Farming still viable for entry-level producers: Andjelic

Posted on March 21, 2024 by Ryan Dahlman

By Heather Cameron
Southern Alberta Newspapers
Local Journalism Initiative Reporter

The 2024 Farming Smarter Conference and Trade Show, which was held recently at the Sandman Signature Lethbridge Lodge kicked off with a Fireside Chat between John Kolk of Farming Smarter and Robert Andjelic of Andjelic Land Inc., Canada’s largest farmland holder.

Andjelic explained that he has a long history of entrepreneurship and investing, starting with him buying his first house for renovation at the age of 17 and later, he w a cofounder of a masonry company, that started with doing masonry housefront, then drifting into doing commercial buildings. In 1987, Andjelic says, he went into commercial real estate independently. After forseeing the coming recession with the demise of the subprime market he and his family put their entire portfolio of over 250,000 square feet up for sale.

“This was my and my family’s lifetime of work, so it wasn’t an easy decision, but I foresaw the market crash coming and I didn’t think that I had any choice,” said Andjelic. “My idea was to sell at the top, then get back into the market at 50 cents on the dollar, after the economic crash took its toll. In between I played the commodities market for around four years and eventually I decided to look for something else, that I thought would have a better future. Being in commercial real-estate most of my life I’ve seen manufacture’s, distributors and other businesses go broke as China took a bigger and bigger market share. Before going into another business venture, I wanted to see what was Canada’s advantage that we had that couldn’t be easily duplicated and produced in the other countries, no matter which one wins the manufacturing and technological race and increases their buying power of the middle class.”

 The answer that he came up with, Andjelic said, was agriculture and water, and that is what led him to invest into farmland, so he slowly liquidated all his commodities holdings and started to buy farmland. His first acquisitions, Andjelic said, were acquired in 2010 and his first farmland acquisitions were under his name and then eventually incorporated under Andjelic Land Inc.    

When Kolk asked Andjelic what economic indicators he looked at to get into farmland, Andjelic explained that it was mostly associated with climate change. Climate change, Andjelic said, will limit most countries from getting top yields or yields that they are used to. 

That trend, Andjelic said, was identified around 15 years back, during his research into climate change and study of solar cycles as well as the Gleissberg cycles. In his research, Andjelic said, he found that the United States will be out of commission, as we knew 30 or 40 years back, as far as agricultural production is concerned, specifically the western half of the U.S.  including California and the furthest south portion. Andjelic also said that during his discussions with some U.S. cattle buyers they told him that the wells in the U.S. central and western parts, are going deeper and deeper. Fifty years ago the wells were 150 to 200 feet deep and they had plenty of water. With time, Andjelic said, they had to go deeper and deeper from 500 to 1,000 feet and now they are 1,500 feet plus.              

Kolk then asked if Andjelic saw his move into land as farming or an investment. Andjelic stated that it was both because his company is partners with the producers, and they all want what’s best for the land, so it is also definitely an investment.             

Then, Kolk wanted to know what Andjelic looked for in people he wanted to purchase land from. Andjelic explained that Andjelic Land Inc. likes to work with like-minded thinking producers, particularly the ones that do a lot of soil testing and return back any nutrients to the fields, and they also like to work with producers that are technically advanced, use the latest equipment and follow the latest and best farming practices. 

When Kolk asked Andjelic about some of the challenges he saw for broad scale agriculture in the prairies over the next five to 10 years, Andjelic explained that he saw many including geopolitical issues, interest rates, how climate change is going to affect producers, and how he feels demand is going to outstrip supply.  

As far as interest rates are concerned, Andjelic said, he believes that there will be contradicting data coming out in the short term, but longer term, but he sees possible recession on the horizon. 

In terms of investing in farmland, Andjelic said, today it is virtually impossible to get a return of more than 3 per cent on rental farmland. However, he bought most of his portfolio when the per acre price was $500 to $1,000 per acre and that land has the same rental rate as today’s $4,000 per acre land. 

“This is no different than most of today’s producers who bought land way back at even lower prices than mine, then buy some at $4,000 or more, this just makes their total cost base a little higher,” said Andjelic. “Some producers out there are carrying land that they bought at $100 per acre way back, so it is no problem for them to pay today’s price and still be very viable.” 

Agriculture, Andjelic said, is a very capital-intensive business, hence very difficult to get into. 

“We got several well motivated individuals, who were also employed by our tenants, started farming by way of us, giving an individual a quarter section of land for the first year rent free, but rent payments start after that. The individual’s employer, also our tenant, would allow him the use of all his equipment for only the price of fuel. After a few years he bought his own quarter of land, as by now he had a production and credit track record. For new entrants into farming, land is only one component, they also have the high cost of equipment as well as inputs. As a matter of fact, land, which is the most critical component, is the lowest cost, especially if you are renting. Let’s take an average rent of $100 per acre, if you were to buy your land, at today’s interest rates, based on let’s say 7 per cent and a cost of $4,000 your interest on that amount is equal to $280 per acre.” 

“Renting land is by far the cheaper route,” Andjelic said.