found at the UFA website:

http://www.ufa.net/PDFFiles/UFA%20Credit%20on%20Account%20Program%20-%20Terms%20and%20Conditions.pdf

We have LIS and the Alberta Auction Market Association also, looking into this new situation.

[may-be]

countryguy. Used to think the same way myself. Everything is a gamble. Even what you do with your money. Lots of people lost thier lifes saveings.
In our area we only have 2-3 10to20 thousand acre farmers. I see that growing in the future. We have immigrants comeing in slowly. We will always have people that will want to expand or buy a quarter in the county. THE LAND WILL ALWAYS BE FARMED.
Your still a young man and looking into a crystal ball I say you have nothing to fear. Worst case, land values go down. But it should be paid for before you retire. You will also have other equities built up.
Or maybe you have another lifes calling?

[perfecho]

Recieved my package in the mail. I was a little nerved by their "terms & conditions", especially since my previous agreement with UFA is/was not as "harsh", and has worked quite well for a number of years.(And was the original agreement "I" choose to sign.)
Probably will close my account and deal with credit card instead.

[grassfarmer]

Presumably if you don't default on repaying your credit balance with UFA there won't be a problem?

[per]

This same thing happened when Agricore was formed and they needed all sorts of financial info and statements to continue doing business. I choose to stop doing business with them any longer. That was several mergers ago and the newest one still doesn't get my business. I think I can do without UFA as well. Too bad for them because I was thinking of switching my fuel to them. For the few things I will need from them I guess it will be cash. What ever happened to 30 year trouble free no default relationships. No value put on history anymore.

[smcgrath76]

We don't purchase enough stuff from UFA to
justify having a credit line, but I would
echo the "watch what you sign" warning. I
think UFA has moved more towards chasing
the acreage market than the farm/ranch
marketplace. I firmly decided that was
the case when I went one day and they
didn't have staples in the farm store.

[wilagro]

Kathy: Things are tough all over. Management runs most of the Co-ops anymore and the grassroots owners are just around to BUY what they wnat to sell you and on their terms.

I either pay cash or by Visa or MasterCard. Head Offices set policy and you either go along with that or too bad, tough luck...shop elsewhere.

The little (or big) owner is just a small cog in a big machine and the big machine REALLY DOESN'T CARE if you squawk or not.

[perfecho]

But somewhere we (some) have to draw the line in the sand........because of many saying "Oh well, that’s the way it is".....we have become complacent and do allow systems that leave us frustrated. One day when enough is enough, it will be too late.
And modern day agriculture is an example.
But hey, don't sweat the small stuff, ......and it's all small stuff.

[Kathy]

I have received very good feedback on my concerns including that which is written here at agriville.

I did call the 1-877 number on the contract paperwork and complain. I did then get a call from a member of the UFA board and later the Chairman. Earlier, I had emailed by area rep, and he did get back to me, also.

All failed to satisfy any of my questions or concerns. The conversations were under-scored by what has been said here: UFA is going after the non-agriculture market (supposedly to support and prop up the agriculture stores in our little communities - as they would otherwise not survive) at least that is their story/opinion.

Section 18 which deals with proceeds of sale of seed, grain, crops or livestock does not apply to the non-agriculture customer, and according to one banker I spoke with, does constitute a "Livestock Security Interest". Still waiting for a legal opinion from LIS and the AB Auction Market Association.

If the majority of the UFA account/Scotiabank credit lines are non-secured... then there would be no need for the lengthy brochure outlining the terms and conditions of the agreement. There are plenty of areas where, without defaulting, you could be put into a tightly secured position by Scotia Bank - at their discretion. Section 14 is frightening!

I don't think UFA stands for United Farmers of Alberta anymore. I told the Chairman this, and that I am aware of the corporate attitude that prevails today, aka "whatever it takes to make a corporation profitable..." Unfortunately, this is not in line with the basic foundations of the UFA history or farmer intentions.

What will UFA members do?

I think that calling and letting them know what you don't like about this Scotia Bank agreement is necessary. Cancelling your account is optional, you can pay for everything with VISA or cash....

I know that this seriously hurts my level of loyalty to the UFA system. UFA was supposed to be working for the farmers of Alberta to provide them a group purchasing power that would save us money. Things have changed at headoffice, have they changed elsewhere is the question.

[per]

They changed years ago Kathy. The stores morphed into peavey mart home hardware hybrids with packaged hardware instead of bulk and little 100 packs of staples instead of in a large pail. It wanted to and has appeal to the town customer and acreage client and only marginally to the original farm base. I suppose the exception to that would be the bins, posts, water tanks etc. This issue is the final piece to their transformation. Keep up the fight and the calls and as in most of these things they will do what they want anyway but at least we went down fighting.