As global populations rise year after year, the demand for food is expected to intensify, placing agriculture and farmland at the forefront of addressing food security challenges. At the same time, farmland values are on the rise due to a variety of factors, including increased revenues from farming operations, continuous improvements in the productivity of farming processes, and a limited and decreasing supply of arable land. For investors interested in farmland, aggregators of farmland like Tract Farmland Partners present an exciting opportunity to gain exposure to this alternative asset class without the responsibilities associated with direct ownership.
Rising Values and Productivity Gains
The upward trajectory of farmland values in recent years may be attributed, directly or indirectly, to multiple factors. These include advancements in technology that have led to improved productivity in farming, increased revenues from farming operations, inelastic demand for agricultural commodities, and consistent demand for farmland.1
Innovations in agricultural practices and technology have significantly improved yield capacity per acre, enhancing productivity and steadily raising farmers’ revenues.
The long-term value of farmland is also inextricably linked to the inelastic demand for agricultural commodities, since food remains a fundamental necessity. This will continue to contribute to an ongoing demand for farmland, given that fertile soil is a critical resource for food production.
Increased Demand and Shrinking Supply
In addition to improved productivity and revenues for farmers, demand for farmland is further driven by Canadian farm operators seeking growth through land acquisitions and rentals, often simultaneously, to fully maximize the efficiency of their equipment and labour. This approach demonstrates the strategic importance for farmers to access additional acreage and explore opportunities for optimization of their agricultural operations.
While demand continues to grow, the supply of productive farmland is decreasing as arable land gets repurposed for residential, commercial, and alternative uses. 2 With demand outpacing supply, we have seen the value of farmland in Canada rise in recent years and anticipate it to continue to increase.3
Farmland as an Investment
Farmland has garnered increased interest from investors due to its strong track record of competitive returns.4 While direct investment in farmland may not be practical or accessible for many investors interested in this asset class, there are opportunities to invest in aggregators in the space that specialize in consolidating farmland.
A Trusted Steward of Farmland Investment
Tract Farmland Partners LP (Tract) specializes in consolidating productive farmland in Saskatchewan, which we then lease to farm operators in exchange for rent and collaboration on asset improvement programs. The fund offers investors leveraged exposure to farmland through an actively managed investment portfolio, aiming to achieve long-term appreciation.
Saskatchewan is home to 40% of Canada’s arable acres, primarily producing staple food crops including cereal grains, oilseeds, and legumes.5 These crops are anticipated to continue to be essential to addressing global food security, especially for rapidly growing, import-dependent nations.
Our team’s extensive experience with Saskatchewan farmland and active management approach presents investors with the opportunity to gain indirect access to this asset class. Tract is the second generation of Avenue Living’s farmland funds, the first being Avenue Living Agricultural Land Trust. With its solid track record, farm-first approach to aggregating farmland and reputation for responsible stewardship, Tract aims to become a preferred acquirer and lessor of farmland in the province.
Sources
This commentary and the information contained herein are for informational purposes only and do not constitute an offer to sell, or a solicitation of an offer to buy, any securities in any jurisdiction, and do not and are not intended to constitute financial or legal advice. This article may contain forward-looking information and past results may not be indicative of future results. Neither Avenue Living Asset Management Ltd. or Tract Farmland Partners LP, or any of their respective affiliates, has any obligation to update, or any liability in respect of, the information contained herein. Readers should speak to their own financial advisors about any investment decisions and the associated risks.