Affordable land problematic, but there are options

It seems to go in cycles, but once again there seems to be a concern that agriculture is not attracting enough young people to replace the present aging population of farmers and ranchers.

It’s not a new story. In “ancient” times, when I was in ag college, professors were lamenting the fact that we were on the threshold of a generational change and that new blood was desperately needed in agriculture. That was a very long time ago and I would suggest that change has occurred, but probably not in a way that is very obvious. Otherwise, we wouldn’t still be hearing about the need for more young people to become involved in agriculture.

The problem always boils down to one reality — the price of land. No matter how enthusiastic a young person is about farming, acquiring land remains the biggest handicap. Sure, there are exceptions — but many of them involve luck, inheritance or truly exceptional skills.

One hears of irrigated quarters of land changing hands in southern Alberta for more than $1 million. That’s easily the going rate and then some for farmland in Iowa and southern Ontario. It isn’t just land costs, either — try buying enough quota to start up a dairy or poultry operation — more millions.

It isn’t always easy for those fortunate young people who come from farming families.

There’s always the anticipation that they would inherit the operation, but darn it, their parents are living longer and wanting to extract some sort of retirement out of the land they own. Many are unwilling to just give it away to the kids.

The kids, in many cases, aren’t willing to wait, and besides don’t seem interested in years of hard work and debt. That sees viable operations sold out of the family, just so the old folks could retire.

In the meantime, land prices continue to escalate far beyond their agricultural production value. The economic rationale is always intensification, consolidation and economies of scale. There seems to be no limit to that and it probably keeps battalions of accountants and bankers busy trying to juggle the figures to make it work.

I guess if you amortize land over 100 years, it all pencils out. Or maybe land should become something like buying stock or shares in a company. Perhaps that’s the direction that land ownership is going. It happens in other countries, so why not here?

That way, young people could lease land for agricultural purposes and never worry about paying for it, because they can never acquire it.

It’s not unusual in Europe to see lowly sheep grazing land that is worth $20,000 an acre. It causes one to ponder how is that possible from an economic perspective. It’s not, of course, the sheep owners generally pay a nominal rent and make some returns.

The land, however, is owned by institutions, funds, investment bankers, etc. It’s bought and sold like a stock and generally appreciates over time, which is all some investors want — steady slow secure growth — the land might only be sold every 10 or 20 years.

Meanwhile, it’s rented out to cover at least the taxes and improvements.

Clearly, we already have a lot of land rental in this country. It’s the big reason so much consolidation has been able to take place, thanks to operators who risk increasing their economies of scale to rent ever more land.

That does see rents increase, which probably causes a lot of operators to accept that collecting rent off their land is easier than farming it.

Such consolidation has the side effect of requiring less people to farm the same land, which means less young people are needed. There’s some indication that large swaths of land are being purchased on the Prairies by foreign entities. However these organizations seem more intent on managing the land for production purposes.

It’s not the same as in Europe, where landowners take a more hands-off approach and are satisfied just to get some rent to cover ownership costs. That probably has to do with the more regulated nature of land zoning and use in Europe.

Will such a European model come to Canada? Perhaps in time, but it would take a change in mindset by investors and by those wanting to farm.

The first place to start might be at our agricultural education institutions, teaching the realities and economics of such a land ownership consequence. Such a change in mindset might give young people some hope that they could actually start farming without millions of dollars in their pockets.