There’s a whole lot of impatience going around. With strong commodity markets, no one wants to wait for yield. We want it now. So it’s little wonder all the good-quality, high-efficiency farms seem to get snapped up before they even hit the market.
So, which is your smarter strategy — to sit on the sidelines, or to buy the farm equivalent of a handyman’s special and then sock some serious extra cash into it, bringing it up to full potential?
Across the country, more farmers are answering with their chequebooks. Here they tell us why.
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Clear faith. Clearing land takes the muscle and grit of our pioneers
Alberta’s Peace River district calls itself Canada’s final farm frontier. In 2002, theGeographical Reviewreported that farmers had cleared 40,000 forested acres near La Crete, Alta. since the 1980s, and the chainsaws haven’t stopped since.
It’s the ultimate land-improvement project and testimony to hard work and hope. It’s also got a unique demographic. “The Mennonites are very industrious,” says Joe Froese, an appraiser in La Crete for Pomeroy Valuation Group Ltd. “If there’s a way, they’ll find it.”
Members of large families wanting to farm and enjoy lifestyles based on traditional Mennonite values are willing to work hard for it and are staying in the area. “Farmland is in big demand here,” says Froese. “It’s a young community.”
There’s less gap between cleared and bush land than you might think. Prime cleared land ranges from $130,000 to $170,000 a quarter section (160 acres). Froese estimates that a typical bush quarter section will sell for $80,000 to $90,000.
Near La Crete, Russell and Suzie Friesen farm with four others in a joint venture called Harvest Moon Acres. They pool their mechanical, agronomic and marketing skillsets as well as their machinery and land base to grow crops, reaching 14,000 acres in 2010.
The last time larger bush areas were sold was in the early 80s for $10,000 a quarter. “Since then, we’ve just cleared smaller pieces and fence rows,” say Russell Friesen. “Mind you, when we remove our fence rows we make 800-to 1,200-acre fields.”
Clearing bush is a massive undertaking that can take the whole summer, depending on the types of trees and how much time you can put into it. “It’s slow, hard work,” says Friesen.
Before the spring thaw, trees are sliced off at ground level. All the vegetation is is piled and burned, then repiled and burned and repiled again and burned. The field is slowly ploughed with a crawler through the tree stumps, after which it gets churned by a very heavy disc, followed by a rock picker. And then, of course, the debris is rowed and burned again.
Friesen estimates it costs $300 to $350 per acre to clear forest. With some rough math the cost of the land can be recuperated if the original purchase price stays under $100,000 a quarter, but Harvest Moon Acres doesn’t like to spend over $50,000 because of the risk up front.
Virgin land isn’t as productive the first couple of years. “It’s a lot of carrying cost,” says Friesen. “The organic matter gobbles up the nitrogen… it releases it a few years later.”
Improved farmland sells for up to $150,000 a quarter in the areas further out of the town, says Friesen. “The price of land climbed quite steeply in the last five years with commodity prices,” he says. “Prices have to level off or your risk gets too high.”
The risk of crop failure is also high. “We’re not in a sure-crop area,” says Friesen. “In 2002 we had an early frost and in 2004 a drought took the crop.”
Also, for farmers in this area freight is a major cost. Although they can get canola yields of 35 to 45 bushels per acre, it costs 30 to 40 cents to freight a bushel to the coast and $1 to get it to the processors in the south, says Friesen. “But the land is decent enough and we get 24-hour sunlight in the summer.”
More water
Western Saskatchewan has huge irrigation potential, but it comes at an equally huge cost
When Gordon Kent of Riverhurst, Sask. dug in his first irrigation pipes in 1969, he planned to install a new pivot every year for 10 years. The pivots would pay for themselves, Kent figured, so once he got the project started, it could essentially finance itself.
Kent wanted to go piecemeal so he could learn how to irrigate step by step. “We decided to get better instead of just bigger,” he says.
Today most of his 1,300 acres are under irrigation, except for the 400 in corners. However, conditions on the ground changed and in the end the Kents spread their 10 pivots over 20 years.
Farm cash flows are hard to forecast, and and irrigation depends on infrastructure supported by continually evolving programs from three levels of government. “Government support comes in fits and starts and didn’t always match up to our ability to invest,” says Kent.
To put up a pivot system and get water costs about $100,000 per quarter section (135 acres when the corners are taken off). When they first started putting up pivots Kent got a $100 per acre grant available for farmers in a couple of districts. However, for the most part, they had to pay for all the on-farm costs and any off-farm turnouts and power needed to develop. “We elected to take this more expensive route because it let us control our development rate, not a government initiative,” says Kent.
With 340,000 acres under irrigation, Saskatchewan is using only five per cent of it’s allotted water flow. Infrastructure money is still dribbling in and the recent growth in urban water needs in the Regina-Moose Jaw Corridor is opening some potential development.
“We see the potential growth around Lake Diefenbaker,” says John Linsley, Saskatchewan Ministry of Agriculture’s irrigation branch. “We’ve got more choices to make on water here than the western U.S. and Alberta.”
The Saskatchewan Irrigation Projects Association has made a case for a half million irrigated acres around the lake, which current has only about a fifth of that land with pivots. Across the province, another 240,000 acres are irrigated, but again, there’s no shortage of optimistic forecasts.
“Irrigation increases the dollar output per acre,” says Linsley. “But it also represents a lot of stuff going in and going out -$200 to $300 an acre of equipment, labour, fertilizer, more inputs.”
Gordon Kent agrees. “You need to manage more and there’s bigger decisions.”
Drain It
GPS Helps Ontario Farmers Get Faster Payback From Tile
“Good farms are demanding a premium price of about $10,000 an acre in our area,” says Ken McCutcheon of McCutcheon Farm Drainage Ltd. in southwestern Ontario. He’s been tile draining since 1977 and says that because drainage is such a well known yield booster, virtually all the class 1 and 2 soils in Ontario already have some sort of tile.
Ironically, the spread between tiled and untiled farmland has slipped, says Larry Rosevear, associate appraiser for Valco Consultants in London, Ont. Historically, the spread was $400 to $600 an acre.
The farmers who are buying non-tiled land are a little further north. “The large cash croppers will buy it today and tile it tomorrow,” says Rosevear. “They want uniformity, no wet spots.”
Sid Vander Veen, drainage co-ordinator for the Ontario agriculture ministry, says the traditional payback for drainage is close to 10 years, but that doesn’t factor in today’s higher crop prices and lower interest rates.
Tile drainage reduces risk too. Farmers can seed earlier into warmer soils and have less risk of delayed harvest and getting stuck. Tiled fields also make more efficient use of applied fertilizers, and there’s less soil compaction, as well as rutting at harvest.
Over the last three years, systematic drainage in the province cost an averaged $705 per acre, but there are reports now of fees up to $1,000 in some areas.
Companies like McCutcheon’s are also busy replacing and updating drainage done post-war. Some of those systems put in with 66-foot spacing are now being in-filled so there’s a tile run every 30 or 25 feet, together with larger outlets.
McCutcheon sees two big differences in his clients. More of them have solid long-term plans, he says. And more of them have GPS units, so they not only know exactly where they want the tile, they have a good read on the yield response they can expect.
McCutcheon is also seeing more drainage being installed in Western Canada, particularly the Red River Valley. After he did some drainage work there, he bought a half section and drained it. Now he rents it to a potato farmer, he says. “It couldn’t grow good grass before.”
Don’t Fence Me In
Ripping out fencerows is opening up more land in the shadow of the CN Tower
“Good land hardly ever comes up for sale in this area,” says Daryl Phoenix, who crops 1,300 acres of soybeans, wheat and corn and has chickens near Sunderland, Ont.
The area he’s talking about is a couple of hours drive northeast of Toronto and has been dominated by smaller dairy and beef farms, so it’s not uncommon for fields to be five or 10 acres. When Phoenix purchases a farm he tile drains and removes fencerows right away. “I’ll buy a 70-acre farm and it’ll be broken into five fields,” he says.
The spread in land prices between improved and unimproved land in this area is limited by non-farmers who like fence-rows. Smaller parcels command a premium, and it doesn’t matter to buyers if the land is drained or clean. Farmers renting this land generally don’t invest in improvements unless they have a long-term lease.
By removing the fencerows, Phoenix gains space and speed. Plus he improves the compacted areas along the headlands and eliminates a source of insects and weeds. Fencerows also are home to some bigger pests with big appetites, like racoons. “I’ve calculated that I lose $64,000 a year to wildlife,” Phoenix says.
Phoenix has also calculated it costs $3 a foot to remove and burn those rows. He pays about $200 an hour to hire an excavator and operator and estimates about five per cent land gain per field. “Plus corn doesn’t grow in the first three rows,” he says.
With land in his area going around $3,500 to $4,000 an acre last winter, removing the fencerows pays back instantly in recuperated land costs. “A lot of guys will call before they buy,” says Walker. “They’ll figure the cost of drainage and fencerow removal as part of the offer.”
“A fencerow can be 40 or 50 feet wide and if you’ve got 1,000 feet of fences you quickly have an acre of land recuperated for the cost of doing it,” says Roy Walker, farmer and owner of Walker-Wright Drainage of Lindsay.
Not only do you have that space recovered, you have eliminated moisture robbers and pest havens. Says Walker: “Trees will steal moisture for 20 to 30 feet.”CG
