Attracting the right kind of capital

Capital is required to grow the farm business but sometimes it takes an innovative approach

By: Craig Macfie

Agriculture’s future will rely on attracting capital.

In the past, capital typically came from banks or family.

But the changing demographic of farmers and farmland owners means that many farms and a tremendous amount of farmland will change hands over the coming decade.

Inflation and farmland appreciation has made farming increasingly unrealistic for someone not already involved in the industry. And in recent years farm profitability and asset appreciation has tempted more kids to return to the farm. In many cases, though, the farm isn’t big enough to support multiple families.

And whether it’s the Lake Diefenbaker irrigation project in Saskatchewan or Great Clay Belt tiling and clearing in Ontario, additional capital will be required since many farms won’t be able to absorb the extra investment needed.

Consolidation will continue. But, is there a way to attract capital that encourages more farms, not less?

Joelle Faulkner just might have the answer.

As CEO of Area One Farms, Faulkner has developed a unique farmland investment model, one that

allows farmers to maintain or grow ownership of the land. Faulkner has spent the last 12 years pitching her model to investors.

“I think farmers should own their land,” says Faulkner. “The way that Area One has most successfully done that (supported farmers in growing their acreage) is through equity partnerships.”

In addition to providing equity capital to farms, Area One provides 10 to 15 per cent of the annual appreciation, or “upside”, of farmland as a bonus to farm partners. This upside isn’t directly correlated to the investment made by the farmer, it’s a top-up provided by Area One.

Area One targets a 10 to 25 year time horizon for their investments. The extra top-up is provided because the farming partner is always the preferred exit strategy. For example, if you were a partner on flipping a house, and the partner didn’t provide any capital, you might not provide them with any of the capital appreciation.

Faulkner likes the provincial ownership restrictions, because she believes farmers should own the land where possible. She suggests, however, that provinces where farmland ownership is restricted such as Saskatchewan may want to start considering not only the amount but the type of farm investment capital needed going forward, and adjudicating applications on that basis.

“Maybe the question should be, ‘What is the character of the capital we need?’ Maybe you want capital that gives equity to farmers or that helps farmers out of special debt arrangements. Maybe equity for farmers that want to irrigate multiple quarters at once and scale a farm faster.”

Though Faulkner asserts the best partner is still no partner. If a farm can fund growth internally or with debt financing, she says they should. In those cases, farm equity appreciation remains with the farm.

“We have found good partners who have bought farmland reasonably and done clean up work, all the things farmers normally do. Area One’s strategy was always to partner with people to help them achieve family farm commercial scale. This means we can give away upside. We work with a lot of people with normal size goals which means we can help more farm families.”

Faulkner believes this model addresses it all. “It’s a good story, it’s intergenerational transfer, it’s keeping farmland where it should be owned: by farmers.”

This article originally appeared in the January 2, 2025 edition of Country Guide.