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Farmland still a hot investment, for better or worse

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What do you do these days if you have more money than you know what to do with?

Forget buying tropical islands, grand houses in hoity-toity neighbourhoods, yachts or other expensive exotic creature comforts.

Apparently, you buy farmland.



At least that’s what some well-heeled athletes in the U.S. are reportedly doing after pooling their funds into a US$125-million account with Patricof Co. (P/Co), an investment platform billed as “leveraging the unique relevance of world-class professional athletes.”

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Given the size of their salaries, these athletes are quite likely buying the other stuff too. Cincinnati Bengals quarterback Joe Burrow and longtime NBA player Blake Griffin, reportedly two of the 20 athletes behind this new venture, make US$9 million and US$36 million respectively, according to their online player bios.

P/Co has started buying up farmland across the U.S. corn belt, the Pacific northwest, and northern Minnesota, its website says. “The farms have high soil quality, strong crop yield, and grow row crops which are planted annually, minimizing risk. Farmland has historically provided attractive risk-adjusted returns, stable annual income, and a solid hedge against inflation.”

Exotic it is not. But farmland is a smoking-hot investment these days, which is good news if you already own some, but not so good if your dream in life is to buy a patch of turf so you can grow things for a living.

It’s not just professional athletes investing. Bill Gates, of Microsoft fame, is credited as being the largest single owner of farmland in the U.S. with holdings of 242,000 acres.

In Canada, that title goes to former Winnipeg industrial developer Robert Andjelic, who reportedly owns 225,500 acres in Saskatchewan. He told the Globe and Mail that started buying up farmland in 2009 as a hedge against inflation.

Farm Credit Canada analysis shows land values across Canada rose an average 8.3 per cent in 2021 and another 8.1 per cent during the first six months of 2022, comfortably higher than last year’s inflation rate of 6.8 per cent.

While it would be wrong to assume land prices will never decline, the last time that actually happened dates back 30 years or more. In most years, farmland values rise at high single- and sometimes double-digit rates.

That’s not bad for a hard asset that’s immobile, except when it blows away, and which in these parts, sits idle for six months or more each year.

However, it means land values are increasingly decoupled from the value of what the land produces, which is a good news-bad news scenario for farmers. Farmers who own at least some of their land aren’t solely dependent on their farming prowess to retire wealthy. It’s in their best interest to farm in ways that preserve the value of that asset, which at times could mean decisions that are less focused on yield.

Tenant farmers won’t have land to sell when they retire. There is more incentive to manage in ways that maximize productivity, which if they aren’t careful, could deplete the asset.

Many farmers use a combination of owned and rented land. They rely on annual production to cover their fixed and operating expenses, so those rising land costs are baked into their risk. Couple that with the rise in interest rates and operating margins are getting squeezed.

Canadian laws prevent foreign investors from buying its farmland so don’t expect to see agents for professional U.S. athletes bidding at local sales any time soon. However, domestic competition for farmland is expected to remain high.

As the saying goes, they aren’t making any more of it. In fact, Canada’s prime agricultural land base is shrinking at an alarming rate.

The 2021 Census of Agriculture found that the agricultural land base in Manitoba declined 2.9 per cent since 2016. In Ontario, the loss was around 4.7 per cent and that’s before the provincial government released parts of its protected GreenBelt to urban development.

It’s one thing to see farmland consolidate under non-farming buyers who at least plan to keep it in agriculture. That’s how business works.

It’s quite another to see it diverted to other uses. That’s just plain short-sighted.

Laura Rance is vice-president of content for Glacier FarmMedia. She can be reached at lrance@farmmedia.com

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Imperial Oil to invest $720M in renewable diesel plant near Edmonton – Yahoo Canada Finance

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Calgary-based Imperial Oil says its renewable diesel project will be the largest of its kind in Canada. (GETTY)

Imperial Oil (IMO.TO)(IMO) says it will invest $720 million to advance its Strathcona renewable diesel facility near Edmonton.

The Calgary-based company has touted the project as the largest of its kind in Canada, aiming to produce more than one billion litres per year, or 20,000 barrels per day, of renewable diesel. Imperial says the fuel has the potential to eliminate about three million tonnes of emissions per year, compared to conventional fuels.

Imperial projects renewable diesel production will begin in 2025. The company says hydrogen and biofeedstock will be combined with a proprietary catalyst to produce premium lower-carbon diesel fuel. The project was first announced in August 2021.

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Last year, Imperial said a final investment decision for the renewable diesel facility was expected in the coming months, based on factors including government support and approvals, market conditions and economic competitiveness. The company said on Thursday that regulators are expected to approve the project “in the near term.”

“Imperial supports Canada’s vision for a lower-emission future, and we are making strategic investments to reduce greenhouse gas emissions from our own operations and to help customers in vital sectors of the economy reduce their emissions,” CEO and president Brad Corson said in a news release on Thursday.

In September, Imperial announced a long-term contract with Air Products and Chemicals (APD ) to supply low-carbon hydrogen for the proposed renewable diesel complex. The company says it is looking for third parties for bio-feedstock supply needed to produce renewable diesel fuel.

Imperial says a significant portion of the renewable diesel from Strathcona will be supplied to British Columbia in support of the province’s plan to lower carbon emissions.

Imperial has laid out goals to reduce its greenhouse gas intensity by 30 per cent by 2030 and reach net-zero in the company’s oilsands operations by 2050. The company says it plans to use renewable diesel in its operations to reduce emissions.

Imperial will report fourth-quarter 2022 financial results on Jan. 31.

Toronto-listed shares added 1.75 per cent to $71.00 as at 11:07 a.m. ET Thursday. The stock has added about 38 per cent over the last 12 months.

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

Download the Yahoo Finance app, available for Apple and Android.

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Imperial Oil to invest $720-million to construct renewable diesel facility in Canada – The Globe and Mail

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Imperial Oil Ltd. IMO-T says it is going ahead with a $720-million project to build a renewable diesel facility at its Strathcona refinery near Edmonton.

The project, first announced in August 2021, is expected to produce 20,000 barrels per day of renewable diesel once it is complete.

The company says a significant portion of the production will be sent to British Columbia to support the province’s plan to lower carbon emissions.

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Imperial says it also plans to use renewable diesel in operations as part of its emission reduction plans.

Renewable diesel production is expected to start in 2025.

Imperial says the project is expected to create about 600 direct construction jobs.

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Is Tesla (TSLA) Still a Worthy Investment?

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Distillate Capital, an investment management firm, released its fourth quarter 2022 investor letter, a copy of the same can be downloaded here. At the end of the fourth quarter, Distillate’s U.S. FSV strategy declined 10.58% on a total return basis net of fees compared to a decline of 18.11% for the S&P 500 benchmark. Better relative performance for Distillate’s SMID QV strategy continued into 2022 with a decline of 8.64% on a total return net-of-fee basis, significantly ahead of a comparable decline of 20.49% for the Russell 2000 ETF and -14.67% for the Russell 2000 Value ETF. On the other hand, Distillate’s Intl. FSV strategy again lagged its MSCI ACWI Ex-US benchmark in 2022, while the Distillate’s U.S. FSV strategy’s free cash flow to market cap yield valuation of 7.2% compares very favorably to 5.1% for the same measure for the S&P 500. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.

In its Q3 2022 investor letter, Distillate Capital mentioned Tesla, Inc. (NASDAQ:TSLA) and explained its insights for the company. Founded in 2003, Tesla, Inc. (NASDAQ:TSLA) is an Austin, Texas-based multinational automotive and clean energy company with a $454.3 billion market capitalization. Tesla, Inc. (NASDAQ:TSLA) delivered a 16.81% return since the beginning of the year, while its 12-month returns are down by -53.00%. The stock closed at $143.89 per share on January 24, 2023.

Here is what Distillate Capital has to say about Tesla, Inc. (NASDAQ:TSLA) in its Q3 2022 investor letter:

“The fund’s relative outperformance occurred despite a nearly 2.5% headwind from being underweight the energy and utilities sectors where cash flow instability and leverage tend to limit our holdings domestically. By individual stock, the largest contributors to relative outperformance were unowned positions in Amazon and Tesla, Inc. (NASDAQ:TSLA) which declined around 50% and 65% during the year, respectively.”

Tesla
Tesla

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Our calculations show that Tesla, Inc. (NASDAQ:TSLA) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Tesla, Inc. (NASDAQ:TSLA) was in 88 hedge fund portfolios at the end of the second quarter of 2022, compared to 73 funds in the previous quarter. Tesla, Inc. (NASDAQ:TSLA) delivered a -35.31% return in the past 3 months.

In January 2023, we also shared another hedge fund’s views on Tesla, Inc. (NASDAQ:TSLA) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters Q4 2022 page.

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Disclosure: None. This article is originally published at Insider Monkey.

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