Cultivated forage crops in Canada present a growing opportunity for investors as demand from export markets begins to rise, according to a research paper by Canadian agri investment manager Bonnefield.
China and Saudi Arabia are earmarked as two key export markets. Canada exported its first load of forage to China in 2012 with about $600,000-worth of double-compressed alfalfa, according to Canada’s Forage Crop: the overlooked cornerstone of Canadian agriculture.
The paper identifies China’s growing dairy and beef industries as a driver for ongoing demand, and says Canadian producers are prepared to meet Chinese specifications for agricultural imports.
Saudi Arabia will phase out the production of forage over the next three years due to drought. Canada is well-positioned to target this market, following a joint venture between Bunge, a globally agri processor with operations in Canada and the Saudi Agriculture and Livestock Investment Company (SALIC). The joint venture, G3 Global Grain Group, bought a 50.1 percent stake in the former state Canadian Wheat Board for C$250 million in 2015. This year Saudi dairy producer Almarai has said it will invest $31 million in 1,790 forage-producing acres in California.
But it is hard to assess the value of Canada’s forage production. “For the most part hay is traded when farmers grow surpluses or deficits to their own needs and usually deal within their regional network,” the report says.
The industry was valued at more $50 billion by Canadian agribusiness consultancy Yungblut and Associates in 2012, based on transactions and sales reported informal trade and social websites.
Cultivated forage crops, including legumes and alfafa, cover 39 percent of the land devoted to crop production in Canada, according to the report.
Bonnefield has raised three agri-focused funds since 2010.
Fund I and Fund II have assets under management of C$31.91 million and $29.00 million respectively. Fund III held a final close on $261 million in 2014, exceeding its C$200 million target and becoming the largest Canadian farmland investment vehicle at that time. Commitments were from Canadian investors. Bonnefield has previously told Agri Investor that the fund is due to be fully invested by the middle of this year.