Time to Bet on the Farm? The Growing Appeal of Farmland for High Net Worth Investors
In recent years, headlines about pension plans and seasoned investors like Bill Gates and Warren Buffett investing in farmland have sparked interest in the asset class. Unlike traditional stocks and bonds, many investors are unsure how to approach farmland investments. Is it merely the latest high-profile trend, or is there more to its appeal?
The reality is that farmland has been an attractive investment for centuries. Individuals worldwide have acquired farmland as a means of long-term wealth generation and to preserve wealth through uncertain times. However, not everyone has the means to buy and manage a farm. To address this, opportunities to invest in portfolios of farmland assets have emerged, facilitating investment with additional diversification exposure across multiple growing regions.
Over the last few decades, institutional investors have led the charge in global farmland investment. Now, increasing numbers of individuals are adding farmland to their investment portfolios. The interest is rooted in the asset’s unique performance features as well as attractive macro-economic dynamics driving value as outlined below.
The Essential Nature of Farmland
Food is a necessity, and farmland is critical to the production of crops that are required not just to meet the food consumption demands of a growing population, but also to meet demands for livestock feed and alternative energy sources. Globally, the amount of arable land is expected to decline by 50 million hectares (picture 100 million football fields) between 2009 and 2050 in favour of other uses. Additionally, certain regions in the world are coming under pressure from increasingly unfavourable growing conditions and declining water availability which can impact their ability to continue to maintain historical crop production levels. All this can create scarcity value for existing high quality farmland.(1) When investing in farmland and agriculture, it is these macro trends that investors are getting exposure to.
Uncorrelated and Stable Returns
In Canada, farmland is predominantly owned by farmers, with investors estimated to hold less than 1% of farmland acreage.(2) As a result, values are driven by farmer-to-farmer transactions based primarily on farm profitability and largely uncorrelated to traditional asset classes or public markets.
Why is this? At a very high level, it’s because farmers are generally reluctant to sell their land, even during periods of low commodity prices, unless faced with significant financial challenges. Farming is an economies-of-scale business, and farm operators buy and sell land based on long-term business decisions rather than short-term financial speculation. Improved profitability through increased revenues (higher crop yields or planting higher value crops, etc.), or decreased expenses (reduced labour or input costs, etc.) all contribute to long-term value appreciation. These dynamics have contributed to Canadian farmland’s average annual rate of appreciation of approximately 7.5% between 1968-2023.(3)
Bonnefield’s own farmland funds have generated a 10-year annualized return of 8.3% – similar to returns on Canadian equities over that period but with a third of the volatility.(4) From an investor perspective, the long-term value appreciation and stability of the asset class provide attractive risk-return trade-offs. The expected outperformance in times of market sell-downs also reduces the overall volatility of your investment portfolio and provides meaningful downside protection.
We expect heightened geopolitical risks over the coming years, under the Trump administration, with threats of tariffs and escalating trade wars resulting in increased volatility. This will likely result in market sell-downs for risk-on assets, as experienced in the first week of March 2025, We therefore believe that this environment makes investments in farmland appealing given the asset class’s ability to outperform in down markets and act as a powerful stabilizer within investment portfolios.
Inflation-Hedging Characteristics
Another sought-after feature of farmland investment is its outperformance against inflation. During inflationary periods, we experience increased food and commodity prices which generally result in increased farmer revenues. To illustrate, in 2021 and 2022, when Canadian CPI increased to 4.1% and 5.4%, Canadian farm cash receipts surged by 15.8% and 14.6%, respectively. In contrast, in 2020 and 2023, when inflation was lower at 1.5% and 2.6%, farm cash receipt growth was more modest at 8.2% and 4.6%.(6),(7)
With more money in their pockets, farmers are better positioned to reinvest in their operations – often by acquiring additional acreage. These periods of high inflation tend to see greater farmland transactions at higher values which then becomes the new baseline value for similar land in that region. In Canada, farmland values rose by 9.5% in 2021 and 14.6% in 2022, aligning with elevated inflation and despite cooling inflation in 2023 (CPI at 2.6%), they continued to increase at an annual rate of 15.5%, reflecting a lag effect as price benchmarks adjust to validated market transactions.(8),(9)
For investors, these dynamics create an opportunity to gain exposure to a resilient asset class that offers a safe haven for long-term wealth preservation during periods of economic uncertainty and inflation.
Climate and Farmland Returns
Adaptability has always been a defining trait of successful farmers, and today’s agricultural landscape is no exception. While climate change presents challenges—such as increased weather volatility—Canadian agriculture is uniquely positioned to benefit from key structural advantages. Longer growing seasons and increased heat units, along with advancements in crop genetics—such as drought-resistant seed varieties—are enabling diversification into higher-value crops. This expansion goes beyond the cold-weather staples historically associated with the region. Canada’s abundant freshwater resources and reliance on rainfed agriculture provide a significant hedge against the water scarcity risks affecting farmland in many other regions. These factors contribute to the long-term resilience of Canadian farmland, reinforcing its value as a stable, inflation-protected asset class with strong potential for appreciation.
Farmland – A Source of Stable, Long-Term Wealth Generation
As outlined above, farmland offers various attractive features. Its ability to diversify returns with low correlation to traditional public markets and other types of real estate reduces portfolio volatility. As a proven hedge against inflation, farmland can act as a long-term store of value, safeguarding wealth during uncertain economic times. Moreover, Canadian farmland specifically offers unique climate hedging characteristics due to its abundant access to fresh, renewable water sources, and changing growing conditions.
For these reasons, along with its critical role in meeting food production needs, we believe that Canadian farmland provides investors with a relative safe haven in uncertain times and is a great addition to an investment portfolio. It is no surprise that increasing numbers of individual investors are adding farmland to their holdings.
For information on the Bonnefield Farmland Funds, please reach out to investors@bonnefield.com
About Bonnefield Financial
Bonnefield is a leading Canadian farmland and agribusiness investment manager. We provide capital to progressive farmers and agribusiness operators through land-lease financing and non-controlling equity solutions. Bonnefield is dedicated to preserving farmland for farming, and the firm partners with growth-oriented farmers and agribusiness operators to help them grow, reduce debt, and finance retirement and succession. The firm’s investors are individuals and institutional investors who are committed to the long-term sustainable future of Canadian agriculture.
Sources
1. FAO 2030-50 Projections of Arable Land (FAO (2017)); OurWorldInData.org/crop-yields.
2. Based on analysis conducted internally by Bonnefield in 2024.
3. Statistics Canada Value per acre of farm land and buildings at July 1, 2023. (table 32-10-0047-01).
4. Data to December 31, 2023 due to availability of returns at time of publication. Bonnefield figures based on a composite of our open-ended funds.
7. Statistics Canada. Table 18-10-0256-01 Consumer Price Index (CPI) statistics, measures of core inflation and other related statistics – Bank of Canada definitions.
8. Statistics Canada. Table 32-10-0047-01 Value per acre of farm land and buildings at July 1.
9. Consumer Price Index (CPI) statistics, measures of core inflation and other related statistics – Bank of Canada definitions – table 18-10-0256-01).
10. Food and Agriculture Organization of the United Nations – FAOSTAT Land Use Database (total agricultural land and total land area equipped for irrigation; data as of 2021).
This document is for information purposes only and does not constitute an offer or solicitation to buy or sell any securities in any jurisdiction in which an offer or solicitation is not authorized. Any such offer is made only pursuant to relevant offering documents and subscription agreements. Bonnefield funds (the “Funds”) are currently only open to investors who meet certain eligibility requirements. The Funds will not be approved or disapproved by any securities regulatory authority. Prospective investors should rely solely on the Funds’ offering documents which outline the risk factors in making a decision to invest. No representations or warranties of any kind are intended or should be inferred with respect to the economic return or the tax consequences from an investment in the Funds. The Funds are intended for sophisticated investors who can accept the risks associated with such an investment including a substantial or complete loss of their investment. This communication is for informational purposes only and should not be relied upon for completeness. Any investment performance data outlined in this document should not be used to predict future returns. Any market prices, data, and third-party information are not warranted as to completeness or accuracy and are subject to change without notice. Prospective investors should take appropriate professional advice before making any investment decision. In all cases where historical performance is presented, note that past performance is not indicative of future results, and should not be relied upon as the basis for making an investment decision. There can be no assurance that any unrealized investments will ultimately be realized at the valuations taken into account in calculating the Funds performance presented herein, where applicable. The performance of such investments when ultimately realized may be materially different. This document may not be transmitted, reproduced, or used in whole or in part for any other purpose, nor may it be disclosed or made available, directly or indirectly, in whole or in part, to any other person without Bonnefield’s prior written consent.
Copying, distributing or sharing this document or its contents is expressly prohibited without the express, written consent of Bonnefield.
Harvesting New Opportunities: Growing Our Investment Footprint with Okanagan Cherries
2024 has been an exciting year for Bonnefield, as we continue to support Canadian farmers by expanding our investment footprint into new geographies and agricultural regions. In this newsletter, we highlight one of our most recent investments in a cherry orchard in the Okanagan region of British Columbia, Canada, and provide an overview of the key considerations between row crop and permanent crop investments.
Crop Selection for Farmland Investment
Bonnefield’s investment philosophy is to build a diversified portfolio of high-quality Canadian farmland and partner with operationally and financially strong operators. Similar to the Canadian agriculture landscape, our strategy is more heavily weighted towards traditional row crops and specialty crops, with modest exposure to permanent crops.
While many farmland investment managers in Canada and the United States specialize primarily in either row crops or permanent crops, Bonnefield offers our investors diversified exposure to both row and permanent crops across top agricultural regions in Canada. We build broadly diversified portfolios in order to mitigate risk, provide a smoothing of returns, and provide maximum optionality for our value creation activities.
Investing across a diversified geography and multiple crop types, however, requires a thorough understanding of each region, crop, and the unique considerations that come with them.
Understanding the Difference in Risks – Permanent vs. Row Crops
Permanent crops, such as fruit trees like cherries and apples, and bush plants like blueberries and raspberries, are perennial plants that produce the same commodity year after year. In contrast, row crops like wheat or canola are planted and harvested annually, allowing producers to rotate the crop grown each year. Understanding the production, pricing and end markets, as well as the unique risks associated with permanent crops versus row crops is critical to evaluating a potential investment.
Compared with row crops, lands that produce permanent crops tend to be valued on a higher dollar-per-acre basis as a result of the higher prices and gross margins that permanent crops can generate. However, these higher prices come with a number of additional risks and potential costs. Firstly, permanent crops require significant upfront investment to establish the plant, with some plants taking several years to reach full production. Secondly, permanent crops also require a higher level of ongoing farm management, requiring specialized equipment and they can be more labour intensive compared with row crops. Finally, because permanent crops rely on the ongoing health of the plant to produce year after year, there are increased risks from disease, pests and adverse weather to a permanent crop operation versus that of row crops.
Bonnefield mitigates the risks related to permanent crops through diligent research, partnership with leading and established operators, and investing in a diversified portfolio of high-quality properties. Customizing the structures of our capital investment and leases are also important to ensure appropriate risk-adjusted returns.
Identifying an Opportunity in BC Cherries
Bonnefield is constantly monitoring macroeconomic and industry trends to identify attractive areas across Canada to invest. These opportunities typically come to us from Canadian farmers looking to grow or support their succession planning and feel that they can benefit from Bonnefield’s capital solutions. Our recent investment in the Okanagan region of British Columbia highlights how we approach entering a new region.
Earlier this year, our team connected with a leading cherry producer in British Columbia. This family farming business was seeking to expand its partnerships, as it looked to improve its balance sheet following a recent business expansion. The team conducted significant industry research and on-the-ground diligence into the tender fruit growing regions in British Columbia and determined that cherries grown in the Okanagan region were an attractive opportunity, partly due to the competitive advantage that the region has with its late growing season, creating a unique window where the region is the only supplier of fresh cherries to the global market for several weeks each fall. Alongside its comprehensive diligence into farm operations and operators, Bonnefield conducted a critical analysis of historical weather patterns to assess current weather trends in the regions.
Bonnefield collaborated closely with the operator to see how our capital solutions could support their growth and agreed to enter into a sale leaseback on 114 acres of cherry land. Our partner in this venture is one of Canada’s largest sweet cherry producers, boasting a robust export presence. This collaboration not only strengthens exposure to a key agricultural region but also offers our investors added diversification and increased yields within their farmland portfolios.
We are excited about the growth potential and the value this new region brings, and continuing to deliver attractive, stable returns to our investors while supporting our farm partners to strengthen and grow their operations.
For information on the Bonnefield Farmland Funds, please reach out to investors@bonnefield.com
About Bonnefield Financial
Bonnefield is a leading Canadian farmland and agribusiness investment manager. We provide capital to progressive farmers and agribusiness operators through land-lease financing and non-controlling equity solutions. Bonnefield is dedicated to preserving farmland for farming, and the firm partners with growth-oriented farmers and agribusiness operators to help them grow, reduce debt, and finance retirement and succession. The firm’s investors are individuals and institutional investors who are committed to the long-term sustainable future of Canadian agriculture.
This document is for information purposes only and does not constitute an offer or solicitation to buy or sell any securities in any jurisdiction in which an offer or solicitation is not authorized. Any such offer is made only pursuant to relevant offering documents and subscription agreements. Bonnefield funds (the “Funds”) are currently only open to investors who meet certain eligibility requirements. The Funds will not be approved or disapproved by any securities regulatory authority. Prospective investors should rely solely on the Funds’ offering documents which outline the risk factors in making a decision to invest. No representations or warranties of any kind are intended or should be inferred with respect to the economic return or the tax consequences from an investment in the Funds. The Funds are intended for sophisticated investors who can accept the risks associated with such an investment including a substantial or complete loss of their investment. This communication is for informational purposes only and should not be relied upon for completeness. Any investment performance data outlined in this document should not be used to predict future returns. Any market prices, data, and third-party information are not warranted as to completeness or accuracy and are subject to change without notice. Prospective investors should take appropriate professional advice before making any investment decision. In all cases where historical performance is presented, note that past performance is not indicative of future results, and should not be relied upon as the basis for making an investment decision. There can be no assurance that any unrealized investments will ultimately be realized at the valuations taken into account in calculating the Funds performance presented herein, where applicable. The performance of such investments when ultimately realized may be materially different. This document may not be transmitted, reproduced, or used in whole or in part for any other purpose, nor may it be disclosed or made available, directly or indirectly, in whole or in part, to any other person without Bonnefield’s prior written consent.
Copying, distributing or sharing this document or its contents is expressly prohibited without the express, written consent of Bonnefield.
Record-high stock markets, geopolitical crises, US political uncertainty, potential rebound in inflation, currency volatility, interest rate uncertainty… we live in “interesting” times. All this uncertainty has led to an increasing number of investors looking to alternative assets to complement and hedge their investment portfolios. Historically, one of the more attractive assets in times of uncertainty is Canadian farmland. The asset class offers low volatility and has a track record of average annual returns of 7.6%(1) over the last 70 years, without meaningful periods of declining value. More recent data shows Canadian farmland prices have increased by an average of 9.1% on average annually over the last decade.(1) But after several years of strong farmland returns, is now still a good time to invest in Canadian farmland, or are we at a “peak”?
Let’s look at some historic data to see if today’s “timing” is good, bad or indifferent to expected farmland returns.
“Timing the Market” Not a Relevant Concern for Farmland
Determining the right time to invest is typical in stock and bond markets, as no one wants to enter at the top of the market. The situation is different for a low-volatility and uncorrelated asset like Canadian farmland. To illustrate the point, imagine you had invested in Canadian farmland each year from 1975 to 2023. You would have had positive returns on each of those investments, with only eight entry years showing negative returns.(1)(2) In contrast, global equities saw negative returns for 17 of the entry years during the same period.(3) This result is unsurprising for fans of farmland investing who are attracted to its low volatility and uncorrelated returns. We have included in Figure 2 below a summary of the historical holding period returns for both asset classes.
What may be surprising even to long-time farmland investors, however, is that investing in Canadian farmland immediately following a year of heightened value appreciation (10% or above) still resulted in strong, long-term returns in line with historical averages. The data suggest that, rather than waiting for a “dip” in the market to invest in farmland, having exposure to the asset and benefitting from its long-term correlation to inflation should support positive investment returns with limited volatility.
Can the Trend Continue?
As seen in the figure above, farmland prices have historically increased at a steady rate. The typical pattern for this asset class is a period of strong growth, generally linked with commodity super cycles, followed by more muted growth. Very rarely have there been absolute decreases in land values, and only temporary ones. This long-term growth history can lead some to question whether ongoing value growth is sustainable. At Bonnefield, we believe that it is, and that there remains significant upside in farmland values.
As a scarce resource, high-quality farmland in regions supported by positive long-term climate and water conditions will increasingly be in demand. Farmland is the base upon which we will continue to meet increasing crop production requirements to satisfy food and alternative energy demands and understanding this, along with the drivers of farmland value (e.g., farm revenues and productivity growth, farmland consolidation, etc.), helps to understand why we believe that farmland provides strong, long-term value appreciation potential.
Now is a Great Time to Invest in Canadian Farmland
Bonnefield expects to continue to see growth in Canadian farmland values supported by farm revenue and productivity growth. Along with the limited price volatility of the asset class, we believe that investing in Canadian farmland offers attractive risk-adjusted returns and that investors can benefit from earlier exposure to the asset class rather than waiting for “the right time” to enter the market.
About Bonnefield Financial
Bonnefield is a leading Canadian farmland and agribusiness investment manager. We provide capital to progressive farmers and agribusiness operators through land-lease financing and non-controlling equity solutions. Bonnefield is dedicated to preserving farmland for farming, and the firm partners with growth-oriented farmers and agribusiness operators to help them grow, reduce debt, and finance retirement and succession. The firm’s investors are individuals and institutional investors who are committed to the long-term sustainable future of Canadian agriculture.
Sources
1. Statistics Canada. Table 32-10-0047-01 Value per Acre of Farm Land and Buildings at July 1, https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=3210004701.
2. Holding period returns calculated by varying investment entry and exit years and adding a 2% cash yield (mid-point of the cash yield target of Bonnefield’s farmland strategy). Capital appreciation is assumed to be identical to Statistics Canada’s farmland values dataset as at July 1st of each year.
3. MSCI World Index total return, large and Mid cap, reported in CAD, https://www.msci.com/end-of-day-data-search.
This document is for information purposes only and does not constitute an offer or solicitation to buy or sell any securities in any jurisdiction in which an offer or solicitation is not authorized. Any such offer is made only pursuant to relevant offering documents and subscription agreements. Bonnefield funds (the “Funds”) are currently only open to investors who meet certain eligibility requirements. The Funds will not be approved or disapproved by any securities regulatory authority. Prospective investors should rely solely on the Funds’ offering documents which outline the risk factors in making a decision to invest. No representations or warranties of any kind are intended or should be inferred with respect to the economic return or the tax consequences from an investment in the Funds. The Funds are intended for sophisticated investors who can accept the risks associated with such an investment including a substantial or complete loss of their investment. This communication is for informational purposes only and should not be relied upon for completeness. Any investment performance data outlined in this document should not be used to predict future returns. Any market prices, data, and third-party information are not warranted as to completeness or accuracy and are subject to change without notice. Prospective investors should take appropriate professional advice before making any investment decision. In all cases where historical performance is presented, note that past performance is not indicative of future results, and should not be relied upon as the basis for making an investment decision. There can be no assurance that any unrealized investments will ultimately be realized at the valuations taken into account in calculating the Funds performance presented herein, where applicable. The performance of such investments when ultimately realized may be materially different. This document may not be transmitted, reproduced, or used in whole or in part for any other purpose, nor may it be disclosed or made available, directly or indirectly, in whole or in part, to any other person without Bonnefield’s prior written consent.
Copying, distributing or sharing this document or its contents is expressly prohibited without the express, written consent of Bonnefield.
Beneath the Surface: Canadian Drought Reality & Farmland Resilience
After a year marked by wildfires and continued global concerns over water scarcity, the headlines at the beginning of the 2024 growing season across North America, Europe, and South America have included discussion of drought risk and water availability. As a leading Canadian farmland and agriculture investment manager, Bonnefield is regularly asked whether such headlines signal increasing risks associated with investing in agriculture and farmland. The short answer is – it depends.
Geography and ongoing farmland management practices impact the relative risk that drought and water availability have on a farm’s operations. So, whether thinking about buying a single farm, or investing in a portfolio of pooled farmland assets, it is important to consider these factors in determining the relative risk that water availability has on the future operations of the farm(s) and on their long-term performance.
Geography and Canada’s Water Advantage
While increasing numbers of sophisticated investors are interested in gaining exposure to the attractive attributes of farmland and agriculture, as with everything, there are risks that need to be considered. Water scarcity is a major challenge for agricultural systems around the world and shifting climate patterns along with existing water management practices globally demand our attention. Research suggests that 40% of global croplands have already experienced water scarcity.(1) Agriculture remains one of the largest users of water globally, accounting for 70% of current global water withdrawals.(2)
When evaluating a potential farmland investment, it is important to consider geography, as certain countries are experiencing (and expected to continue to experience) greater water stress than others. For this reason, Bonnefield feels that investment in Canadian farmland entails less water-scarcity risk than investment in other countries, and can also hedge against water risk in a broader investment portfolio.
Canada boasts a significant water resource advantage relative to other parts of the globe, with approximately 20% of the world’s freshwater reserves and 7% of the world’s renewable freshwater, while only representing 0.5% of the global population.(4) Estimates suggest that approximately 11% of existing cropland globally could be vulnerable to lost productivity due to water scarcity by 2050. In contrast, it is thought that only 1% of Canada’s cropland is potentially vulnerable.(5) Additionally, Canadian farmland is largely rainfed with less than 2% of Canadian agriculture reliant on irrigation systems.(6)
While Canada offers less risk to water scarcity than other regions, there are still parts of the country (particularly in Western Canada) that exhibit greater risk and instances of drought, so it is important to consider this when investing in a farmland portfolio. In Bonnefield’s case, we do not avoid these regions but rather, take a risk-adjusted approach when evaluating such opportunities. We also examine the water source and storage capacity of various irrigation districts and utilize climate models to estimate the potential impact of water shortages in each district, ensuring that properties in our portfolio will still receive water allocation in the event of curtailments.
Understanding regional variability in climatic conditions, specifically areas with more or less drought risk, is core to Bonnefield’s investment strategy to appropriately diversify farmland holdings across the country and insulate the portfolio from ever-changing weather patterns.
Employing Practices to Mitigate Water Risk
Despite Canada having relatively reliable access to freshwater resources, extended periods of drought still have the potential to negatively impact crop yields. As such, it is important to be exposed to farmland that is being well-managed with high-quality practices designed to ensure long-term, sustainable production. Through innovative practices, Canadian farmers have successfully enhanced water retention in the soil, mitigating the effects of water scarcity. As of 2021, almost 65% of farms across Canada reported using sustainable farming practices, up from 54% in the previous Census of Agriculture five years prior.(7) At Bonnefield, we work with and seek out farm partners who employ sustainable farming practices and function as long-term stewards of the land on which they operate. Some key strategies employed by Canadian farmers include:
Reduced Tillage: One of the most impactful practices is reduced tillage or no-till farming. No till farming, where the soil is not plowed or turned over before planting, minimizes soil disturbance and enhances water retention. In Canada, no-till farming is most common in the Prairies as higher precipitation volumes in Eastern Canada can make implementing no-till farming difficult.
Improved Irrigation Systems: Canadian farmers have embraced advanced irrigation technologies, such as low-pressure pivot systems, drip irrigation and sub-surface irrigation, to manage water more efficiently. These systems are often combined with soil probes and sensors that allow farmers to apply water at variable rates across fields to maximize crop production per unit of water.
Crop Rotation and Cover Cropping: Crop rotation and cover cropping have been integral parts of Canadian farming systems for decades, contributing to soil health and water retention. Rotating crops helps break pest and disease cycles while improving soil structure. Cover crops protect the soil from erosion, enhance organic matter content, and promote water infiltration.
Drought-Tolerant Crop Selection: Crop varieties optimized for local soil, water, and climate conditions can enhance yields. Specifically, breeding plants to have deeper and longer root networks can enhance resistance to drought and heat.(8) Canadian farmers are turning to more drought-tolerant crops, like barley, which saw an increase in planted acreage of nearly 25% from 2016 to 2021.(9)
Furthermore, Bonnefield’s robust and continuous property-level due diligence sets the stage for transformative investments.
So, Are Droughts and Water Scarcity a Risk in Farmland Investing?
Earlier we asked the question whether there is increasing risk associated with investing in agriculture and farmland due to water scarcity. As discussed above, the answer depends on a number of factors, most notably where the farmland is located, the risk mitigation practices, and investments that are made to the properties. By focusing on regions with relatively low water risk and ensuring the farms are operated in a sustainable manner, farmland remains an attractive asset and one that has the potential to offer water-risk hedging characteristics and long-term value in an investment portfolio.
About Bonnefield Financial
Bonnefield is a leading Canadian natural capital investment manager that invests in farmland and agribusinesses. We provide capital to progressive farmers and agribusiness operators through land-lease financing and non-controlling equity solutions. Bonnefield is dedicated to preserving farmland for farming and promoting sustainable production practices. The firm partners with growth-oriented farmers and agribusiness operators to help them grow, reduce debt, and finance retirement and succession. The firm’s investors are individuals and institutional investors who are committed to the long-term future of Canadian agriculture. www.bonnefield.com
Sources
1. Liu, Xingcai, et al, “Global Agricultural Water Scarcity Assessment Incorporating blue and Green Water Availability Under Future Climate Change,” AGU, April 23, 2022.
2. FAO. 2020. The State of Food and Agriculture 2020. Overcoming water challenges in agriculture. Rome. https://doi.org/10.4060/cb1447en
3. World Resources Institute, data August 26, 2015. Projections are based on a business-as-usual scenario using SSP2 and RCP8.5.
4. Environment and Climate Change Canada (2024, March 22). Goal 6: Ensure clean and safe water for all Canadians. Canada.ca. https://www.canada.ca/en/environment-climate-change/services/climate-change/federal-sustainable-development-strategy/goals/clean-water-sanitation.html
5. N. Fitton et al, “The vulnerabilities of agricultural land and food production to future water scarcity”, Global Environmental Change, Volume 58. 2019
6. Food and Agriculture Organization of the United Nations – FAOSTAT Land Use Database (total agriculture land and total land area equipped for irrigation; data as of 2021).
7. Ontario Federation of Agriculture. “Farmers embracing technology, sustainable practices and direct-to-consumer sales” May 19, 2022.
8. Anita, S., Hyat, T., & Wilhelmus, J. PGIM. “Food for Thought: Investment Opportunities Across a Changing Food System” 2023.
9. Ontario Federation of Agriculture. “Farmers embracing technology, sustainable practices and direct-to-consumer sales” May 19, 2022.
This document is for information purposes only and does not constitute an offer or solicitation to buy or sell any securities in any jurisdiction in which an offer or solicitation is not authorized. Any such offer is made only pursuant to relevant offering documents and subscription agreements. Bonnefield funds (the “Funds”) are currently only open to investors who meet certain eligibility requirements. The Funds will not be approved or disapproved by any securities regulatory authority. Prospective investors should rely solely on the Funds’ offering documents which outline the risk factors in making a decision to invest. No representations or warranties of any kind are intended or should be inferred with respect to the economic return or the tax consequences from an investment in the Funds. The Funds are intended for sophisticated investors who can accept the risks associated with such an investment including a substantial or complete loss of their investment.
Opportunity for Investment in Canadian Agribusiness
Sophisticated investors are increasingly looking at Canada’s agricultural industry for attractive, diversified opportunities. In the global context, Canada’s agriculture and agri-food industry punches well above its weight. Despite ranking as the 12th largest OECD nation by population, Canada is the world’s fifth largest agricultural exporter and the fourth largest exporter amongst OECD countries.(1) We take our role in sustainably feeding the world seriously, operating within a robust regulatory framework that upholds best-in-class governance and operating practices. However, despite these dynamics Canadian producers and processors suffer from chronic underinvestment due to a lack of access to capital, hindering growth and leading to industrywide inefficiencies, which creates an attractive environment for investment.
There has been a lot of recent discussion about Canada’s anemic rate of capital investment. According to OECD data, between 2011 to 2015, the rate of investment in Canada was among the bottom third of member nations, placing 37 out of 47. The situation worsened from 2015 to 2023, in which Canada dropped to 44 out of 47 nations. This trend impacts all industries, including agriculture, where Bonnefield has witnessed the pressing need for capital firsthand. For the last 15 years, Bonnefield has forged strong, trusting relationships with Canadian farmers, providing them with alternative financing solutions to enable their continued growth. Through these relationships, Bonnefield has seen the need for capital investment beyond farmland, across the entire agricultural value chain. We recently launched a fund to address this need by providing noncontrolling growth capital to a broader range of agribusiness in
Canada.
Size of the Opportunity
The agriculture and agri-food industries are among the largest sectors of the Canadian economy, accounting for approximately 7% of GDP and employing 2.3 million people in 2022.(3) There are over 8,500 Canadian food and beverage processing companies alone(4), many of which are continuing to expand both domestically and
internationally to meet growing demands. Today approximately half of everything that Canadian agriculture and agri-food produces is exported as either primary commodities or processed food and beverage products.(5) Increasing demand for food products, driven by population growth, underscores the potential for investment in Canadian agribusinesses. The global population is projected to reach nearly 10 billion by 2050, necessitating a substantial increase in food production to meet growing demand, with current projections expecting an increase in global food demand by 35% to 56% between 2010 and 2050.(6) Meeting this increased demand will be especially challenging in the face of climate challenges and declining crop yields, two factors that are competitive advantages for Canada. With our extensive agricultural production and sector expertise, there is potential to unlock outsized growth in Canada and further our position as a globally recognized, trusted agricultural trade partner.
Today approximately half of everything that Canadian agriculture and agri-food produces is exported as either primary commodities or processed food and beverage products.5 Increasing demand for food products, driven by population growth, underscores the potential for investment in Canadian agribusinesses. The global population is projected to reach nearly 10 billion by 2050, necessitating a substantial increase in food production to meet growing demand, with current projections expecting an increase in global food demand by 35% to 56% between 2010 and 2050.6 Meeting this increased demand will be especially challenging in the face of climate challenges and declining crop yields, two factors that are competitive advantages for Canada. With our extensive agricultural production and sector expertise, there is potential to unlock outsized growth in Canada and further our position as a globally recognized, trusted agricultural trade partner.
How (and Where) to Invest
In 2017, the Canadian federal government’s Advisory Council on Economic Growth released a set of recommendations to improve Canada’s economic growth trajectory. This report, which is commonly referred to as “the Barton Report”, identified agriculture and agri-food as one of the key sectors with potential to drive substantial economic growth and increase exports. Since that time, however, we have seen limited investment in the sector relative to demand from producers and the opportunity for attractive returns. Increasing exports is critical to the future success of Canadian agriculture and agri-food and requires investment to enable expansion of operations and enhancement to storage, transportation, processing, and manufacturing capabilities. This investment will allow Canadian operators to capture a greater share of the value created in the broader value chain. To date, underinvestment has posed challenges for the sector’s ability to grow and meet expanding demand. Investment in the food processing industry as a percentage of revenue decreased by ~50% from 1998 to 2016.(7)As depicted in the graph below, annual capital investment in agricultural equipment and machinery has lagged depreciation (i.e. the investment required just to replace aging equipment) over the last 15 years by a cumulative $12.9 billion(8).
These challenges for Canadian agribusinesses present an opportunity for investors to fill the investment gap and drive growth in the sector. Investing in modernizing agricultural infrastructure, and investments in value-added processing facilities can unlock new opportunities for growth and innovation, and enable producers to tap into growing export demand. By investing in Canadian agribusinesses, investors can not only generate attractive returns but also contribute to the growth, sustainability, and competitiveness of Canada’s agriculture and agri-food sectors, ensuring a prosperous future for Canadian agriculture.
The Bonnefield Agribusiness Fund
With nearly 15 years’ experience supporting Canadian farmers with land-based financing solutions, the team at Bonnefield has seen significant opportunities to support the growth and capital needs of leading agribusiness operators across the value-chain. For this reason, we launched the Bonnefield Agribusiness Fund LP I (“Agribusiness Fund”) in 2023, to invest in established, lower-middlemarket agribusinesses with significant growth opportunities.
Bonnefield’s Agribusiness Fund invests non-controlling capital through structured solutions, including subordinated debt, preferred equity, and/or equity with warrants, as well as facilitating sale-leaseback arrangements on vital agricultural infrastructure. Bonnefield’s approach is to be a customizable capital solution for business owners across the agricultural value chain. We use structured capital to minimize downside risk to investors, while participating in some of the upside from equity value creation. Bonnefield has deep industry roots and expertise in Canadian agriculture, with long-established agricultural operating partners. This experience provides unparalleled access to investment opportunities with agri-business owners who see Bonnefield as a value-add partner that brings more than just capital – our robust network of farm operators and industry experts that we can leverage to support their growth.
We see an attractive opportunity to invest in leading Canadian agribusinesses while providing attractive risk-adjusted returns to our
investors. We are excited to be able to support the long-term growth and expansion of Canada’s agriculture and agri-food global
footprint. The launch of Bonnefield’s Agribusiness Fund reaffirms our dedication to advancing the future of Canadian agriculture.
For information on the Bonnefield Agribusiness Fund please reach out to investors@bonnefield.com
About Bonnefield Financial
Bonnefield is a leading Canadian natural capital investment manager that invests in farmland and agribusinesses. We provide capital to progressive farmers and agribusiness operators through land-lease financing and non-controlling equity solutions. Bonnefield is dedicated to preserving farmland for farming and promoting sustainable production practices. The firm partners with growth-oriented farmers and agribusiness operators to help them grow, reduce debt, and finance retirement and succession. The firm’s investors are individuals and institutional investors who are committed to the long-term future of Canadian agriculture. www.bonnefield.com
Sources
1. The World Bank. United Nations Population Division. World Population Prospects: 2022 Revision.
2. Food and Agriculture Organization of the United Nations. FAO Statistics Division – Total Agricultural Products, excluding fishery and forestry products.
3. Government of Canada. Overview of the Canadian agri-food system.
4. Government of Canada. Overview of the food and beverage processing industry.
5. Canadian Agri-Food Trade Alliance. Agri-Food Exports.
6. van Dijk, M., Morley, T., Rau, M.L. et al. A meta-analysis of projected global food demand and population at risk of hunger for the period 2010–2050. Nat Food 2, 494–501 (2021).
7. Statistics Canada. Table 34-10-0278-01 Historical (real time) releases of capital and repair expenditures, non-residential tangible assets, by industry and geography (x 1,000,000).
8. Statistics Canada. Table 34-10-0036-01 “Capital and repair expenditures, non-residential tangible assets by industry (x 1,000,000)”; Table 32-10-0049-01 ”Farm Operating Expenses and Depreciation Charges (x 1,000).
This document is for information purposes only and does not constitute an offer or solicitation to buy or sell any securities in any jurisdiction in which an offer or solicitation is not authorized. Any such offer is made only pursuant to relevant offering documents and subscription agreements. Bonnefield funds (the “Funds”) are currently only open to investors who meet certain eligibility requirements. The Funds will not be approved or disapproved by any securities regulatory authority. Prospective investors should rely solely on the Funds’ offering documents which outline the risk factors in making a decision to invest. No representations or warranties of any kind are intended or should be inferred with respect to the economic return or the tax consequences from an investment in the Funds. The Funds are intended for sophisticated investors who can accept the risks associated with such an investment including a substantial or complete loss of their investment.
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