An uncomfortable truth about selling prime farmland

Photo by Simon Carr (Flickr CC BY-SA 2.0)

Urban sprawl is a real threat to farmland long-term in many areas of Canada and the U.S., but our attitude about developing farmland is littered with hypocrisy.

As I see it, farmers are in the land business as much as the food production business and that is the reality we tend not to discuss openly.

Historically, there are good reasons that cities grew besides bodies of water such as lakes or rivers because these supported transportation and trade. Cities naturally grew where farmland was productive, as having good farmland close to a growing city was advantageous to supporting the citizens living there. Over time, as cities spread in acres, more and more farmland has come under threat due to urban sprawl. Simply put, it’s always been easier to relocate a dairy farm than a hundred, a thousand, or a million people.

This week, Ontario’s auditor general published a report on Premier Doug Ford government’s handling of the Toronto Greenbelt boundary change in late 2022. The AG said the handling of it “cannot be described as a standard or defensible process.” The Ford government acted behind the scenes in opening up Greenbelt acres to developers which impacts prime farmland, and the ag industry is understandably upset, but I do wonder if our industry realizes our say-one-thing-and-do-another approach to preserving farmland.

It seems that some stakeholders believe farmland must be preserved at any cost, but that is not possible or realistic. In a long enough timeline, farmers that own land are as much land investors as they are farmers. History shows that owning land has been great for balance sheets. According to Farm Credit Canada, Canadian farmland was up 12.8% in 2022 and 8.3% in 2021.

Significant wealth has been created in agriculture among land owners due to strong demand for farmland; we should not begrudge this, concerns over the increasing barrier to entry for new or expanding farms notwithstanding.

If you are going argue against urban sprawl or changing the Greenbelt boundary then you should also be against farmers selling prime farmland to developers full stop. Most farms are sold in Canada not based on cash flow (EBITDA multiples), but on asset values.

For many farmers, land holdings are the true exit plan for retirement. This exit opportunity can come from aggressive peers looking to expand or — if you are really financially lucky — it comes from housing or commercial developers.

Should cities be considering building up instead of out more often as a part of city planning? Absolutely. But there are free market drivers pushing for continued build-out. Encouraging local, regional, or federal governments to protect farmland from development is an ask that isn’t always applied in reality.

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