Some of you might be familiar with “Ted Talks”. If you Google “Ted Talks” you will learn more about it. It’s about spreading ideas to help us get a deeper understanding of our world. If you Google my name and “Ted Talks” you’ll be able to see the “Ted Talk” I gave last February in Chatham Ontario. I can honestly say when I stood up to speak; what came out wasn’t necessarily planned that way. Needless to say, let me know what you think. I ended up talking about agriculture’s future and the hope I have for agriculture.
The difference now is I’m closer to the end of my career than the start. This past week I ordered another guidance system for my tractor and combine to help get me to the end of my career. There is still a lot of life left in me no doubt, but new technology is helping me produce food for this world. What comes next is anybody’s guess. Hopefully it will be some UAV drone shooting weeds out of my fields with laser beams.
So your guess is as good as mine with regard to what the future holds. Usually in farming it means everything will take a lot more money. If we could assume that that is just going to continue along with our cheap interest-rate policy maybe we should just go buy fixed assets and let the chips fall where they may. Add a little inflation along the way and maybe will come out smelling like roses. Of course, nobody really knows if that will happen or not. What I find particularly interesting is the future price of farmland. That has been a very difficult thing for me to get my head around.
I think it is difficult for me to understand partly because of where I come from, the bad old days of 23% interest rates. It also comes from the 50-acre fields, which surround me in Southwestern Ontario. Equipment has grown so large now that the 50-acre field is taking away from that efficiency. We spend more and more time on the roads transferring equipment instead of being in the field in southwestern Ontario. I do not know how that will change.
What I find particularly interesting is pension funds getting into the purchase of farmland. As many of you know I speak at FCC forums about farmland prices during the wintertime. We have our own specific farmland market here in Ontario, which is being very robust over the years. However, I recently read an article by Gerald Pilger of Country Guide magazine, where he talks about the new land barons buying farmland made up of pension funds. In his piece he talked about 115,000 acres of prime Saskatchewan farmland that is now owned by the investment arm of the Canada Pension Plan. However he also documented other pension funds that are putting millions of dollars into large tracts of land. It was interesting stuff.
Of course there are dangers in this as in how am I going to compete against the pension fund when I want to buy a farm? Yes, it was only 5 years ago that I bought my last farm and who’s going to worry about an old guy like me on the farm. The pertinent question is how will young people be able to buy farms or will they? The old adage that farmers live cash poor and die asset rich has always been in the back of our minds. However if more institutional investors and pension funds buy farmland and rent that land to farmers maybe it’s about living cash poor and dying cash poor. There are just so many questions to answer.
Key of course is that agriculture remains profitable. That’s always the kicker in my agricultural economic mind because I look at all my farming activity that way. The problem is I went too many years where farming was not profitable and it was very difficult to maintain cash flow. The last 8 years have been the opposite of that in cash crop agriculture. That has partly sustained the institutional investors buying into Ontario farmland. However, pension fund investors like the long-term capital returns and are likely into the game for a very long time may be upward of 50 years.
In 50 years, unless there is some bionic health-conscious technological innovation that will matter to me anymore. Of course, it looks like needing more money is always a litmus test as we look ahead under that scenario. Then there is everything else like planting corn at 10 mph, bigger, better and newer agricultural equipment and technologies will surely come to the fore. Those 50-acre fields in southwestern Ontario will just have to go. More farmland will surely open up in South America and Africa. We won’t be going back to the ox cart. That ship left port many years ago.