Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue No. 17 - Evidence - Meeting of October 25, 2016
OTTAWA, October 25, 2016
The Standing Senate Committee on Agriculture and Forestry met this day at 6:02 p.m. to continue its study on the acquisition of farmland in Canada and its potential impact on the farming sector.
Senator Ghislain Maltais (Chair) in the chair.
[Translation]
The Chair: Hello everyone.
[English]
Good evening, gentlemen. Thank you for coming today. The committee is continuing its study on the acquisition of farmland in Canada and its potential impact on the farming sector.
[Translation]
Before we begin, let me introduce myself. I'm Senator Ghislain Maltais, the chair of the committee. I would like to invite my colleagues to introduce themselves.
[English]
Senator Merchant: Hello and welcome. I am Pana Merchant, Saskatchewan.
Senator Tardif: Claudette Tardif, Alberta.
Senator Oh: Victor Oh, Ontario.
Senator Unger: Betty Unger, Alberta.
Senator Dagenais: Jean-Guy Dagenais, Quebec.
[Translation]
The Chair: Since the House has just adjourned, other senators may join us. Senator Nancy Raine has just arrived. We're pleased to welcome her. Other senators will join us as soon as they return from the House.
[English]
We are beginning with the first panel, Keystone Agricultural Producers of Manitoba, Dan Mazier, President; and from the Agriculture Producers Association of Saskatchewan, Norm Hall, President; and from Alberta Federation of Agriculture, Lynn Jacobson, President.
[Translation]
I'm sure you have a brief to present to us. Please keep your remarks short, because the senators are eager to ask you questions. As you know, we have only one hour. Mr. Mazier, you have the floor.
[English]
Dan Mazier, President, Keystone Agricultural Producers of Manitoba: Mr. Chairman, committee members, thank you for inviting me to share Keystone Agricultural Producers', or KAP's, views on the issue of farmland acquisition.
KAP is Manitoba's general farm policy organization. We work on behalf of all farm families in the province taking direction from our members, which include individual farmers and commodity groups. We speak upon issues that are most important to them.
Among the many issues that our members are currently faced with is the impact of soaring farmland prices. This issue is causing great concern within the farming community in Manitoba. In the recent Farm Credit Canada Farmland Values Report for 2015, Manitoba displayed the highest increase in farmland values amongst the provinces for that year.
Our members have been struggling with both the additional municipal tax burden that increased farmland values have on their annual profit margins, as well as the difficulty it creates in acquiring new land to expand agriculture operations or start new ones.
In Manitoba, we are keenly aware of the problems this is causing and appreciate the committee's interest in studying this topic further.
On the question of the reasons behind the increasing value of farmland in Canada, we are pleased to offer the committee several observations. However, along with the Canadian Federation of Agriculture, we urge the government to consider devoting more resources to collecting more comprehensive data on this issue. Such information is needed in order to make clear, factually based claims of what the main causes of the problem are.
First, we believe that one of the factors causing an increase in farmland values is the high commodity prices of the past few years. Although these have begun to decline somewhat, the lower Canadian dollar has helped offset the declines. All in all, crop receipts have been climbing, and thus the cost of land has been increasing in response.
Second, there is little doubt that low interest rates over the past few years have been a major factor affecting the price of farmland. This is not unique to farmland, as even people living in urban areas have seen substantial increases in home prices for the same reason. When it costs so little to borrow the money needed to acquire new land, more people are in the market looking to buy. The simple principle of supply and demand therefore leads to a situation where people are paying higher and higher prices to buy the limited amount of farmland that is available for sale. Bidding wars are becoming a more common occurrence when it comes to the sales of farmland.
Third, we believe that succession planning is a driving force behind increasing farmland values. Many farmers are seeking to acquire additional land so that when they retire and pass on the family farm to their children or other family members, they will be in a position to divide it up into multiple parcels of land that can financially sustain a family. For a farmer looking to significantly add to the size of his farm, low interest rates are a motivating factor. Thus in some instances, succession planning, coupled with lower interest rates, may be driving up the demand and affecting farmland values. This issue may not be evident in the aggregate, but it certainly plays a role in certain regions.
The fourth issue that has become a concern to farmers in recent years is the apparent increase in the number of institutional investors — non-governmental organizations such as conservation and/or environmental groups and foreign buyers who have entered into the farmland market in Canada. These investors represent an increased number of actors seeking to purchase farmland, thus increasing demand and prices. They are often well-funded and able to access the capital needed to pay even higher prices for farmland. While it is difficult to cite evidence of this, given the lack of information on the topic, it is nonetheless a concern we hear often from our members.
Finally, and most obviously, there is a limited supply of farmland available for those seeking to purchase it. Arable acres are not increasing in number, but rather decreasing in many regions due to urban development pressures. Farmland is a limited natural resource, but it is often the same areas that people want to live in. There is no doubt that a substantial portion of the approximately 4 million hectares of farmland lost between 1971 and 2011 was tied to urban development. In fact, we have seen this become a major issue in Manitoba, with growing communities surrounding Winnipeg seeking to expand into rural farmlands. This urban expansion into rural areas reduces the amount of farmland available and increases the price paid for the remaining land. The prices that developers are willing to pay for this land when it comes into close proximity to major cities must also be considered.
I will now turn to the concerns that arise from the increase in farmland values and the challenges it presents to producers. We would like to highlight three main points.
First, we are concerned about the long-term ability of farmers to pay for the highly priced land they are buying today. We have already seen commodity prices softening recently. It seems imprudent to assume that commodity prices will rise and continue to stay on the high side of averages into the future.
Additionally, we should not assume that borrowing rates for the Canadian dollar will remain low. Mortgaging land is a multi-year commitment, and markets, interest rates and exchange rates can rapidly change. Data from Agriculture and Agri-Food Canada indicates that between 2013 and 2014, farm debt in Canada rose from $78 billion to $84.4 billion. More telling is that the average size of a loan approved by Farm Credit Canada increased by nearly 10 per cent from 2013 to 2014. These numbers do not solely represent real estate costs, but there is little doubt that these debt and loan increases are tied up with increasing farmland prices.
This leads to our second concern, which is that farmers are carrying too much debt because they are paying too high a price for land. We are creating a situation where both farmers and Canadian agricultural production in general are becoming very vulnerable to a market of interest rate changes. We do not want to see the situation in the future where large numbers of farm bankruptcies occur and where Canadian agriculture production is disrupted. They called that the 1980s.
Agriculture production represents a significant portion of the Canadian economy and represents a large amount of our exports. Major financial troubles at the farm level would inevitably affect Canada's ability to continue to produce and export these valuable commodities, which would cost us international buyers who seek a stable supply to draw from.
Finally, we are very concerned about the consequences of increasing farmland values to young and beginning farmers. The average age of a Canadian farmer is now over 54 years old. This means that in order to maintain current production levels, more young people and new entrants need to embrace farming as a profession. However, the current cost of farmland presents a significant barrier to this occurring.
Farm Credit Canada offers a Young Farmer Loan, and the Manitoba Agriculture Services Corporation also offers incentives through a Bridging Generations Initiative to assist young farmers. However, the sheer size of the loans required to purchase land under the current conditions is undoubtedly a disincentive to entering farming. Additionally, the current demand for farmland creates a situation where it is challenging for those who are new to the scene to get their hands on it.
I would like now to address the question of solutions.
Overall, I would like to say that this is a very complicated issue and one that does not lend itself well to simple solutions. For example, farmers who are retiring and looking to sell their land will have a very different perspective on the issue than those still actively farming and seeking to expand the size of their farms and young farmers and new entrants hoping to acquire land to set up their operations. However, there are a few actions that could help alleviate the issue of soaring farmland values.
First, we believe that the federal government can take a leadership role in framing the discourse surrounding this issue and encouraging the provinces and municipalities to institute clear, consistent and robust rules that protect this important resource. Farmland needs to be viewed by all actors across Canada as a valuable, but limited, natural resource that is in need of substantial protections.
This includes careful decision making by the federal government when it comes to farmland incursions by things such as pipelines. Every effort, at every level of government, should be made to preserve farmland and ensure that any possible incursions do not take land out of production. As well, we encourage the Government of Canada to work with the provincial governments in joint effort to strengthen provincial land use planning guidelines and legislation.
Second, we would like to see the government pass laws that substantially limit ownership of farmland by institutional, non-governmental and foreign owners. Farmland preservation and agriculture production are simply too important to be left to the primary motivation of financial speculation. We must also seek to place limits on those intending to re-purpose farmland for other than non-farming uses.
Finally, we urge the government to consider making greater investments in gathering data on factors contributing to this issue. Agriculture and Agri-Food Canada should work with the provincial governments to create a national land- use monitoring program. The aim of this program should be to track changes in land use and in ownership with a specific focus on acquisition by non-farming actors. A thorough and well-grounded understanding of this problem founded in sound research will better prepare us to deal with this issue and find optimal solutions. Our primary goal needs to be the preservation of farmland, but we cannot accomplish this goal without greater resources being devoted to data collection and tracking.
I thank you for your time today, and I welcome any questions.
The Chair: Thank you very much. Before we continue, permit me to present the new members of the committee who have arrived from the Senate.
[Translation]
Senator Plett from Manitoba, Senator Pratt from Quebec and Senator Gagné from Manitoba. Mr. Hall and Mr. Jacobson, do you have anything to add? I see you have a presentation. Mr. Hall, you have the floor.
[English]
Norm Hall, President, Agriculture Producers Association of Saskatchewan: On behalf of the Agriculture Producers Association of Saskatchewan, or APAS, I wish to thank the committee for the opportunity to appear today and offer our perspective on farmland values and farmland acquisition.
I will begin by stating how important farmland is in Saskatchewan. Land and seeds are the agricultural producer's most fundamental inputs. The opportunity to own this land is what motivated settlers to homestead on the Prairies.
Land ownership is a powerful motivator that continues today. Ownership is by far the preferred business structure over leased or other non-ownership tenure arrangements, similar to the way that owning one's own home is preferred over renting.
The conservation of Saskatchewan farmland is in the strategic and economic interests of Canadians. Over 40 per cent of Canada's farmland is located in Saskatchewan, and in 2014, we exported $15 billion worth of agricultural commodities around the world.
Canada is currently the sixth-largest grain exporting nation. Preserving productive agricultural land is critical if we are to maintain our competitive position in the international marketplace. It is also a very important moral issue, as the world needs to produce 70 per cent more food by 2050 to feed our growing population.
Farmers' ownership of their own land is a successful model that has clear economic, environmental and social benefits for Canada. When farmers own their own land, the surplus value generated through this ownership stays in local communities, supports jobs and economic growth. In Saskatchewan, where agriculture is our number one industry, this is very important.
Farmers have a vested interest in keeping their land sustainable and productive over the long-term. This vested interest also leads to better stewardship of the land and better environmental outcomes for all Canadians.
Farmers are the largest sector of private land managers in Canada and provide many of the environmental goods and services enjoyed by society as a whole, including wildlife, native species habitat, conservation, water quality protection and carbon sequestration. Recent analysis demonstrates that agricultural soils in Saskatchewan absorb over 11 million tonnes of carbon per year. This is equivalent to the emissions of over 1 million vehicles.
Farmland is also home to most of Canada's wind and solar energy installations.
There are a number of areas where government policy can help ensure that producers remain landowners and in a position to continue to provide these goods and services. I will first address land values and barriers to entry.
Land prices in Saskatchewan have increased drastically over the last decade. Between 2007 and 2014, values increased by an average of 16 per cent per year, significantly higher than the national average of 9 per cent. These price increases generally reflected the overall health of our sector. Historically, land prices have corresponded with the rate of return on our commodities, as Dan has already said. Strong prices for cattle and grain translate into more competition for land and higher prices. Record low interest rates have played a role in encouraging increased borrowing.
Competition from non-farming speculative interests has been a much discussed topic in more recent years. Saskatchewan, for example, has recently had a debate on farmland purchases in a provincial review of the Saskatchewan Farm Security Act. Through that review, the provincial government has since amended the act to restrict farmland purchases by pension plans and other institutional investment firms. This was based on a strong consensus from Saskatchewan residents that we want our farmland base to be accessible to resident owners. Surveys done by both the province and APAS noted that 90 per cent-plus wanted Canadians to be the ones opening our land, not foreigners.
We are also happy if people want to come here from around the world and farm with us, but investment in farmland from outside or absentee interests helps drive farmland prices out of the reach of the local buyers and disconnects the true value of farmland from its productivity.
APAS supports regulation that ensures farmland remains accessible to local producers. We also feel that more needs to be done specifically to help young producers and new entrants who struggle to acquire the capital to enter the industry or expand their land base.
If we are to ensure that Canadian farms remain family-owned and operated, there needs to be programs in place to assist young producers and new entrants to acquire the capital needed to get established.
Based on discussion with our partner organizations KAP and AFA, we know that increased land values pose barriers to new entrants across Canada. The development of the next agriculture policy framework to replace Growing Forward 2 is an opportunity to develop nationwide policies to help young producers access capital.
Another area concerning the future of farmland ownership is our ability to compete with alternate land uses, such as urban growth, recreational uses and rural residential development. In our view, the most important way to protect farmland from these competing land uses is to ensure that primary producers are profitable enough to compete.
We need to ensure that the right to farm our land is expressly respected and understood in federal, provincial and municipal legislation, and in regulations and government policy. We also recognize the need for more data about land ownership so we can understand the trends and developments and better develop policy.
I will leave you with one thought: Our agricultural land is both a finite and renewable resource. It is important to our environmental and economic health to ensure that it stays in the hands of those who work with it.
The Chair: Thank you very much, Mr. Hall.
Now Mr. Jacobson from the Alberta Federation of Agriculture.
Lynn Jacobson, President, Alberta Federation of Agriculture: I would like to thank the committee for inviting us here to testify before you today. It's a great privilege to do that.
Two of our most important sustainable natural resources on the Canadian Prairies are soil and water. Both are essential to produce food to sustain human life. While it seems that society has begun to recognize the trend of disappearing fresh water and the importance of conserving, the same cannot be said when it comes to soil, yet the land and our soil resources are critical and remain vital to our society.
Alberta has a land area of almost 159 million acres, but only 51 million acres are used for agriculture, of which 26 million acres are in native rangeland or tame pasture and used for livestock production. This is mostly rated as class 5 and 6 soil or land. About 25 million acres are used for annual crop production. This is only 15.7 per cent of the total land area of Alberta, and none of it is class 1 land. The best cultivated land in Alberta is class 2, 3 and 4. Class 2 makes up less than 4 per cent of all land in Alberta.
Agriculture continues to be one of our province's key industries and economic drivers, with Alberta ranking as the third-largest producer and exporter of agri-food products in Canada. This drives home just how crucial the availability of farmland is to our overall economy.
As our best agricultural lands are removed from production, there are limited opportunities to develop new lands for production. For this reason, preserving agricultural land is of critical importance to us as a society.
I would like to go into some of the farmland values issues. As I stated above, agriculture remains one of the pillars of Alberta's economy. However, much of the province's best farmland can be found in the corridor between Calgary and Edmonton, and this is the same area where rapid population growth has created the greatest demand for new homes.
Over the past 25 years, urban and suburban land use increased in total area by 4.1 per cent, with about 60 per cent of urban expansion occurring on agricultural land, two thirds of which were highly suitable for farming. As development of our urban and residential areas continues to utilize our best agricultural land, we see agricultural development on poorer-quality soils. Throughout the same time period, agricultural land area increased by 3 per cent, mainly at the expense of natural vegetation like woodlands and grasslands.
It is important to note that in Alberta, the purchase of farmland by foreign buyers is not as big an influence as some may think. Currently, Farm Credit Canada statistics show that price and demand is driven far more by local or Canadian producers. This is an interesting statistic: Land tends to be held on to for a very long time once it is acquired and only changes ownership about once every 40 years.
Overall, the strong demand for Alberta farmland has meant a 23-year streak of rising prices for us, with the average value of Alberta farmland increasing 11.6 per cent in 2015, following gains of 8.8 per cent in 2014 and 12.9 per cent in 2013. While these higher land values can be advantageous for farmers seeking to retire or otherwise leave the business, they are a serious barrier to young people trying to enter the industry, as the capital required to start is extremely high.
The loss of prime farmland in Alberta can be attributed to three main factors, and they are as follows:
Urban encroachment: Alberta has experienced a relatively high rate of growth in recent years, due in large part to its economy. Even as we head into our second year of recession, the province still has the fastest-growing population in the country, according to Statistics Canada. In the first three months of 2016, Alberta's population grew 0.4 per cent faster than Canada as a whole and any other individual province.
As new people have flooded into the province, urban development has clicked along at a very quick rate, particularly along the Calgary-Edmonton corridor. As these urban centres grow, they continue to utilize some of Alberta's best farmland to expand.
Industry use: The oil and gas sector also poses a threat to Alberta's farmland. For example, as of June 2016, there were approximately 150,000 abandoned well sites on agricultural land in Alberta that needed to be reclaimed. Reclamation procedures can greatly improve crop production potential. However, the soil cannot be returned to its original state. Industrial growth in the form of oil and gas wells, plus batteries, gas plants, windmills, electrical transmission, and the roads that lead to the industrial sites, all continue to utilize farmland in the province.
Investment by non-producer groups: Real estate speculation, real estate developments, conservation groups and non-farming corporation interests continue to buy up farmland, reducing the overall availability of land to farmers. As an aside, as we explained earlier, some of the foreign investment has not happened, but we do have investment in our province from the Canada Pension Plan, for example, which is Canadian owned.
Lack of profitability in farming in the past has resulted in an exit of producers from the industry. When this farmland is sold without thought to what its future use will be, it can lead to a gradual, yet permanent loss of productive land when it is no longer used in agricultural production. It is important to note that the consequences of high land prices and lower profits are that it becomes increasingly difficult to convert and retain new producers within the industry.
So where do we go from here on our moving-forward strategy? I will offer some of AFA's thoughts on this.
First, we would like to have access to capital for new entrants. Entering the farming industry as a new farmer is extremely difficult and requires massive amounts of capital that often seem out of reach for young farmers. On top of that, the economic realities of farming make it increasingly difficult to attract young farmers to our industry.
While Alberta currently offers beginning farm loan programs, with Farm Credit Canada and some private lenders also offering support to young farmers and new entrants, there is more work to be done in that area. Provinces need to continue to look at increasing access to preferential financing and grants for new entrants at a scale that will still allow them to have commercially viable operations.
Making intergenerational farm transfer easy: Many farms are handed down from one generation to the next. However, the older generation's retirement is tied up within their farming operations. Programming that addresses both transition funding for intergenerational farm transfers and seed capital requirements for the establishment of new operations is critical. One consideration would be to tax exempt interest and provide security for retired producers participating in a young farmers or new entrant program in order to give non-commercial lenders incentive to offer more products and better rates.
Protecting the interests of exiting generations is very important to us. While improving profitability in agriculture would obviously represent the best way to protect Alberta farmland, this is not a current reality. Often, as farmers look to exit the industry, they are met with incentives from non-farm interests that can greatly outweigh their desire to keep the land in agriculture, especially when their retirement is often tied up within that operation.
Number four would be addressing land use rules. The creation of sound land use rules and regulations that are based on solid research and policy is a critical tool in ensuring the farmland is kept in agriculture production. This also sparks a need for strong right-to-farm legislation that provides reciprocal setbacks. It is not uncommon to find that urban residents often have setbacks that prevent farms from being developed adjacent to them, but often the same pieces of legislation do not afford farmers with the reverse protection.
Thank you for listening to us and asking us to make a presentation to this committee.
The Chair: Thank you very much, Mr. Jacobson.
[Translation]
Before starting the question period, I would like to ask the senators to keep their questions brief and the witnesses to keep their answers short. That way, everyone can ask questions. If there's any time left, we'll do a second round. Is that okay?
Voices: Yes.
The Chair: Senator Plett will ask the first question. He will be followed by Senator Unger.
[English]
Senator Plett: Isn't free enterprise a bummer?
I apologize for being a little late, but I think I caught most of what was said. I will ask one brief question, chair, but I need to preface it a little bit, if you will please indulge me.
All three of you gentlemen believe in free enterprise. There is not a doubt in my mind about that. The problems you have shared with us are all free enterprise capitalism type of problems. Increase in farm values because of high commodity prices. We want high commodity prices. Low interest rates. We all want low interest rates when we carry debt, and this has been a major factor affecting price of farmland. Farmers seeking to acquire additional lands so that when they retire they can pass on the family farm and break it up. Wonderful thing. And last, farmland is a limited resource but is also in the same areas where people want to live.
We had a young farmer here last week, and I asked him the question: If you had 1,000 acres of land up against the city of Toronto and you could get $100,000 an acre instead of $10,000 an acre out by let's say London, Ontario, what would you do? He said he would sell it and go and buy cheaper land somewhere else.
All these problems are affected by free enterprise. I agree with everything you are saying, and I think foreign ownership is a problem, but how do we deal with the four problems that you, Mr. Mazier, and a little bit the other two gentlemen, raised? How do we deal with it when we believe in the farmers and high debt load? But again we say farmers are great businesspeople and should be left to their own resources. Tell me how we deal with that.
Mr. Mazier: Thank you for the question. In preparing for this presentation, we had to do some scrambling to get some data. I could not get over that.
One situation that is happening in Manitoba we talked about a bit in the presentation is to do with institutional investors and conservation groups. Ducks Unlimited is the one causing all the problems in Manitoba. They are going to auctions when there is farmland for sale in areas, especially in western Manitoba. I'm from Brandon, two hours west of Winnipeg. It's pothole country. That's what it's known for, and that's where Ducks Unlimited likes being. That's where ducks like it.
They will go in and bid against regular cleared farmland that has basically been made to support modern-day agriculture, and they will bid against it. You see them take $3,000, $4,000, good valued. very productive land. and put all the drains and everything back the way it was in the 1970s, put all the potholes back the way it was, and then they are supposed to put it back on the market. We don't know if they are doing that or not, but that is a problem. They are taking municipalities and taking vast tracts of land and devaluing it and making it less productive. It may be more productive for cattle or grassland or growing ducks, but it's not conducive to agriculture practices, especially modern day and maximum production.
So until our policies change and we start getting proper signals of how to use this finite resource, we need data and we also need regulations to throttle on it a bit. Let free enterprise take it over and let things sort themselves out at a local level, but we need some definite research in what is actually going on with land ownership in Canada. If we don't own it at the end of day, we are in big trouble, and that's what's concerning everybody: Who will own our Canadian resource at the end of the day?
Mr. Hall: Our forefathers came here with the promise of owning farmland. If they came from mainland Europe, they came from a serf system. If they came from other places, it was just the promise of owning land period. You're right; the success is all on free enterprise. But if we want our kids, future generations, to be able to own land and not live in the serf system that our forefathers left, then we need to be able to somehow create the ability for the next generations to own this land or somehow be able to buy it.
In southern Ontario, land is trading for $25,000, $30,000 an acre — that's in the London area by the way. You are right that around Toronto its 100 grand or more per acre. Saskatchewan has the cheapest land in the country yet, unless maybe on the Rock, and you can answer that one, Kevin, but we are in the neighbourhood of $1,500 to $3,000 an acre. That's relatively cheap, but for the productive value of that land, it's very expensive.
To get the next generation in there means there need to be some tax changes. I made a presentation on that to the House Finance Committee, and possibly, as was said in the presentation, the next policy framework makes some sort of a national program that helps young farmers get going.
Senator Unger: Thank you, gentlemen, for your presentations.
I have many questions that I'd like to ask, but I'll pick one here. Farm ownership rules are governed by provincial legislation. Is the only role for the federal government to take a leadership role in framing the discourse surrounding this issue and encouraging provinces and municipalities to institute clear rules? Is that the role you see for the federal government, given that it's a provincial issue?
There is a really neat little two-page article in Country Guide dated February 3, 2015, and they start by saying: "Are non-farmers snapping up too much Canadian farmland? Nobody knows, especially in Ottawa." There are really good points here about each of our provinces in here, and you may agree or disagree, but I would urge you to read that.
Mr. Hall: You're right that it's all provincial, and in a lot of cases it's municipal as well. It gets down to there for the land use.
One thing we can ask the federal government to do is to help educate our population. In Canada, very few of the white Europeans have ever starved. Food is taken for granted and, therefore, land ownership. In Western Canada, we export 80 to 85 per cent of our production. Most of eastern Canada is self-sufficient in food. A lot of our population takes food for granted so there is no pressure on government to make any rules to keep farmland as farmland. The majority of our cities in Canada are built on some of our most productive land. What do cities do best but expand, and on to this productive land?
One of the things that the Canadian government could do is to help educate the people on the importance of food and the how finite our farmland is. When they get outside of the GTA or Saskatoon, even, and see all this farmland, they ask, "How can we go short of it?" But it is finite.
By 2025, there will be six countries in the world that export food, and we'll be one of them. We're supposed to increase our production by 70 per cent by 2050. We can't do that if our cities cover all the land or if we've lost it to recreational purposes. Most land that goes out of agriculture production never comes back if it's in cities or if it has gone to some other use.
That's something that the federal government can talk with provincial governments about. I'll stop there. Maybe you can talk about data.
Mr. Mazier: Actually, there are three points, and they are coming. We just talked this afternoon at the Canadian Federation of Agriculture about up-to-date soil mapping across Canadian. We don't even have a handle on what we are capable of as far as what we can do with soil in Canada, and with the changing climate it could be an opportunity, so we need to get a coordinated approach right across Canada on that.
Regular reporting of off-farm or land loss: How much is coming into production, and how much is going out? We have no monitoring of that at all. That's all at a provincial level, and maybe there is something we can do there on a national scale and at multiple scales, provincially as well as federally as a nation.
And then there is an inventory database that includes information on foreign ownership and non-farm ownership. Having that as a special selection, we should be able to pull that data out to see how much of Canada is actually owned by Canadians and by farmers and how much by institutional and foreign ownership. Those three things could help us go a long way in understanding the problem.
Mr. Jacobson: It's an interesting concept because, basically, the provincial government has jurisdiction over land ownership within their provinces, like Norm said, down to the municipalities.
One thing the federal government can use to influence what is happening within farm ownership through the federal lending industry is FCC, which is the major banking institution that is lending to farmers for the acquisition of inputs, plus equipment and farmland.
One of the things that maybe is lacking and could be treated with or hooked up to FCC is offering more business courses for beginning farmers. That would really help cement, because we all know of or have experienced instances of farms within our area that were transferred over to some people who really were very young and not prepared to begin with, and most of them went broke within the first couple of years. That's a big loss not only to the community, but it's a loss to them, the FCC and the federal government.
I would say one way you can influence what is happening on ownership, accountability and making good, sound business cases would be to offer a few more businesses courses through FCC.
[Translation]
Senator Dagenais: My question is for Mr. Mazier. Correct me if I'm wrong, but in your presentation, you said that the value of farmland increased by about 67 per cent between 2010 and 2015. That's enormous.
If the value of the land is increasing, as has been the case in recent years, I would think that, with more capital in their pockets, the farmers have easier access to credit and undoubtedly a lower debt ratio.
Are the landowners taking advantage of this situation to do things such as improve the condition of their equipment, which is certainly very expensive?
[English]
Mr. Mazier: That's the problem. When it comes to farming, you still need cash flow. Your land is the resource that you need; the medium is the way you make money, and you only come into that — I think there was reference to it — every 40 years. When you begin the cycle, you acquire the land, you farm it and use it and if it appreciates or depreciates in value, when you are done, you sell that land or pass it on. Either way, that is the farming model, and it doesn't mean just because your land is worth a whole bunch more money that you are more profitable ass a farmer. I'll use the analogy of a house: Just because your house went up in value by 300 or 400 per cent in Vancouver doesn't mean you can afford the payments any more.
It is the same type of thing, but the land is the base of what we work with in farming, so it's different. Some people ask, "Why not sell off a quarter if you get into financial trouble?" To sell it off a quarter or half-section of land doesn't help your business at all. What you do is you borrow more money and hopefully get through that cycle.
In any other business, that does not make sense. We have to figure out to how to break that cycle. When you do run into trouble, you are either profitable or not. But there is this whole thing called Mother Nature that has a tendency to bat last, to use a World Series analogy.
[Translation]
Senator Dagenais: You said that your land is soaring in value. Obviously, a farmer may profit from selling the land. However, we know that today many foreigners want to acquire the land and are ready to pay for it.
Do you think the government should set a national limit to prevent that from happening? If so, how should the government proceed? It's a bit like the situation in Vancouver with the real estate industry, because at this time, we know that foreigners are interested in our farmland.
[English]
Mr. Mazier: I wondered whether the interest rate cap would come up.
We don't know. That is, I guess, the short, simple and sweet answer. We don't have a good handle of who owns what kind of land in Canada, and that's why we are asking for a national inventory on what is going on with our land in Canada, with our Canadian assets.
Senator Tardif: As you have indicated, provinces are responsible for legislating matters of farmland ownership in Canada, and many provinces have, in fact, put in restrictions regarding the acquisition of farmland by foreigners. However, farmland grabbing by foreigners appears to be relatively marginal, or at least that's my understanding. But what about farmland acquisitions by Canadian investors? Are they becoming more widespread?
Mr. Jacobson: It is a fact in Alberta that there are institutional investments there. In fact, where I live, in Enchant, and in Vauxhall, I think a Canadian pension plan has bought up a farm. I think they bought about 30 quarters of land out of that farm. They have turned around and rented that land out to farmers and given them a long-term lease on it.
As I say, it's not really a large practice in our area at this point in time. We can see why they are doing it, because I think any of the institutional plans or investors are looking — or if they are a pension plan, they have a payout and they are looking for investments that will actually appreciate in value and give them that payout. When they go the regular route to what they used to be investing and they earn maybe or 1.2, or 2 or 3 per cent, that is not enough to keep their plans viable, and that's what they're looking for.
I think that will continue, because as long as the interest rate is super low, they can't recap the interest or they can't make investments that will actually pay. I think that will be a concern in the future. I don't know how you will stop that, especially with the land rules. In Alberta, basically if you are a Canadian company, you can own land. They only frown on foreign investment.
Now, we did have quite a rush about 10 years ago with a lot of farmers coming from Holland. At that point, they were immigrating and they bought up land. They drove up the land price. Land prices between Holland and southern Alberta, where they were coming to — or anywhere in Alberta — there was quite a difference. They were coming in with a lot of cash and investing, and it did drive up the price of land.
Senator Tardif: Is the situation the same in Saskatchewan and Manitoba?
Mr. Hall: In Saskatchewan, as I said, we are limited to Canadian investors. But also, we've shut the door on investment groups such as the Canada Pension Plan Investment Board, CPPIB. They bought up another investment group, which was 102,000 acres. As Lynn said, they are investing. They have to make money to pay out our pensions eventually, and their goal is a 5 per cent return. That's a combination of both the increase in value of the land as well as the rental of the land. They are looking for 3.5 to 4 per cent of the purchase price as rent, and the rest they're hoping for appreciation.
Mr. Mazier: In Manitoba, it was interesting. We had a provincial assessor come to one of our meetings. We had the Manitoba provincial ownership board there as well. We have a provincial board. If there is a foreign investor or entity coming in, they have to go in front of a board. He was sorry to report that probably we are true free enterprisers in Manitoba. Normally it's private, or the neighbours who are running up the prices in Manitoba, not so much institutional advisers.
I alluded to this earlier before. The only thing that's going on in Manitoba that is a little different is the environmental organization Ducks Unlimited coming in and buying very good farmland and then taking it over. That's a newer development, and more concerning than anything, because how do you control them? What kind of criteria do they have to perform to? It's a little bit of an anomaly, and probably more of a concern than the big institutional investors coming in right now.
Senator Pratte: Good evening. I understood from what you said that all three of you want more protection for farmland, for instance, from urban growth and residential development. I'd be curious to know to what extent you want more protection. The most extensive protection system in Canada is in Quebec, right? They have a very extensive protection system. They've had it for 40 years. A lot of people think it is too extensive. Between a free enterprise system, which you have, and a very extensive protection system, which we have in Quebec, is there some middle ground that you see?
Mr. Jacobson: It's something that has been tried and that we thought about before. One of the fixes on the spreading of the cities is basically raising the density levels that they can actually populate the cities with — to control that or make that density level higher or mandatory before they spread out. Right now, everybody wants their house and lawn, et cetera, outside that.
If you fly over Calgary — as I'm sure you all have — you've seen all the outlying communities. That has taken up valuable farmland. That's some of the best farmland in Alberta, and it keeps growing out. It's not growing to the west of Calgary, where you get into the rockier land and some of the scrubland that you can't really farm on. You could maybe ranch on that area. But they are taking out the good flatland that is easy for them to work on. One of the ideas is to raise the density level of cities and then force the population to grow up a little bit instead of out.
Senator Pratte: The Quebec system, in principle, is quite simple. You legislate that this is farmland, and you can't do anything but farm on it. In principle, it's very simple. It's the law, and this is farmland, and that's it. Would you not agree with that?
Senator Plett: We believe in free enterprise everywhere else in the country.
Mr. Jacobson: He's right, in a way. The guy that's backed up against the city and is hoping they are going to get annexed, they're quite a vocal group too. It's an issue that has to be talked about.
There are expectations on some people. They think they're lucky to be living close to the city, because if they want to keep farming, they can sell out for this and come out to my area and buy a whole wad of land, and they can make themselves profitable at that point in time. You run into problems with legislating it. But one thing that will probably help — and it's not legislated — is to increase the density that cities have to go to before they can start going out.
Mr. Hall: One of the two examples I can think of that tries to work this, besides Quebec, is the GTA, the green zone around the GTA. It just leapfrogged over that, didn't it? That experiment didn't work as well as they expected.
I forget the name of the set-aside they have for farmland, but in the Lower Mainland of B.C., for every acre you take out of farmland production, you have to create another acre somewhere else. So it's taking the decent farmland, and they create much poorer land further up that does not produce. It's not worth anything but grazing. They are taking some of the fruit-growing or grain-production land further down. It's really tough to make it work in our country.
Mr. Mazier: It's interesting in Manitoba. The land is a finite resource. I'm torn. To me, ownership is control. If you lose ownership, you lose control of that land, and whoever owns it has the ultimate say on that. If you say, "Okay, here is farmland, and we're going to put it to the side," and that's the way it's going to be dealt with, that's great, but I wish the rest of society would catch on to that.
We are an exporting nation, and we have land as our resource to benefit all from. Instead of saying we're going to limit it, we are limiting it to agriculture for this reason: for our economy, for our nation, for the goodness of all the people. If we started looking at it that way instead of a commodity that can be bought and traded and owned by anybody, that's not a bad conversation and I think everybody can get around that, but we're far from there. Everybody just wants their piece of dirt and to heck with the rest of the world.
I think we need to look at agricultural land differently now, especially in this growing world. Mankind has never come across the number of people that will need to be fed in this world in the next 50 years. We have a different challenge in front of us now. I think it needs to be talked about differently as far as land ownership and who is controlling it.
I go back to as long as the Canadians are operating it and can control it, we are golden, but as soon as we get away from that model, we're going to be in a little bit of trouble.
Senator Plett: This is, Mr. Mazier, a little more personal, because you and I are both from Manitoba, as is Senator Gagné, but I have never heard before about this issue with Ducks Unlimited. If you don't have the numbers, if you have to send them in, fine, but I would like to know how much land Ducks Unlimited is buying at these auctions and what they are doing with it.
Grain land, if this is for ducks, ducks like grain land as well. What is the reason for doing it? You say turning it back into potholes? Explain that a little bit, please, and if you could send us some numbers as to how big a factor that is in Manitoba, I would be interested in that.
Mr. Mazier: The land ownership board would probably have the ultimate numbers for you. I don't know if you've heard of Whitewater Lake. It is down just north of Deloraine, Manitoba. It's growing. It's a terminal basin. It doesn't have any place to drain. It just slowly builds up. It's got into farmland. It used to be almost desert. Southwestern Manitoba was very arid, and now it's at record-high levels.
They went and bought about a quarter of this land, and some of it was farmland, but they're able to control whether they're going to drain Whitewater Lake now or not. That's the kind of thing. That's just one example.
They've also gone into very good parcels of land. I know a couple farmers who realized that they were bidding up against Ducks Unlimited. When that word gets out, of course you don't know what they're bidding, but a lot of these land auctions are going just by you just write in and put your bid in and you bid, like, I'll pay $10 more than anybody else. That gets to some pretty astronomical figures pretty quick. A bid like that, guess what, you can't beat the treasury.
Senator Plett: Maybe you can get us some numbers. If not, then maybe we can get some witnesses in for this. I'm interested in this. Thank you.
[Translation]
The Chair: Mr. Mazier, you can send the information requested by Senator Plett to our clerk.
[English]
Senator Oh: Thank you, gentlemen. Investment funds such as Walton International and AG Capital have been buying a lot of land. They probably are the biggest land bank. I know Walton also takes the land and divides it and sells lots to overseas people. How is this affecting the future of farmland?
Mr. Hall: It's not happening in Saskatchewan because investment groups are not allowed to buy farmland in Saskatchewan. They can buy up to 10 acres, but that's it, so it's just not happening in Saskatchewan.
Mr. Jacobson: In Alberta, there is some control on foreign ownership of land and that it has to be Canadian citizens. So there is a reporting system. I know there are provinces, and I think Ontario is one, with no rules.
Senator Oh: I think in Ontario you have to be a resident to buy farmland.
Mr. Jacobson: But I know there is because we talked about this at the CFA, talking to some of the different members. They said some of their provinces have rules and some don't have the rules on that end of it.
When you're talking industrial land, which is maybe being bought up or compared to farmland, I think there may be a difference on that farmland ownership. There is in Alberta, too, because they can buy lots, industrial land in Calgary or any of the other cities, and there are no checks and balances on that at all. It's more just on the farmland that we have checks, as far as I know.
Mr. Mazier: As far as your industrial use, I think that's probably one of the biggest limiting factors or more concerning factors. There is the whole case around Lipton, whoever is buying in southern Ontario, about buying water. When these industrial processes come in, what does that do to our water balance in the area for agriculture?
I know Bow Valley is dry. Calgary area is over-allocated. That's a big problem for Calgary.
When we start talking about industrial uses and centralized uses of resources on land mass, there are other implications to the development of the area, and water is one of the biggest concerns or limiting factors when this comes to that type of use and how that impacts the areas for agricultural use.
Senator Raine: I'm just a guest on the committee today, but it's a very important issue, and I wish I had the time to come on a regular basis.
I know in British Columbia there is an Agricultural Land Commission Act. I'm sure you're more familiar with it than I am. But when that was passed back in the early 1970s, there was a lot of outcry and people said, "You can't do that. You're down-valuing our land." But now, all these years later, everybody recognizes it was the right thing to do. There is some trading back and forth to take necessary land for other purposes out of the agricultural land, but I think most British Columbians are still very much in favour of farmland staying and continuing to be farmed.
I know Albertans love to be independent and free and not have any rules, but it doesn't make sense to have the city spread onto arable farmland when they could spread out onto land that wouldn't be impacted for farming. I think it's up to you guys in Alberta to rally the troops there.
Do the different provinces talk to each other about best practices in terms of their legislation and the experience they've been having so that they can share and you don't have to reinvent the wheel? You can share and find out what it was like to put those laws in.
Mr. Jacobson: There have been talks between the different provinces and they do communicate on that. We communicate as a farm organization, through CFA, all across the country, so we get examples of that. We raise that with the government too on these issues. I think the government, through their own sources, will talk to other people, but they're really not going to do anything to a large extent unless there's probably a bit of pressure or pressure groups or lobbying by some of the government, because for every argument we raise up, there's always somebody in there that's saying, "Well, no, let me do this. Let me do that." It has to be balanced off to a certain degree. But we do talk, and I think the governments do talk. I haven't heard specific cases on the land banking issue because it hasn't been a topic in Alberta at this point in time.
Senator Raine: I guess the big question we would have with our committee is what the federal government could do to kind of initiate this.
Mr. Jacobson: To increase that, yeah.
Mr. Hall: Last Thursday you had Ron Bonnett from the Canadian Federation of Agriculture make a presentation to the committee. The CFA does have a farmland committee, which I chair, and one of the goals of that committee is to bring the best practices from around Canada on what are the best practices for farmland protection.
Yes, provinces do talk, but I'm not sure that they have the same kind of camaraderie or relationship that we as farm groups have, because we don't wear coloured hats going into these sessions. We are all just farmers. So we're bringing those best practices in, and the best for protecting their land is Saskatchewan and Quebec. I'll stop there.
Mr. Mazier: It's interesting. You can put a farmer and a small town across from each other, and I liked Lynn's comments as far as setbacks. We're always talking about setbacks from populated areas, but we never consider setbacks from farming operations.
It's interesting what's happening in B.C. It's more what type of farm is going to be on that land — organic, commercial, livestock. What kind of people are going to be around? Does the community accept that agriculture practice?
We can talk best management practices until we're blue in the face, but if the community doesn't accept it and they don't want it there, they're not going to have it there, and they're going to make our lives as miserable as possible.
Why do we have agriculture in Canada? Why do we have them in our areas? What is the purpose of agriculture? How does that serve our country? If we start answering those bigger questions, that's where the federal government can play a role. What kind of economic engine are we tinkering with when we talk about land ownership and land use?
Senator Gagné: Is there a good collaboration going on between the federal government and the provinces to deal with this farmland protection issue?
Mr. Mazier: We're here today.
Mr. Hall: To the best of my knowledge, no, because as we've said from the beginning, it is a provincial issue. In the past, there has been no reason for the federal government to get involved, because it is encroaching on provincial jurisdiction.
Senator Gagné: You've been talking about nationwide policies in different areas. How do we obtain this if there is no cooperation between the federal government and the provinces on those issues?
Mr. Hall: That's one of the reasons we have our committee at the Canadian federation, just to start getting that evidence. Then we talk to the provinces and the federal government on how they should be working together on this, because there are such differences from one end of this country to the other as far as foreign ownership and land use.
If Canada wants to have the reputation of a food supplier for the world, or even just to supply ourselves, especially the eastern half of the country, then maybe the federal government needs to get involved with the provinces to help protect that land.
Senator Gagné: Do you feel there is an interest from the federal government?
Mr. Jacobson: I think there is an interest on the federal government on land use. I'm not so sure it's developed to the point of talking about how it can be implemented and influencing the provinces.
In Alberta, when you hear news out of the cities, and the cities talk about land, they've talked about annexing this part of land, and there doesn't seem to be any consequences. It's not a topic of interest to the population. They're more interested in whether they are going to get that subway or what will happen, or "I don't want that subway, come and buy my house."
It's going to take a mind shift of talking about food production and the value of land as we go down the road. Like I said, at this point in time, cities don't seem to be interested in containing themselves. They want to keep spreading. Lethbridge is close to me, and it's the same thing. It keeps expanding all the way around, and there doesn't seem to be any check and balance, or there is no desire to build up instead of out.
Mr. Hall: The federal government is showing some interest. They're talking about a national food strategy. That might be the first step to recognizing the need for production of food and food security in Canada and the world.
Mr. Mazier: We just don't call it agriculture. You're familiar with the Bipole project with Manitoba Hydro. They were going across farmland. Well, they applied for a national environmental impact study, but they didn't apply for an agricultural impact study. It's just a matter of changing our terminology. They could look at an agricultural impact and how it's weighted. It has to get higher up on the radar. It's not a stretch. But instead of asking the environmental impact, who cares how many burrowing owls you have when you can't feed yourself? We have to alter our national priorities and ask the right questions.
Senator Plett: Mr. Mazier, you opened up a bit of a sore spot with your last comment, but I'll try to leave my political hat off and not go after that. But you're absolutely right with the comment you made.
Mr. Jacobson, you said something about we're going out instead of up. Again, this is the chicken and the egg type of thing. I don't know what Kelowna's regulations are now, but I know a few years ago they had regulations in the city of Kelowna where you couldn't build a building of more than four or six storeys, and cities are putting these regulations in. That's not a federal issue. You have accepted the fact that most of these are provincial and municipal issues. Senator Dagenais briefly raised the Vancouver issue, and that's the same in all these cities.
What do we do when cities want to expand, unless we want to become socialist? If we want to believe in the free market, I cannot see how we can stop this unless we take away that scenario.
The city of Toronto wants to expand, and, unfortunately — the young man who was here last week was very honest. He said, "If I'm getting $100,000 an acre, I'll sell." As long as we are all looking after ourselves, including the farmers, they will look after themselves, and they will do what you suggested. They'll sell for $100,000 an acre and buy land in Saskatchewan for $1,500 an acre and be debt free and able to make money, for a few years, until they have spent it all. I know the old saying.
This is more of an observation than a comment, but unless we want to take away the free market attitude, we cannot solve the problem.
Mr. Jacobson: You're very right, and it's one of the foundations we believe in, the freedom and being able to do that type of thing.
But you look at other places in the world, they're free enterprise, but they have regulated densities in cities and stopped it. There comes a point where you have to do something. Our population in Alberta is not 100 million people, but if we had 100 million people in Alberta and they could expand out, there wouldn't be one bit of farmland in Alberta.
Senator Plett: Absolutely right.
Mr. Jacobson: We have to make a decision, as a society, as we go down this road, some things for the public good are for the public good and some things for free enterprise are gone, and we have to make that decision and go down that road.
Senator Raine: I don't know if I should ask this question, but it's only because I sit on another committee as well.
You know we're facing reconciliation with our First Nations and Indigenous people, and I know that has an impact on farmland as well, because Aboriginal people across the country are looking for some of their land back. Has that been discussed in your committee?
Mr. Hall: Yes. First Nations have purchased tens of thousands of acres in Saskatchewan, and it is a discussion at the table.
One of the things that we try and do at APAS, but also at the CFA, is to have discussions with First Nations about agriculture. There are a few reservations and groups that do farm, but the majority of the time, when that land is purchased and it is farmland — sometimes it's in the cities — it is then rented out and used as a revenue source. They are not using it for their own farming practices.
Senator Raine: But it stays as farmland?
Mr. Hall: Well, in Saskatchewan, the majority of the time, yes.
Mr. Mazier: Just outside of Brandon, Manitoba, just between the airport and, actually, north Brandon, there are three First Nations that own land, and they were trying to put a horse racetrack in there, and VLTs. That seems to be model. They had acquired some land in Carberry Sandhills and they built a casino in the middle of the desert. I don't know if they were trying to recreate Vegas, but that's the sad thing about it.
I talked to Claude Shannacappo out of the Rolling River First Nation. I don't know how to talk to First Nations, and I had a lot of questions about that. He said just to view them as one of those communities, and it really struck me. They have land, and they are right on the edge of Riding Mountain National Park, and they rent their land out to local landowners, and I asked, "Why don't you farm it yourself?"
We're a general farm organization, and if you're a farmer, you can belong to us. Who do you talk to in these communities? That is our biggest challenge in trying to get them engaged in these conversations. If you can offer any help with that conversation, by all means, please bring it forward.
[Translation]
The Chair: Gentlemen, I'm sure you noticed that I didn't ask any questions. This morning, I spent a few hours with the vice-president of the Canadian Federation of Agriculture, and we examined the situation.
In closing, I would like to say that it has been a privilege to have you here this evening. As you may have seen, the senators are very interested in farm ownership in Canada. This interest is shared by thousands of Canadians.
Thank you for coming all the way here. We hope to see you again under happier circumstances. You can send your information to our clerk. Thank you and have a safe trip home.
(The committee adjourned.)