A lack of investment by Ontario farmland landlords into tile drainage, clearing, storage facilities and irrigation has sparked concern from the Ontario Federation of Agriculture (OFA) after it conducted a survey of local farmers.
“If farmland is rented out for years and decades at a time, as it often is, important productivity improvement investments aren’t likely to happen,” Bruce Webster, a board member of OFA, said in a statement. “The overall production capacity of Ontario’s farmland will diminish. Ontario’s ability to produce an abundance of quality food will be challenged unless efforts are made to encourage landlords to make the necessary long-term investments in their farmland.”
The survey asked 350 members of the OFA, who represent more than 225,000 acres in Ontario that are rented or sharecropped, about their rental agreement conditions. And the survey revealed that three-quarters of respondents said they would make “additional productivity improvement investments” to the farmland they rent if they owned it. Webster argued that this suggests non-farming landlords are not making the necessary farmland improvements.
But Tom Eisenhauer, president of Bonnefield, the Canadian farmland fund manager, said the survey results contradict what he has seen in the past and his personal experience as well.
“The survey results are directly contradictory to every other study we have seen,” Eisenhauer told Agri Investor. He said the concerns about landlords investing in the quality and sustainability of the land shouldn’t be the focus of long-term leases. The responsibility is in the tenants’ hands, he argued.
“Every other statistical study we have seen in the past all conclude just the opposite,” Eisenhauer said. “Long-term leases are essential to provide the right incentives to the tenants to ensure that they continue to invest to sustainable farmland practices.” Under short-term contracts, though, there is a lack of incentive for tenants to make investments. “Because they think they are only going to be on that land for a year or two then it’s going to be someone else’s problem,” he said.
The survey results also show that nearly 65 percent of the respondents would not change their farming practices if they owned the land.
Eisenhauer added that without knowing the survey’s methodology, it was hard to judge the significance of the results, but he said that the reason Bonnefield sets up long-term leases is because the company’s chief concern is to ensure tenants are aligned with the land’s continued sustainability as if they owned it.
Bonnefield is Canada’s largest farmland investment manager and property management firm that currently has $325 million of assets under management across 40,000 acres of farmland in Alberta, Saskatchewan, Manitoba, Ontario and New Brunswick. The firm’s farmland funds are solely Canadian-owned and controlled.
The OFA survey, which has 12 opinion-based questions, was generated by the University of Guelph’s Food, Agricultural and Resource Economics Department.
Between 35 percent and 40 percent of Ontario’s farmland is rented, according to Eisenhauer.