Transcription
Hello everyone and welcome to the Ver Paath introduction series. Today's, um, video video will be about the Farmland Value Driver. What is Farmland's Value Driver in the Canadian Market?
I just like to introduce myself. My name is Step Johnson. I'm the managing partner of Paath. I'm one of the co-founders. Um, the critical value driver in the Canadian Farmland Market is really this concept of a of a discount. Um, value discounts can be very powerful return drivers if value is mean reverting, which in markets like Farmland it typically is. And we believe that Canadian Farmland exhibits a a really material value proposition in certain provincial markets.
Um, when you look at the land through the lens of productivity adjusted pricing, meaning the price for a ton of wheat growing capacity, and you compare that to other developed markets, you'll see that Canada has some very deep discounts. Just to to make that, uh, analysis more specific, if you look at the price of a ton of hard red spring wheat growing capacity, the Canadian Market averages about $3,000 per ton of capacity. The developed Market Market in the G7, um, Market is about $6,000 Canadian dollars per ton of hard red spring wheat growing capacity. So you can see already there's a very material discount because you've normalized for productive capacity.
And then if you look at the Prairies, Alberta, Saskatchewan, and Manitoba, and that's where 80% of Canada's Farmland is, you'll see that the price for a ton of hard red spring wheat growing capacity is even lower than the Canadian average at about $2,500 a ton. And if you look at actually Vath portfolios as of Q1 2024, that's a our price for a ton of hard red spring wheat growing capacity is actually even lower at $2,000 a ton. And that discount is a value proposition, and that should and will drive returns.
So here's just a visualization of that. You can see Saskatchewan, Alberta, Manitoba at around $2,500 a ton, Canada around $3,000 a ton, and the global average at around $6,000 a ton. And it's really important when you're thinking about Farmland investing because of course, you've got to pay less attention to the absolute price per acre and really focus on the price for a ton of growing capacity. And you can normalize for whatever crop you think is appropriate. But when you look at it through that lens, there's a very significant discount in the Canadian Market if you're looking carefully, um, and you can capture that, and you should generate additional returns.
So thank you very much for listening today. I hope that was informative. We do have a number of other short videos in this series, um, which I, uh, encourage you to listen to. But thanks for your time.