May 212019
 

Farmers are feeling the pain

Last year Canadian farmers couldn’t grow enough canola to satiate China’s appetite. About 40% of Canada’s canola exports go to China every year. In 2018 that worked out to about $3.8 billion. But it all changed this year after Canadian officials detained Meng Wanzhou, the CFO of Chinese tech company Huawei, due to an extradition request from the U.S. government.

In March, China started to ban shipments of Canadian canola on the grounds they’re plagued with pests, even though Canadian authorities say they’ve received no evidence to support that claim. Unfortunately the trade war and political shenanigans between the U.S. and China have affected households around the world, including Canadians. Our farmers in Saskatchewan are in trouble. They’re caught up in a global conflict between the two largest economies in the world, that has nothing to do with them. I canola imagine what they’re going through. Prime Minister Justin Trudeau recently announced financial aid for canola farmers. But it’s not a proper long term solution.

value of major exports from Canada to China

Major export products Canada shipped to China in 2018.

 

But canola isn’t the only export facing bans in China. Canadian peas and soybeans also have restrictions. And earlier this month, China suspended imports from two major Canadian pork producers over paperwork issues. According to the Canadian Pork Council the suspensions appear to stem from a labelling problem and are not tied to any political moves by China. But some people think that excuse is complete hogwash. ūüôā It’s ironic that China is currently experiencing a major pork shortage due to swine fever. The country could lose up to 200 million pigs to disease during the epidemic. To put that into perspective that’s about 3 times the pig population in the U.S. :0 And yet China still refuses to buy our pork. But that’s because China is so big, it can afford to cut off its snout to spite its face. It doesn’t need Canadian bacon because it can import it from other countries.

 

Farm prices rose modestly last year

The new farmland values have been published by Farm Credit Canada. It appears the average value of Canadian farmland increased 6.6% last year. That’s down from 8.4% in 2017 but at least it’s still going up. ūüôā Quebec had the highest increase, while Nova Scotia actually saw a decline.

It’s nice to prices continue to rise for farmland almost across the country. By contrast, Canada’s housing market fell about 5%¬† in 2018, according to the Canadian Real Estate Association (CREA.) But maybe farmland prices naturally lag the residential market? It would be interesting to how prices change in next year’s value report. ūüôā

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Apr 132017
 

Farmland Update – Small Price Increase

Farm Credit Canada just released its annual Farmland Values Report which provides a yearly overview of provincial and national land values trends across the country. As usual, it is this time of the year that I adjust the value of my Saskatchewan farmland using the average change of this report and the inflation rate (CPI.)

Unfortunately farmland values in east-central and southeast Saskatchewan remained unchanged in 2016. This is where my plot of land is. The FCC report points to¬†the oil and gas industry slowdown as the main reason for the lack of appreciation. However, other parts of Saskatchewan did see increases. ūüôā

There was 0.00% increase in value to my farmland according to the report.¬†The overall inflation rate in Canada was 1.43% in 2016. The average of these two numbers is 0.715%. Therefore I will be adding $3,000 to my farmland value from $433,000 to $436,000 in my April net worth update. ūüôā

Ever since I started to invest in farmland, the FCC reported values is SK have always appreciated faster than CPI. This is the first year where the inflation rate has surpassed that of the annual FCC report.

Despite the stagnation in some parts of Saskatchewan, the overall appreciation in Canadian farmland was pretty good. Each province saw positive growth in aggregate, and the average increase across the country was 7.9% for 2016.

Luckily my farmland operation is profitable and I have a rental contract for the next 2 years so I am not too concerned that my farmland did not appreciate in 2016. I just hope it retains its value for the next 4 years, at which time I will probably sell it to free up capital for other, more liquid investments.

I bought my farmland in 2012. If I had to grow my own crops I would probably start with fruit farming. I think I would be berry good at that. ūüėÄ But for now, I am happy just being a landlord. ¬†My tenant always pays on time and the land’s value has gone up a lot so far.

But as we can see, the growth has been slowing since 2013. I believe the hay-day of farmland investing is behind us. Interest rates can’t go much lower than it already is. A weakening of the Canadian dollar and more foreign investments can spur a little more growth in the farmland market, but it’s not a guarantee.

 

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Random Useless Fact:

Domino’s has over 8,000 stores across 82 countries, making it the 2nd largest pizza chain after Pizza Hut.

Oct 132016
 

Slow and Steady

A reader recently asked for a farmland update. So here’s the latest. I’m collecting $8,500 a year from my tenant who is growing canola on my 310 acres of farmland. He pays me twice a year, half the¬†total¬†amount in the spring and the other half in the fall. Here’s the latest cheque that I deposited into my bank account last week. This amount includes 5% GST.

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My farmland loan outstanding is about $193,000. The interest rate is 3.4%. Property tax was about $1,500 this year. No insurance or other cost is necessary for owning farmland. So my total expenses came to $8,100. I’m rounding these numbers to the nearest $100.

Thus I’m able to make a $400 profit on my farmland in 2016. Slowly but surely, the financials are¬†improving each year. ūüôā

16-10-farm-update-financials

I think farmland returns are starting to dry up in North America. Commodity¬†prices still haven’t recovered. So unless crop receipts increase by a substantial amount it’s hard to see any reason for the underlying land to become more valuable. Maybe farmland will continue to keep pace with inflation for the foreseeable future so it’s still a good¬†store of wealth, but I don’t see much more appreciation from here.

It’s too bad the¬†Canadian prairies is so cold. Many plants like hemp¬†can’t grow¬†out there. Since marijuana will soon be legalized there will probably be a lot of new cannabis growers by this time next year. Not to be blunt, ūüėĄ¬†but this obviously creates opportunity¬†for investors too. For example, last year I blogged about buying some shares in Canopy Growth Corp, a supplier of medicinal marijuana. So far the stock has doubled in price!¬†Not bad. ūüėÄ

Free eBook Download

Maybe I just got lucky with that marijuana stock. You shouldn’t get your investment advice from an amateur finance blog anyway. ūüėČ But my acquaintance David Chilton, who runs his own financial planning business is more than qualified to offer quality advice. I use the term “acquaintance” loosely because we’ve only corresponded by email a couple of times. ūüėõ¬†Anyway, he’s teamed up with Tangerine bank to give away the eBook edition of his latest¬†work, The Wealthy Barber Returns.¬†

16-10-wealthy-barber-returns

If you’re interested, just go to this Tangerine page and use one of the download links on the right. I’ve read the paperback before and recommend it for anyone who likes personal finance. The book¬†covers a lot of core investing topics like index funds and the stock market. You can download it to your computer, or mobile device. It also supports the¬†Kindle App. Enjoy! ūüėÄ

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May 022016
 

My net worth increased $64,000 so far in 2016 

Goodness gracious me! ūüėÄ That’s even more than my annual gross salary. Maybe I should quit my full time job already.¬†Haha.

But here’s the caveat. My net worth is measured in dollars. So I’m¬†only¬†becoming richer relative to the local currency. But as we shall discuss¬†below, currency depreciation can be a real PITA. ūüėõ Policy makers from around the world are covertly initiating inflation to see which country can print the most money to improve their economy’s competitiveness. But by doing so, the devastating¬†knock-on affects will financially destroy millions of lives in the years¬†to come.

Higher Living Expenses in 2016

If you’ve purchased car tires before you are probably familiar with inflationary pressures. Inflation has been fairly¬†high in 2016 so far. The government won’t admit it for political reasons, but¬†regular folks like you and I have most certainly felt the effects of rising expenses in¬†our wallets.¬†Over the last year nearly all types of spending¬†in Canada¬†have become¬†more expensive.

16-05-inflation-cost-of-living-canada

Crude oil was trading at US $35 per barrel when the year started, but now it’s just over¬†$45, a 29% increase. Coincidentally¬†the price of silver bullion has also increased by 29% over the same 4 month period. The price of oil affects the price of many consumers goods, not the least of which is food, due to transportation costs. And since we use silver in photography, x-rays, solar panels, mirrors, cars, medicine, smart phones, and other consumer electronics, we can expect higher costs in these related fields moving forward.

Then there’s the largest monthly expense for most people – housing. The most recent S&P/Case Shiller index shows that U.S. home prices in February grew 5.3% year over year. I don’t even have to mention how crazy hot the Canadian real estate market has been lately. ūüėõ CREA forecasts the national average price this year will probably¬†increase by 8%.

16-05-home-price-canada-crea-forecast

So house it going on the west coast?¬†you might ask.¬†Well let’s just say February was a record-shattering month for home sales in British Columbia, with a 45%¬†increase in volume compared to a year ago.

How Investors Hedge Against Inflation

A few years ago I wrote a post detailing¬†how prices of different goods¬†increased 100% to 200%¬†between 1990 and 2010. But if we were to store¬†our net worth 20 years ago in¬†real tangible assets such as oil, land, fixed properties, silver, and profitable businesses, instead of simply holding on to money or “savings,”¬†then we could keep all¬†of our purchasing power.

The reality is that life doesn’t cost more over time. In the 1990s if we needed fuel, we could buy 2 or 3 barrels of oil with 1 ounce of silver. Today in 2016, we can still pretty much do the same thing. On the other hand, buying oil with dollars would cost us 150% more today than in 1990. In other words, the costs of time, labor, skills, commodities, goods and services, which are all things that have intrinsic¬†value, tend to stay fairly constant across multiple generations for the most part.¬†But it’s the currency that is usually the clear outlier and it tends to lose value over any extended period of time.

One way we can hedge against inflation is through investing.¬†Here are some¬†choices that I’ve made in the past that have made 2016 one of my best years so far!

  • Buying precious metals stocks:¬†I own metal mining stocks such as¬†Goldcorp (G) and Silver Wheaton (SLW) which have outperformed the general stock market recently. But I’m in no way a good stock picker. ūüėõ The Market Vectors Gold Miners ETF (GDX) on the NYSE¬†is an index fund that tracks the performance of global gold mining firms that are publicly listed in the U.S. This ETF has climbed 88% year to date!¬†So anyone who holds¬†a basket of gold/silver stocks or owns this GDX fund should be dancing on cloud nine right about now. ūüôā
  • Buying physical commodities: I occasionally¬†purchase silver and gold directly from the Royal Canadian Mint and bullion exchanges. For example, about half a year ago I bought a 100 oz silver bar¬†which has appreciated in value since then. ūüôā I also practice earning¬†silver wages, which basically means¬†I make a portion of my money in silver¬†to diversify my income. I’m not¬†suggesting everyone should go out and do this too. I’m just saying from my personal experience this has been profitable¬†for me.
  • Buying farmland: My¬†down payment was less than 15% so this¬†amplifies my return on investment by¬†many folds.¬†Canadian farmland prices have grown on average by 10% last year, which boosted my¬†net worth by more than $30,000 as I’ve explained last month.
  • Buying real estate: I purchased a condo here in Vancouver when many people warned of a real estate bubble. Maybe they’re right, maybe they’re wrong. All I know is Vancouver condos have increased in price by 10% over the last year, adding over $25,000 to the market price of my property.

As we can see all these investments represent¬†real, tangible assets that have economic value, and therefore do not suffer at the hands of inflation. Everyone wants to know the secret to investing. But it’s really quite simple. All we have to do is look at historical patterns in the economy¬†and apply common sense. ūüôā Piece of cake, right?

Liquid’s Net Worth Update

My investment¬†income is really starting to grow now thanks to 7 years of compounding. I received $360 in interest payments in April between my Air Canada bonds and Antrim MIC. Plus I made $720 in dividend income from my stock portfolio. That’s nearly $1,100 of passive income that I made without any effort. ūüôā

*Side Incomes:

  • Part-Time =¬†$800
  • Freelance = $700
  • Dividends =¬†$700
  • Interest = $400
*Discretionary Spending:
  • Fun =¬†$300
  • Debt Interest = $1300

*Net Worth: (MoM)16-04-stock-fiscal-update-networth

  • Assets:¬†= $971,900 total¬†(+23,900)
  • Cash = $5,200¬†(+2700)
  • Stocks CDN =$113,900 (+3800)
  • Stocks US = $65,600 (-3800)
  • RRSP = $68,100 (-1000)
  • Mortgage Funds = $23,100 (+200)
  • Home = $263,000
  • Farms = $433,000 (+22,000)
  • Debts: =¬†$487,500 total¬†(-2,800)
  • Mortgage = $189,200 (-400)
  • Farm Loans = $195,900 (-500)
  • Margin Loan CDN = $28,300 (-100)
  • Margin Loan US = $24,500 (-1400)
  • TD Line of Credit = $20,600 ¬†(-400)
  • CIBC Line of Credit = $11,000
  • HELOC = $18,000

*Total Net Worth = $484,400 (+$26,700 / +5.83%)
All numbers above are in $CDN. Conversion rate used: 1.00 CAD = 0.79 USD

Stocks were pretty much flat in April. But my net worth increased by over $26,000 mostly due to the updated farmland value. The most recent FCC assessment report shows Saskatchewan farmland value rose 9.4% in 2015. The average inflation rate (CPI) in Canada in 2015 was about 1.4%. To be on the conservative side, I have adjusted the farmland value on my net worth statement by taking the average of these two figures, which is 5.4%, or an increase of about $22,000.

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Apr 142016
 

To become a successful farmer you have to be outstanding in your field, if you know what I mean. But as most investors know, commodity prices have been in a slump over the past couple of years. This means many grain farmers have to live a very tough life. Perhaps some of them barley survive from wheat to wheat! But things may not be as bad as they seem because crop sales in 2015 were some of the strongest Canadian farmers have ever seen, and was cited as a contributing factor to growing farmland prices.

 Canadian Farmland Values Grow 10.1% in 2015

The national agency, Farm Credit Canada, recently released its annual farmland value report about the previous year‚Äôs farming landscape. As it turns out in 2015 the average Canadian farmland price increased 10.1%.¬†This is absolutely incredible! ūüėÄ

16-04-farmland-value-canada-up-10

Farmland prices are assessed using recent comparable sales. These sales must be arm’s-length transactions. All provinces saw their average farmland values increase and Manitoba experienced the highest increase at 12.4%. The full report is on FCC’s site.

After this year’s adjustment using the 9.4% Saskatchewan increase¬†from the new¬†FCC report my farmland should now be worth $129/acre more than last year. Since I have about 300 acres of Saskatchewan farmland, that’s almost $39,000 of capital appreciation in one year. Whoop Whoop!

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Farmland Historical Performance

Here’s a look at historical farmland values in Canada from¬†1985 to 2015¬†according to FCC.

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