Omnigence Asset Management has released a comprehensive study exploring the impact of long-term real interest rates on Canadian farmland investment performance. The research, titled “Real Rates and Canadian Farmland Returns: The Market versus Veripath Across Rate Regimes,” examines data spanning from 1970 to 2025 and highlights how different real interest rate environments influence farmland returns.
Traditionally viewed as a hedge against inflation, farmland’s investment value is scrutinized in this study through the lens of real interest rates—yields on long-term government bonds adjusted for inflation. The findings suggest that these rates may be more indicative of farmland price movements than inflation alone. Specifically, the study identifies three interest rate environments, revealing significant variations in annual farmland appreciation. When real rates were negative, appreciation averaged 15.2% annually, compared to 9.7% when rates were between 0% and 4%, and a mere 1.2% in periods where rates exceeded 4%.
The analysis also indicates that all negative farmland price years occurred during periods of positive real interest rates, while substantial market drawdowns, particularly between 1983 and 1992, were concentrated in the highest-rate category. This insight provides a crucial historical perspective for investors evaluating Canadian farmland opportunities in light of current financial conditions, where real rates hover around 1%.
The research further evaluates the performance of the Veripath strategy against national farmland market returns from 2008 to 2025. During this time, real interest rates fluctuated between negative 4.0% and positive 3.1%. The Veripath strategy achieved its greatest performance margin over the broader market when real rates were within the 0% to 4% range, attributed to strategic asset selection and purchasing farmland below average productivity-adjusted prices.
Stephen Johnston, a director at Omnigence and the study’s lead author, emphasized that long-term real interest rates offer a more relevant framework for understanding farmland performance than inflation alone. The research aims to assist investment allocators in navigating changing rate environments and highlights the role of asset selection in enhancing returns.
This study provides investors with a valuable tool for assessing the potential of Canadian farmland investments amid varying economic conditions. For those interested in a deeper dive into the findings, the full paper is available upon request from Omnigence Asset Management.
About Omnigence
Omnigence is a Canadian alternative investment platform focused on farmland, operational private equity, and secondaries with partner funds managing over $1.2 billion. The firm targets fragmented, unfinancialized investment theses where scale, operational complexity, or size constraints limit participation from larger participants and therefore value is more compelling.
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