Farmland Update 2019 – Rising Diplomatic Tensions

Farmers are feeling the pain

Last year Canadian farmers couldn’t grow enough canola to satiate China’s appetite. About 40% of Canada’s canola exports go to China every year. In 2018 that worked out to about $3.8 billion. But it all changed this year after Canadian officials detained Meng Wanzhou, the CFO of Chinese tech company Huawei, due to an extradition request from the U.S. government.

In March, China started to ban shipments of Canadian canola on the grounds they’re plagued with pests, even though Canadian authorities say they’ve received no evidence to support that claim. Unfortunately the trade war and political shenanigans between the U.S. and China have affected households around the world, including Canadians. Our farmers in Saskatchewan are in trouble. They’re caught up in a global conflict between the two largest economies in the world, that has nothing to do with them. I canola imagine what they’re going through. Prime Minister Justin Trudeau recently announced financial aid for canola farmers. But it’s not a proper long term solution.

Major export products Canada shipped to China in 2018.

But canola isn’t the only export facing bans in China. Canadian peas and soybeans also have restrictions. And earlier this month, China suspended imports from two major Canadian pork producers over paperwork issues. According to the Canadian Pork Council the suspensions appear to stem from a labelling problem and are not tied to any political moves by China. But some people think that excuse is complete hogwash. 🙂 It’s ironic that China is currently experiencing a major pork shortage due to swine fever. The country could lose up to 200 million pigs to disease during the epidemic. To put that into perspective that’s about 3 times the pig population in the U.S. :0 And yet China still refuses to buy our pork. But that’s because China is so big, it can afford to cut off its snout to spite its face. It doesn’t need Canadian bacon because it can import it from other countries.

Farm prices rose modestly last year

The new farmland values have been published by Farm Credit Canada. It appears the average value of Canadian farmland increased 6.6% last year. That’s down from 8.4% in 2017 but at least it’s still going up. 🙂 Quebec had the highest increase, while Nova Scotia actually saw a decline.

It’s nice to prices continue to rise for farmland almost across the country. By contrast, Canada’s housing market fell about 5%  in 2018, according to the Canadian Real Estate Association (CREA.) But maybe farmland prices naturally lag the residential market? It would be interesting to how prices change in next year’s value report. 🙂

Liquid’s farmland business 

My farmland in Saskatchewan hasn’t changed much itself. But economic conditions surrounding my business are constantly shifting. Some changes are good while others are not. So here’s an update for 2019.

• Interest rate has gone up. I still have a bank loan that I used to purchase my farms. Unfortunately the cost to borrow money has gone up from 2018 so I am now paying almost 5% for that loan. I am due for a renewal soon so I hope I can negotiate something lower. At least the balance is a lot lower now, currently at $178,000, than last year.
• Rental income increase. I managed to secure a second renter to farm my land. So now I have 2 tenants, each occupying one quarter of farmland for 2019. Both have already paid for the first year’s rent. I am now collecting $10,870 per year total. That’s a 8.7% adjustment over last year when only 1 farmer was paying me $10,000 for both quarters. Luckily for landlords, there is no rental control out in the prairie boonies. 🙂
• Land value adjustment. I’m happy that Saskatchewan farmland prices went up by 7.4% last year. But that number is only an average. I checked with my realtor near Yorkton, SK. He says although prices did go up a little, volume has slowed down, especially this year. He appraised the value of my farmland to be in line with my latest net worth update on this blog. Of course the land’s value doesn’t affect my day to day operations. But it’s nice to get an idea of how much it’s worth if I decide to sell some day.

Overall I’m running a small profit in 2019.

Rental income:               +$10,870
Property tax:                      -$1,500
Interest on farm loan:     -$8,500
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Net income                          +$870

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Random Useless Fact:

Each episode of season 8 of Game of Thrones cost HBO an estimated $15,000,000 to make.